A few years back I made a really nice return buying Netflix stock, but had I held on it would have been a grand slam. Instead I sold it and bought Apple because I love companies that make boatloads of money, pay dividends, and have awesome products. I've done pretty well with Apple, but Netflix has increased in value 600% since I sold. Ouch.
But I just don't get the valuation on Netflix. They seem to release new shows by the hundreds, yet the buzz is limited to a few hits like Stranger Things, 13 Reasons Why, and a few others. I'm a huge Marvel Comics fan, and I'm already burnt out on the Marvel shows they release. The main reason for this is that they've sucked.
Netflix releases their entire seasons at once, which is a terrible idea. It's impossible to build buzz because no one knows if it's safe to talk about a show with anyone else. I may have seen 1 episode and my friend watched the whole season. So we can't chat, which means we can't help build buzz.
Coming from a guy who has a merch perspective I know that the value of merch isn't just the revenue driven, it's the fact that the merch helps drive awareness. But when the show gets released all at once and no one can talk about it the window to sell merch is super limited. Stranger Things sells a lot of merch, but nowhere near what it would if it were on AMC.
Netflix has a ridiculous amount of shows and most of them have zero buzz. At this point when I see the Netflix brand on a show it feels like the generic aisle in the supermarket from back when I was a kid. Remember the aisle with all the stuff in white packaging with black letters.
This is what Netflix shows look like to me. Except it could say "Political Drama", "Family Sitcom", etc.
I literally was looking for a way to sort out the Netflix owned shows from my display. Maybe I'm the minority here, but I predict Netflix will see a precipitous decline unless they fix this problem. And to me the easiest way to fix the problem would be to release shows one week at a time in the traditional method. It seems to be working for Hulu with Handmaid's Tale. That show got so much buzz my wife and I joined Hulu. She's hooked. I find the pace to be too slow and I get restless while we are watching. But the key thing is we're watching.
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I wrote this post in May 2018 and it’s now January 2020. Netflix is doing just fine, and even though their US growth is slowing (that will happen when you’ve already got such a high percentage of the US population with access to Netflix already) and new competitors are coming into the market (Disney+, AppleTV+, and soon to be launched Peacock) by all accounts there seems to be no stopping Netflix.
I still believe they would benefit from releasing shows 1 episode per week. I also don’t know how much value their content will retain after years of release. The most rewatchable shows are sitcoms and so far Netflix hasn’t done much there. But Netflix provides a much greater value than cable for non-sports fans. As Ben Thompson from Stratechery put it “people watch shows because they are on Netflix”.
I made the mistake of thinking people watched shows like I watch shows. I am very discerning about how I spend my tv time. But kids are not discerning at all and Netflix has them on lockdown. There are also people who, once they’ve paid for Netflix, will maximize the value of their subscription. So if the choice is to rent a movie that they want to watch for $2 to $5 or watch whatever is on Netflix that is already paid for they’ll choose Netflix.
All of this is my way of saying that my fundamental issues with the way Netflix is doing things still remain, but I now see that those issues won’t prevent Netflix from being very popular. As a comparison… Disney+ has a much smaller selection of premium content, so at some point you literally may have watched everything that you want on Disney+. Because of that it’s super important that Disney+ bring out new content and keep it on the weekly schedule to keep subscribers paying. Netflix has tons of not so premium content, but the price matches the content so they keep their customers. Different models but both can and I think will be successful.