Why Netflix is Collapsing: The Truth About Netflix's Empire

the history of netflix is one of the most fascinating stories but things were nearly very different at one point netflix was a small dvd rental service on the verge of going out of business and they were desperately trying to sell their company to their biggest competitor blockbuster however blockbuster turned their offer down and laughed them out the room fast forward a couple of decades and blockbuster have long since gone bankrupt whilst netflix went on to be worth over 200 billion dollars win countless prestigious awards and completely revolutionize entertainment so how did they do it and most importantly why is netflix now in very deep trouble [Music] mark randolph was sure of one thing he wanted to start his own internet business he'd seen the huge success amazon was having selling books online and felt there was a huge opportunity with this new internet thing the only problem was that he had no clue what business to start for months everywhere mark went he carried around a little notebook to write ideas in and he then pitched them to his friend reed how about we sell personalized surfboards dog food baseball bats mark had endless ideas of things they could sell but read always just shook his head and said that'll never work after mark had gone through more than 100 ideas reed said they should instead try to find something that people will pay for repeatedly so once you've found a customer you'll be able to sell to them over and over again we'd also said they should stay away from customizable items because then every new order requires additional work so it's not scalable mark considered this and then threw out one final suggestion how about videotapes for the first time reed didn't immediately dismiss the idea instead he looked out the window seemingly deep in thought and eventually said maybe now here's the thing right before mark had mentioned videotapes rita just been fined a 40 late fee by blockbuster for returning a movie late we'd thought to himself that perhaps movie rentals was the industry in need of a change perhaps this could be their big business idea renting out movies via the internet it's perfect right wrong as soon as mark and reed thought about the idea some more reality started to sink in remember this was 1997 where people were using vhs tapes which were very bulky to ship and this had pretty high postage costs so they'd be a huge disadvantage compared to physical video rental stores who didn't have to pay postage not to mention the high risk of the tapes getting damaged in the mail it started to become clear to both mark and read the business idea was dead before it had even begun at least it was until a few weeks later when reed was reading an article in a tech magazine about a new technology called dvds which would solve most of the issues that vhs tapes had dvds were much smaller and lighter meaning they were easier and cheaper to ship in fact they could be posted with just a regular stamp for 32 cents plus dvds were much cheaper to buy and easier to store so reid felt the business model of renting out dvds could work much better than vhs tapes and since it was a brand new technology nobody else was doing it yet admittedly neither mark nor reid had ever actually seen a dvd before prior to 1997 dvds were only available in japan but both of them had liked the idea of bringing movie rentals onto the internet especially reid who just received yet another hefty late fine from blockbuster and so this new dvd technology seemed like it could be the answer they were essentially betting big that dvds would become more mainstream and the default standard instead of vhs tapes and thus the original idea for netflix was born the business model was fairly simple mark and reid would buy a big collection of dvds and create a website where people could rent them out for a small fee each after a customer placed an order they'd mail them the dvd of their choice in a protective sleeve and it'd be at their doorstep in a couple of days once they'd watched it the customer would simply put the dvd into a prepaid return envelope that was included with the order and send it back so now they have their business idea they needed some money to fund it luckily reed already had some of his own money to invest from a previous business venture but mark couldn't really afford to put much money in himself so he instead turned to his mother who became one of netflix's earliest investors of course she only invested because she wanted to support her son yep that initial investment would go on to make her insanely wealthy by the end of 1997 mark and reed had used their initial money to get a little office and hire a small team admittedly it was all very low budget they had just a few cheap folding tables along with old secondhand furniture and the employees they'd hired were working for well below average wages but they promised them stock options meaning those early employees would get a big payout if netflix succeeded although initially none of the team wanted the company to be called netflix the word flix had a pretty negative low quality connotation so they all came up with other name ideas like luna cinema center now showing scene 1 and video pics but eventually they all decided it would make sense to have a name that would combine one word related to the internet and one word related to movies and since netflix hit that criteria plus it was short and kind of catchy eventually they just went with that and the name stuck the small netflix team then spent the next few months building their website and buying multiple copies of literally every dvd they possibly could since the dvd format was still new there were only around 800 titles available because a lot of movie studios hadn't been releasing their films on dvd yet but netflix tracked them all down so they could legitimately claim to have every dvd that had been made of course they pretty much just had to guess how many copies of each movie to buy based on what they thought might be popular but finally after months of work and planning and questioning whether this idea was totally insane or not they were ready to launch netflix to the worlds it was time for the madness to begin [Music] [Music] it was 8 56 a.m and to say that the small netflix team were nervous would be a ridiculous understatement mark hadfield beads of sweat on his forehead as he checked the clock once again at 9 00 am they would make the netflix website publicly accessible to the world the team had been preparing for this moment for months they'd even lined up a bunch of interviews with news outlets and reporters so that as soon as they put the website live they'd get lots of media attention to introduce people to their new service however the biggest reason for their anxiety was none of them had any idea how many orders to expect it could be zero it could be ten it could be hundreds at nine am on the dark one of the engineers made a few clicks on his computer and the netflix site was officially live they'd hooked up a bell to the computer so it would ring whenever they got a new sale and so to get the ball rolling mark himself placed the first ever order on netflix he rented a copy of casino and entered his details to get it shipped to his home address the bell rang and netflix were in business a minute later the bell rang again and again and again these were now real customers strangers somewhere on the internet who are ordering dvds for themselves you see in the weeks leading up to the website launch the netflix team had infiltrated online forums and bulletin boards for movie fans and started building up profiles on these sites as if they were normal users then as soon as the netflix website launched they started making comments like anyone try out that new dvd by mail company yet netflix looks like they have hundreds of dvds prices are pretty good too obviously they gave no indication they worked for netflix and so people on these forums just thought it was genuine comments which helped drive some movie fans to the netflix website right from day one mark was excited and went off to the other room in the office to do his scheduled interviews with the media to help drum up even more publicity for netflix's launch and for 15 glorious minutes the orders continued to roll in but denmark noticed the bell has stopped ringing meaning the orders had stopped coming in and it soon became clear from the worried expressions from everyone else in the office something had gone horribly wrong turns out they'd had too much traffic and their website had crashed remember this was long before the days of cloud hosting but you could instantly just add more servers and bandwidth back in 1998 you had servers physically in your office to host your website netflix hadn't brought enough of them so someone had to run to the electronics store nearby to buy some more servers they'd simply not expected demand to be this high on day one of course it was a good problem to have but it was also incredibly stressful all that work over the last few months preparing to launch and now just 15 minutes in and people couldn't even access their websites and there was no guarantee those people would check back again later mark's mind was racing thinking of all the potential customers they were losing out on because of this when one of their employees returned from the store with eight new servers they got the website back online this time the website lasted 45 minutes before it crashed yet again not just that the netflix team ran out of boxes to ship the dvds and they ran out of ink to print the shipping labels despite all the chaos though they finished the first day with 137 orders which was far higher than anyone had expected and they've almost certainly had even more orders if the site hadn't been crashing most of the day so it was an incredibly promising start for the company of course it was clear there was a huge amount of work ahead there were several massive things they'd completely overlooked like they hadn't set up automatic order confirmations so the team was manually emailing everyone who placed an order plus they hadn't even thought about how to handle international orders to other countries and of course the most urgent issue of all simply trying to stop the site from crashing the netflix team knew they'd be working very late that night so they ordered pizza feeling optimistic about their new company of course at that moment not a single one of the netflix team could have possibly predicted what would happen next [Music] in netflix's first full month after launching their revenue passed ninety four thousand dollars however only one thousand dollars could actually come from renting dvds the rest was all from selling dvds you see when netflix first launched they gave people both options you could buy the dvd for around 25 or rent it for four dollars and mark and reid had expected most people would rent in fact they hadn't just expected people to rent they needed people to rent the business model of renting out dvds was much better because netflix could rent out the same dvd over and over again hundreds of times and thus make far more money in the long run but weirdly hardly anyone was choosing to rent from netflix people were just buying the dvds as a one-time transaction now sure it was great they were making lots of dvd sales but it wasn't sustainable as soon as other large companies started selling the exact same dvds as netflix they would become a commodity as everyone would be selling identical products so netflix's profit margins would shrink and their sales would decrease the only reason netflix was selling so many dvds in their first month was simply because nobody else had started selling dvds on the internet yet but mark and reed knew for a fact that other companies would soon start doing it so basically netflix needed people to start renting more dvds instead because then they'd have higher profit margins and a business model that was harder to replicate meaning they could build up a loyal customer base before anyone else funnily enough just a few weeks later in the summer of 1998 mark and reid got a call from amazon founder jeff bezos he wanted to meet them bezos had started amazon as an online bookstore but now he decided he wanted to build an everything store and he was eyeing up dvds that's one of the next products amazon could start selling since amazon was pretty flush with cash after going public jeff was looking at the possibility of acquiring netflix and integrating it into amazon in many ways this was win-win for both sides for amazon it would be much faster for them to get into the dvd market by buying netflix instead of starting completely from scratch and with mark and reid it would mean they get a huge chunk of money for just a few months of work plus they knew if they didn't sell netflix to amazon it was only a matter of time before they were in direct competition with them there was just one problem though mark and reed didn't want to sell netflix they really felt there was huge potential with the online dvd rental idea and they just devoted the last few months of their life to building a great small team a working website and the largest collection of dvds they were just getting started so mark and reid declined bezos's offer to buy netflix however on the plane ride back home after meeting with amazon mark and reid came to another realization offering both dvd sales and rentals on the same website was probably over complicating things too much it was basically like running two separate businesses and it was confusing to customers as well both mark and reid strongly agreed renting dvds was the business they actually wanted to be in so instead of selling their entire company to amazon they came up with a deal once amazon started selling dvds netflix would redirect their users who wanted to buy dvds to amazon's websites and in return amazon would direct customers to netflix advertising it as a way for customers to rent dvds in theory this could solve everything a partnership with amazon would massively boost netflix's profile it would keep amazon as a friend not an enemy and most importantly it would mean netflix could solely focus on dvd rentals which is the business model mark and reid actually wanted to pursue and that they felt would work best long term but remember in the first two months netflix had been running so far almost all of the money netflix had made had come from selling dvds not renting so netflix were about to ditch the part of their business that was actually working well what could possibly go wrong in order to get more people renting dvds from netflix mark made a deal with some of the biggest manufacturers of dvd players like toshiba and sony the plan was that whenever someone bought a dvd player if they entered the product's serial number on the netflix website netflix would let them rent some dvds for free in theory it made sense because as a new customer bought a dvd player they'd immediately sign up for netflix for this promotion to get the free dvd rentals and then hopefully get hooked on the service and become paying customers but in reality it was an absolute disaster netflix initially offered three free dvd rentals to anyone who bought a dvd player but sony pushed netflix to make it 10 free rentals instead this was really expensive for netflix but they desperately needed customers so they agreed the problems then began when the netflix team noticed they'd ship loads of free dvds to the exact same address it turns out sony had put the serial numbers for their dvd players on the outside of the boxes which meant anyone could see the serial number without actually buying the dvd player as a result people could go into their local electronics store simply look at the small print on the bottom of the dvd player boxes and then claim 10 free dvds from netflix with every single serial codes in other words the promotion was getting abused and netflix were getting ripped off but it gets worse even with the legitimate customers who actually had bought a dvd player once they'd redeemed their free dvds they never went back to the netflix websites people would claim the free ones from the promotion but less than five percent became regular paying netflix customers so although the promotion most definitely increased the amount of dvds netflix sent out it was costing them huge amounts of money with very little to show for it netflix realized they needed to try a new promotion idea and this time they decided to go for a publicity stunts congress had just released the full footage of bill clinton's grand jury testimony where he went into detail about his affair with white house intern monica lewinsky this was an event all of america was talking about and lots of people wanted to see the footage of the trial so netflix decided to convert the video footage onto dvd formats and give it away on their website for just two cents with the tagline have your two cents on the clinton testimony just as netflix had hoped many newspapers wrote about the promotion giving netflix the free publicity they needed and at first it seemed like a big marketing success for just a few thousand dollars netflix attracted thousands of new customers to their websites but then once again things went wrong you see netflix had partnered with a company to help them convert the videotape of the clinton trial onto dvd and then make lots of copies of it but it turns out that the company was also offering a similar service to people making adult movies and somehow whilst creating these bill clinton discs for the netflix promotion they accidentally mixed some of the adult movies in with the clinton discs since all the dvds were unlabeled nobody realized about the mix-up until netflix had already sent some of their users some pretty hardcore stuff of course as soon as netflix realized about the mix-up they sent an email apologizing to everyone who'd signed up for this promotion and asked that people return the explicit dvds so netflix could send them the proper bill clinton dvd as they'd advertised although funnily enough not a single person returned it however all of this didn't change the fact that netflix was hemorrhaging money none of their promotions were leading to returning customers and the deal they'd made with amazon wasn't going well either netflix had sent them loads of traffic but amazon wasn't sending many customers back towards netflix things were all looking quite bleak and mark couldn't help wondering should we have just sold to amazon when we had the chance or should we have stuck with selling dvds instead of renting them and then things got even worse reid pulled mark aside and said i'm worried about us actually i'm worried about you about your judgement now remember reid and mark were both co-founders of netflix reed had put up most of the money but hadn't been as active within the company meanwhile mark was running the company as ceo devoting most of his time to it however reed opened his laptop to a powerpoint he'd repaired and began to explain some of the many issues he felt netflix was having reed tried to explain as politely as he could he was concerned about mark's recent choices for example some of his decisions with promotions hiring and the finances of the company which admittedly were in a pretty bad state reed had always been pretty blunt and direct but this presentation completely caught markov dodge he was furious was reid seriously gonna give him a presentation on all the ways mark was failing as a ceo reed eventually ended by saying he wanted to become the netflix ceo and that mark should move to the role of president he said there'd be a team working together but reed should have the official ceo title mark was completely overwhelmed by all this he was angry he was hurt he considered reid not just a co-founder but a good friend and this felt like a betrayal but the worst part of all for mark was that he knew reid was right even though mark had been essential in getting netflix started reid simply had a lot more experience of running a company compared to mark and since reed had a very good reputation in the tech industry after selling his previous business he knew that reed being ceo would be more popular with investors and help him get more attention and funding after mark had calmed down and rationalized the whole thing he accepted his job title wasn't that important to him anyway and he'd still be heavily involved in any big decisions plus he felt with reid now giving netflix 100 of his focus they had a better shot of making this work of course making reid ceo wasn't magically going to fix all their problems the reality was they were still struggling to get enough customers renting dvds from them for the business to be profitable mark went for a run to clear his mind and try to process everything and whilst he was running an idea struck him an idea that might just change everything up until this point netflix had basically just been doing the same thing as blockbuster but on the internet and renting dvds instead of vhs tapes wow but then mark thought instead of people renting individual movies one at a time and keeping them for just a couple of days what if netflix completely ditched the return dates and late fees and instead offered a recurring subscription plan for a flat monthly raids you'd get four dvds at a time and whenever you were done with the film you'd simply swap it for a different one but you'd always have some movies at your home meaning you had complete flexibility of when to watch things and when to swap the dvds for new ones it was perfect because before this change blockbuster had a clear advantage over netflix if you wanted to watch a movie you could just drive down to their physical stores unlike netflix where you had to wait two or three days for the dvd to ship but with this new netflix subscription model where there were no set return dates and no late fees it meant customers could always keep a few movies at their home so they were ready to watch instantly whenever the mood struck so you didn't have to plan things out in advance reed loved the idea too and once netflix switched to their subscription model immediately their popularity grew on the first day they introduced this offer 90 of people who saw it signed up to the subscription plan that's an insanely high conversion number things were suddenly starting to look up for netflix not only did they now have a better business model but dvds were starting to become more mainstream and dvd players had started to get much cheaper which of course all led to more interest in netflix and thus their subscribers started to grow more and more every month and because the subscription automatically renewed each month these were repeat customers so their revenue was growing rapidly as well however things got even better for netflix when they started developing an algorithm to match the right dvds to the right people netflix had realized that as they added more and more dvds to their collection it was important users could easily find movies they liked not only would it make users more likely to renew their subscription each month but netflix wanted a way for people to discover movies that were cheaper for the company to buy because if everyone was just renting the newest most in-demand dvds it'll be more expensive for the company but a recommendation algorithm would help people find dvds specific to their tastes so netflix developed an algorithm called cinematch to pick up on patterns between users who watch similar things they also started asking users to rate the movies they watched to help their prediction algorithm understand what each individual was enjoying and what to recommend more of once again this gave netflix another advantage over competitors so after several rocky years of changing their business model multiple times netflix were now finally on track and then it's described as nothing short of breathtaking a points drop never before seen on the us market this closing bell might as well have been an alarm so savage was the silly for an internet-based company that was investing heavily in growth the dot-com crash was a disaster funding for internet companies completely dried up and the sentiment towards internet businesses changed as a result mark and reed had to take some drastic action [Music] although netflix had started gaining a lot more customers since switching to their subscription plan model the company was still tiny compared to their biggest movie rental rival blockbuster whilst netflix was on track to make around five million dollars in revenue in 2000 blockbuster made nearly 800 million dollars in revenue in late fees alone and blockbuster was valued at around 6 billion and had around 60 000 employees this was truly david vs goliaths netflix had just one thing in its favor blockbuster had been extremely slow to react to the rise of the internet blockbusters seem to have the mantra if it ain't broke don't fix it and so they'd stuck with their physical stores and did things the way they always had the problem for netflix was that they knew eventually blockbuster was likely to launch their own dvd by mail subscription service once it became clear that more and more people were switching to netflix now before the dot-com bubble burst and internet stock prices came crashing down investors were throwing money at any companies that had com in their name and easy funding meant it would be possible for netflix to invest heavily in growth and get a massive head start before blockbuster or any other big companies started copying their idea but after the dot-com bubble burst no investors wanted to go anywhere near a business with dot com in their name and so getting the funding netflix needed for their big expansion plans suddenly seemed impossible however mark and reid had an idea to save the company maybe blockbuster would want to buy netflix it seemed like a win-win a win for mark and reed because they could essentially continue running netflix but be backed by blockbuster's huge resources working as a team rather than competitors and it would be a win for blockbuster because they'd immediately be able to kick-start their online business and give their customers an alternative option so read use some of his contacts to try and arrange a meeting with blockbuster and for a while they didn't hear anything back at all netflix weren't sure if blockbuster even knew who they were but weeks later they had a call to say blockbuster could meet with them the following morning it was extremely short notice but mark and reid dropped everything got on a plane and went to meet the blockbuster ceo the meeting was intimidating especially as blockbuster had most of the power in the negotiations but reader mark explained why blockbuster and netflix should join forces how together they could dominate in-store and online movie rentals the blockbuster ceo heard them out listening patiently but eventually he said that he felt the dot-com hysteria was overblown and the online business models like netflix just weren't sustainable finally he asked out of curiosity what price are you looking to sell netflix for reid had rehearsed this line in his head and replied 50 million dollars and basically they they laughed at us they laughed at us because of the hubris that in the heat of a dot-com meltdown this upstart direct mail video business would dare be worth 50 million dollars and it was crushing the blockbuster ceo tried to hide his smirk but it was immediately clear to read a mark that blockbuster had no interest in buying netflix and he thought their valuation was a joke mark and reid left the meeting feeling devastated and extremely anxious about whether netflix was even gonna survive one thing was clear though if blockbuster didn't want to buy netflix then netflix somehow had to beat blockbuster the struggling internet startup somehow had to take down the multi-billion dollar empire it was time for david to beat goliath since netflix knew money was going to be a lot tighter they had to lay off a third of their employees however something interesting happened once they did this they seemed to get more work done with less people they kept only their best employees their star players and as a result the company became leaner and more efficient more focused and decisive plus their service was genuinely popular with customers so it seemed like netflix might just about make it through these difficult economic times but of course to have any hope of competing with blockbuster they still needed money and so in 2002 netflix had its ipo which is where a company starts selling their shares to the public on the stock market as a way to raise more money netflix made a spectacular debut on the nasdaq stock market today the next couple of years saw great growth for netflix which inevitably attracted blockbuster's attention blockbuster realized after we went public that we were going to be a real threat um and they geared up an effort they launched to 2004 and from 2004 2007 we had a very fun scary epic battle with blockbuster it took until 2004 for blockbuster to eventually launch their own streaming website with a dvd by mail rental service exactly like netflix had and from that moment on the two companies were in very direct competition however mark randolph netflix's co-founder and original ceo would not be joining for the battle with blockbuster ever since reid's powerpoint where he took over a ceo things had been a little different mark's responsibilities at the company had decreased and he felt a little out of place the original netflix team of eight employees had now become a team of hundreds and whilst the growth was great mark missed those early startup days the tight-knit family working together to solve all kinds of different challenges might miss the spontaneity of everyday being something totally different when you're a startup and thus mark decided to step away from netflix and instead focus on helping other small startups in their very early stages so reed was left to run netflix himself and he was well aware that the battle with blockbuster was going to be brutal especially now that blockbuster was essentially offering the exact same dvd by mail service as netflix as well as having their physical stores too and remember even though blockbuster had been so slow to adapt blockbuster was still a much larger company than netflix and thus they had a bigger budget to spend in an interview at the time reed said that blockbuster was throwing everything but the kitchen sink at them and so the next day the rockbuster ceo literally sent a kitchen sink to netflix's office seriously the message was simple blockbuster finally saw the threat of netflix and were gonna put everything they could into beating them so netflix initially thought the solution to this was to experiment with a bunch of new features to try and differentiate themselves from blockbuster's new copycat dvd by mail service firstly netflix created their own social network called netflix friends where you could share with your friends what you are watching and see each other's movie ratings and recommendations netflix also experimented with other ways to make money like selling discounted used dvds selling banner advertising on their websites and even buying the movie rights to some small films from sundance and other film festivals and then putting them onto dvds so they owned the contents unfortunately none of these new initiatives really helped netflix much at all and reid quickly came to the realization that they were spreading themselves too thin by focusing on all these new ideas in hindsight we realized when attacked we should retreat to do the core better and not try to broaden the uh surface of attack essentially so now when people say aren't you getting into news or sports we're like absolutely not in other words netflix realized their best chance of success was to be laser focused on improving their core business and not getting distracted by other ideas blockbuster on the other hand did not come to that realization they started experimenting with totally new services like renting out video games as well as movies meanwhile netflix stayed focused on movies and tv shows and most importantly they continue to look to the future even though by this point they were shipping out over a million dvds by mail every day it had become clear to the netflix team that dvds could not be their end game internet speeds were getting faster and faster and in 2007 netflix decided to launch a video on demand service or in other words letting people stream movies and tv shows over the internet netflix took some inspiration from youtube for this but to netflix's credit nobody else had probably attempted to stream entire tv shows and movies over the internet like this before so it was a big move now initially netflix's library of content they had the rights to stream over the internet was very small and so they kept their dvd rental subscriptions as well the streaming site was more like an added bonus for subscribers and a way to differentiate themselves from blockbuster but netflix knew that as internet speeds got faster eventually they ditched dvds completely and focused solely on streaming the great news for netflix though was that back then they were the only streaming company and so it was relatively cheap for them to get licenses to use other people's content as there was no competition in fact they made a great deal with a company called stars for 20 million dollars which gave them the rights to stream a huge library of popular content including disney and sony movies netflix also made deals with xbox playstation tivo and apple so that it was easy for people to watch netflix's streaming service on their tvs and other devices since this was before the days where everyone had a smart tv with apps on but most importantly by launching this new streaming service it allowed netflix to begin expanding internationally up until this point netflix had really just focused on the us markets because the business model of sending out dvds by mail meant they were relying on the us postal service and entering other countries would have meant whole new logistical challenges to ship out the dvds but with this new streaming site they'd launched netflix could now pretty easily enter any country in the world since they didn't have to ship anything physical meanwhile netflix also continued to invest heavily in their recommendation algorithm to match users to the right contents because they'd realized that their previous rating system wasn't actually the best way to understand what customers really wanted everyone would rate schindler's list five stars and then they'd rate um adam sandler you know the do over three stars okay but in fact when you looked at what they watched it was almost always adam sandler okay and so what happens is when we rate and we're metacognitive about quality that's sort of our aspirational self um and it works out much better to please people to look at the actual choices that they make so in 2007 netflix ran a public contest called the netflix prize where they offered a million dollar reward for the best prediction algorithm to help match users to the right contents the contest was open to anyone at all and so it not only helped netflix get a better recommendation algorithm but it was great marketing for the company too because lots of new customers heard about netflix because of this million dollar competition they ran over the years netflix would continue to invest in trying to personalize their service to each user for example nowadays different users see different thumbnails on netflix's websites based on what netflix's algorithms think someone is more likely to click on using all the data they have about a user's viewing preferences however whilst netflix were making a lot of good decisions in the mid 2000s blockbuster was also busy trying to promote its dvd by mail rental service to try and win back some of the customers they'd lost to netflix rockbuster even decided to ditch their late fees like netflix had done however blockbuster got a little greedy here whilst they did scrap late fees for people who returned movies late they changed it so that if you didn't bring the movie back within a week of the date you were given they automatically charged you the full price of buying the movie and said it was yours to keep whether you wanted it or not so they tried to spin it like they were making a really great improvement to their service like netflix had done but it came across as a bit of a greedy cash grab blockbuster also had rewind fees if you'd forgotten to rewind your vhs tape back to the beginning when you returned it basically it seemed like blockbuster's strategies to make more money often involved giving the customer a worse experience or squeezing money out of them whereas netflix back then tried to make more money by improving the customer experience gradually more and more customers started to drift over to netflix especially after netflix had launched their streaming site which was ultimately just way more convenient than renting dvds by mail or in physical stores and thus by 2010 blockbuster had filed for bankruptcy video rental chain blockbuster has filed for chapter 11 bankruptcy protection blockbuster has been synonymous with the home video market but has been losing money and market share for years competition from the likes of netflix and redbox weighed on the retailer dependent on its brick and mortar infrastructure but why exactly did netflix be blockbuster and are there any lessons we can learn here well clearly blockbuster was consistently slow to react to changes in technology netflix was proactive about innovation blockbuster was extremely reactive and repeatedly failed to adapt until it was too late leaving them stuck in the past really if they had started two years earlier they probably would have won you know in perfect hindsight because they would have just over even though it was messy execution they would have overwhelmed us blockbuster was too busy making money with their current business model to realize how fast things were changing with the internet and netflix was always a few steps ahead plus the big issue for blockbuster was that they'd expanded so rapidly and had so many physical stores which meant they were terribly positioned to act quickly to technological changes all that expensive real estate blockbuster had which had once been their big advantage become their biggest weakness once things started going online in blockbuster's defense this type of thing isn't uncommon many big companies can't adapt quickly enough when their industry shifts think about how dominant nokia once were in mobiles or kodak in photography but companies get stuck doing things a certain way and are too bloated and bureaucratic to react quickly to changes so a new leaner startup innovates and takes their place and that's why netflix deserves some credit here once they'd finally got things running so well with their dvd subscription service it would have been tempting to stick with that but instead they started focusing on streaming instead and throughout netflix's entire history they've been like this like when they stopped selling dvds to focus on rentals or when they stopped normal rentals to focus on their subscription plan rather than be content with what was working they kept trying to improve and this was largely down to their extremely unique and bizarre culture which we're going to look at very shortly but for blockbusters management they must surely look back and think of how differently things could have gone if they just made a few better decisions like in 1999 blockbuster was approached by enron to make a video on demand streaming service pretty similar to the one netflix would make eight years later blockbuster could have dominated the streaming industry if they'd listened to this advice i've been the first ones to launch a streaming service as this article points out but essentially zero cost to itself blockbuster had been handed a video on demand infrastructure and yet because they were doing so well as they were and were unwilling to adapt to a new business model the deal never went ahead as if that wasn't bad enough remember as well that in 2000 netflix literally turned up at blockbuster's office trying to sell their company to blockbuster for just 50 million dollars which was virtually nothing to blockbuster who were worth billions at the time but they laughed them out the room of course if blockbuster had bought netflix they'd have probably stifled all the innovation anyway so there's no guarantee netflix would have gone on to become what it is today but still with hindsight it's crazy how different things would have been if blockbuster bought netflix when they had the chance having said all of that though it should be acknowledged that technically blockbuster isn't fully dead there is actually one blockbuster store left that's privately owned that's basically there as a nostalgic tourist attraction there was even a documentary made about this last ever blockbuster store which ironically was available to stream on netflix before we get to the next chapter i want to tell you about our video sponsor shipstation when you run a business every misplaced moment feels like a missed opportunity but shipstation gives e-commerce sellers more time to focus on the most important things by automating time-intensive shipping processes shipstation handles all your shipping and handling and it works with all your storefronts amazon ebay etsy and more and what i really like is they also give you deeply discounted shipping rates normally reserved for fortune 500 companies so it's time to let go of all those shipping tasks shipstation can do it better and faster sign up for a free 60-day trial today at shipstation.com magnates and start saving time on every shipment that's two whole months of shipping made quick and painless and it's free to try just go to shipstation.com magnates ship station make ship happen and then once you've done that let's get back to our story [Music] despite defeating blockbuster netflix now had another problem to deal with themselves you see in 2011 netflix made what reid has since called the biggest mistake in netflix's history at the time netflix was charging users 10 per month for a netflix subscription and for that you got to rent out a physical dvd and you got access to their streaming service both were included as part of one single package but since they'd launched their streaming service a few years ago it had really grown in popularity and it was clear to read that eventually netflix would ditch the dvd business model completely and solely become a streaming service since watching movies instantly over the internet was clearly way more convenient than mailing physical disks so we decided to split up netflix's dvd business and its streaming business the streaming service would be on the netflix website like normal but if you wanted to rent dvds you had to go to a brand new website they created called quickstar this was the first mistake suddenly users who wanted both streaming and dvds now had to use two separate websites with two separate logins next netflix told their customers that instead of ten dollars per month they'd now be charged eight dollars per month for the dvd rentals plus eight dollars per month for the streaming now if you only wanted one or the other that was great but most people had gotten used to having both for ten dollars now they were suddenly having to pay 16 for both it was a massive out of the blue price increase right in the middle of a recession where families were really struggling and people were paying more for a worse product because now they had to have two separate accounts managed through two separate websites the huge mistake we made is remember otan 2010 were in the middle of a recession still pretty deep as we said well it's eight dollars is a good price for the dvd plan it's a good price for the streaming plan so the combination which is 16 is the new price and the old price was 10 bucks so from the customer's standpoint um one day the price went up 60 in the middle of a recession and now they had to deal with two user interfaces instead of one so there was a huge uproar because we took 20 million u.s households in the middle of the 2008 recession and gave them a 60 price increase so then the mob effect and crowd effect kicked in and we went from love to hated very quickly it seemed like people hated everything about quikster including the name and so reed got on camera to make a public apology and tried to explain why they'd made the change we're making this video today to apologize in person or at least on camera for something that we did recently however the apology just backfired even further in fact snl even ended up making a parody of it but that's not all we knew you loved netflix because it was an easy to use website for all your movie needs to make it better we split it into two separate slightly more confusing sites netflix for streaming video and quickster which will handle dvd rentals did we spell a quickster in a normal way no we didn't though q-w-i-k annoying but easier right yeah and by the way we know it's off-putting to see the ceo of a powerful company rocking a goatee and teal shirt but trust us we know what we're doing the whole debacle hurt netflix's reputation and over 1 million subscribers left because of it as a result they killed off the quickster brand completely and reverted back to keeping everything on the netflix websites however despite this setback netflix moved on quickly and began working on yet another huge change but this time the change they were gonna make would be an unimaginably huge success streaming movies and tv shows over the internet was great of all the business models netflix had had this was clearly the best and users loved it too but there was one major risk netflix didn't own any of the content they were just licensing it which put netflix in a vulnerable position if license holders ever changed their minds and didn't renew their agreements with netflix now in the past when netflix rented out physical dvds once netflix had bought the dvd they could do what they wanted with that but with streaming content if license holders didn't renew the deal netflix would lose that content from its streaming service the solution was clear but scary original contents netflix making their own shows and movies reed had always been open to the idea of producing original contents in fact you may remember he actually tried to buy the rights to some small films back when netflix was solely just a dvd rental service but the issue had always been they just didn't have enough scale for creating their own content to be worth it because whether you have 10 000 subscribers or 10 million the price of buying a film is the same however in the few years after netflix started their streaming service and blockbuster filed for bankruptcy netflix subscribers and revenue had grown significantly every year especially once netflix started expanding internationally and so now it seemed like they could potentially afford to try and make their own content in 2011 a man named ted sarandos had the role of chief content officer and was tasked with finding the first original show for netflix to produce and after months of searching he returned with good news and bad news the good news was that ted had found a show called house of cards that he felt had massive potential to be a huge heads the bad news was that for netflix to produce it it would cost them around 100 million dollars that's because it was a show that needed a big budget to make and also lots of production companies wanted the rights to it including hbo now for context for netflix to actually make a profit on this hundred million dollar investment they basically needed to bring in around half a million new users who stayed subscribed for two years each so buying the rights to this show was an extremely risky and expensive gamble that reader would later call a bet the company moment but netflix took the plunge and bought the rights to house of cards and they began creating it as their first original tv show the show premiered in 2013 and was a massive success becoming the first online only tv series to receive an emmy nomination it was clear to netflix they needed to double down on this new strategy of producing original contents the main reason for this was that netflix now had other competitors in the streaming market like hulu and so other content producers had stopped giving netflix an exclusive license to stream their movies and tv shows netflix knew more streaming services would soon pop up as well and that they needed a way to differentiate themselves and having exclusive shows that nobody else had was the best way to do that netflix also realized that even though creating original content was expensive upfront in the long run paying licensing fees every year may actually end up being more expensive especially as some studios were starting to charge netflix higher and higher licensing fees once they saw how much money netflix was making so netflix dived into original content more and more every year upping their production budget further they initially focused more on tv shows as they're typically a bit cheaper to make and also they figured if people got hooked on a show they'd stay subscribed to netflix for future seasons but soon netflix was throwing money at all kinds of different content including some big budget movies in fact it even became a bit of a joke just how much content netflix seemed to be making netflix your green lit who am i speaking with uh yes hello we have an idea for a show that we think would be great for netflix okay great would you like a pilot or just go straight to an order of six episodes when netflix first started spending hundreds of millions on original content many questioned the strategy but as more and more streaming services later started competing with them and pulled their own content off netflix it became clearer that making original content was clearly netflix's best option and to be fair to netflix they're outspending competitors outspending hollywood studios and in 2021 alone they spent 17 billion dollars on contents and regis wants to keep upping the amount netflix spends on originals even further you don't think you're gonna ultimately have to take down spend no we plan on taking spend up quite a bit as a result netflix has won countless awards and even become the first streaming platform to get an oscar nomination for one of its originals no one goes to cinema no one really watches network tv everyone's watching netflix this show should just be me coming out going well done netflix you win everything good night but no no we gotta drag it out for three hours netflix also had an advantage in terms of the amount of data they had about their users and their viewing preferences which helped them make decisions of what type of shows to make and what to renew another advantage for netflix was that unlike traditional networks who typically operate in a single country netflix had users in pretty much every country in the world so when they produced a hit show in one country they could easily distribute it to their subscribers in other countries too for example we saw this with the korean show squid game which became a massive hit all around the world we have a show uh quicksilver out of sweden uh crime thriller um did super well in in sweden of course you expect that or hope for that but it did 15 times more viewing in the rest of the world cumulatively than it did sweden so we've got this huge uh opportunity there and so for a while it seemed like netflix was going to be a hugely dominant force in entertainment of course in present day netflix's position looks much less certain but we'll get to that soon what i think is really interesting though is that the company has managed to completely pivot their business model multiple times we can see here the four main stages of netflix number one it was selling and renting dvds by mail number two was their dvd subscription service number three was their video on demand streaming platform and number four is content production what's crazy to me is that netflix is older than google this is a company that's been around a long time and genuinely had a huge impact on multiple industries not to mention the fact they quite literally changed the way we consume shows since they pretty much pioneered the concept of binge watching by dropping whole series of a new show all at once so the real question we need to ask is how have they managed to innovate and stay relevant for so long and the answer was not what i expected before we get to the next part of the video i want to ask you a very quick favor if you're enjoying this video so far and you want to see more mini movies and documentaries like this please consider turning on the notification bell so youtube tells you about my future videos by the way my name is john but the channel is called magnates media because of magnate is someone with a lot of wealth influence and business success and those are the three main themes of this channel i've got some big plans in the works so i'd love it if you turn on notifications and join me for the ride thank you for your support you are a legend and now let's get back to the story when you first join netflix as an employee you're shown a short presentation that includes the following sentence adequate performance gets a generous severance package in other words if you're just average at your job you'll quickly get fired this is because netflix's ceo reed hastings strongly believes in the concept of talent density to illustrate what this means we need to look at a famous experiment where students were divided into random teams to complete various tasks however some teams included a paid actor who was told to be either lazy or overly negative about the work and not take the task seriously in dozens of trials repeated over several months the group with the underperformer did worse than the other teams by 30 to 40 percent meaning just having one team member who wasn't pulling their weight massively affected the performance of the rest of the group as well it was like their poor performance was contagious and brought down the enthusiasm and quality of work for everyone in the team if you've ever been in a group project at school or work you may have experienced this yourself and if you have an experienced step maybe you were the underperformer in the group however the reverse is true too if you have a team full of only top performers a team of talented people or equally wanting to work hard and do well and achieve incredible results it brings out the best in each other this is why netflix are quite ruthless about firing anyone who isn't an a player because otherwise they bring down the performance level of everyone else netflix also believes in the rockstar principle which is that top employees don't just outperform other people by maybe twice as much it's more like the top talent outperforms average employees by 10 times or maybe a hundred times as much so netflix believes one absolute rockstar employee who's amazing at their job is better than 10 people who are just decent at their job quality over quantity so in order to try and attract that top talents netflix say they pay top of market salaries basically they'll pay a lot of money to get what they believe are the absolute best candidates available they'd rather have less employees but higher average talent per employee or in other words higher talent density this then has the added bonus that the top employees generally want to work with other top employees so once you build a culture like this it automatically attracts other top performers however netflix is very open about the fact they're a team not a family so the analogy we use a lot is professional sports you know if you want to have world class and world cup winning teams you need to assemble an amazing group of people at every position basically they'll work together to support each other but ultimately netflix wants the best people in each position within the business meaning if you stop performing well you could be replaced you're fighting for your position but netflix believes the top performers want map to be on a winning top-level team now obviously every company wants the best employees so how do netflix actually try to enforce this well they have something called the keeper test what's different about netflix is the keeper test and what we say is for managers is would their people if they were leaving to go to another company would we try to change their mind to keep them we would fight to keep them and if we fight to keep them great if they're someone that you wouldn't fight to keep we say give them a generous severance package four to six months of compensation now and let them go find a place that's a better match and let us find a great new talent that may be one of those great people basically if a manager wouldn't mind if an employee on their team left the company then they should fire them as brutal as that may sound netflix offer a minimum of four months severance pay so even if the employee hasn't been there long they'll still get a big payout if they're fired the reason for this is firstly so netflix don't get any lawsuits for unfair dismissal but secondly some managers don't feel guilty about firing people if it's not working out as they know the employee will get a big payoff however another reason why netflix have tried to develop this culture of only keeping high performers is that then you can have less rules and restrictions in place which leads to more creativity and innovation for example netflix don't track how much vacation time employees take as long as they get their work done they also don't have an expense policy they just tell employees to act in netflix's best interests and make their own decisions even for big purchasers this empowers employees gives them responsibility and means netflix can act faster without getting slowed down with bureaucracy like managers are proving every little decision reed has a saying that if you dummy proof things too much you end up with only dummies working for you and that you stifle creativity and innovation if people don't have freedom netflix also shares all of their internal plans and secrets with literally every employee at the company even if they're a brand new low-ranking employee this is very different to most companies where information is segregated and you only know what you need to know to do your specific job but netflix tells all their employees about their long-term plans and they even share their quarterly financial results with all their staff before they release publicly which very few companies do because it would be disastrous if that information got leaked early but netflix does it as a sign of trust in their employees however perhaps the weirdest part of all of the netflix culture is their policy of radical honesty where everyone is encouraged to be brutally honest with their feedback and suggestions to other employees and this is true for lower level employees too they're encouraged to say if they disagree with their team leader or any other managers in the company even reid himself as the ceo asks employees to critique him with constructive criticism so he can try to improve his own performance there was even one incident where an employee told him in the politest way possible he needed to shower as reed had been working so hard he'd stayed at the office overnight and was starting to smell now if you're thinking wait doesn't this culture create some problems then the answer is yes it absolutely does firstly giving employees so much freedom over spending netflix's money has obviously led to some abuse like there was one employee who spent over a hundred thousand dollars on personal travel trips using his company credit card before someone realized secondly the unlimited vacation policy sometimes leads to people being afraid to take any vacation at all since they don't have a specific allotted amount of vacation days plus when you consider the high performance netflix demands and how they'll fire you for average work it's understandable people are reluctant to take time off thirdly sharing all that inside information with employees has led to internal company secrets getting leaked to the public and competitors and their radical honesty policy has undoubtedly led to arguments there was even an article about netflix that talked about a culture of fear the headline said employees describe a climate of fear where peers are encouraged to rate each other emails are sent slamming former workers and managers feel under constant pressure to fire people it sounds brutal right well the truth is the netflix culture would suit some people but not others however reed's core belief is that if you have really amazingly talented employees and you give them this level of responsibility and freedom generally the gains outweigh the losses read uses the analogy of a jazz band where the musicians all know the overall structure of the song but there's freedom for improvisation and spontaneity from individuals whether musicians can riff off one another ultimately reid believes in business their biggest risk isn't making a mistake it's failing to attract top talent invent new products or change direction quickly enough when the situation changes he'd rather try things and they fail rather not innovate enough at all and looking at what happened with blockbuster maybe he's on to something there however if i was making this video a couple of years ago this is where the story would end it would be a success story with a happy ending for netflix but that is no longer the case netflix is currently in trouble and this time they may not be able to fix that we are right in the midst of the streaming wars we are there's a lot of competitors all throughout the world all the major media companies are investing in their own services i do not think that they're gonna have a great quarter or have anything great to say about uh you know new subscribers netflix has become a victim of their own success they led the way with streaming and then just about everyone who makes movies or tv shows realized they wanted to get in on streaming too in fact not only does netflix now have to compete against so many different networks who've launched their own streaming services but they've also got a battle against giant tech companies like apple and amazon who've got into streaming and producing original content as well and of course it's definitely not ideal that amazon is their competitor it's the one who is powering netflix using amazon web services all this competition is clearly bad news for netflix in multiple ways firstly of course the simple fact that more competition obviously means consumers are more likely to pick a rival service instead of netflix or perhaps subscribe to netflix for a couple of months but then cancel and switch to a different service for another few months however the real bad news for netflix was that all these companies started pulling their content off netflix to use on their own service instead netflix used to have so much content from disney and hbo and all these other networks and now they've pulled it all off netflix for their own streaming sites instead as a result netflix has lost a lot of big shows like the office and friends they've lost movies from marvel and disney and whilst netflix do of course they'll have some third-party content they license it's nowhere near as cheap for them to license it as it was when they first started however despite all of the competition until fairly recently netflix still looked to be in a good position thanks to all the original content they're making plus netflix was one of the few companies who massively benefited from the pandemic because suddenly the entire world was stuck at home looking for stuff to watch and so netflix's subscribers grew substantially but in 2022 netflix announced for the first time in a decade that they'd lost subscribers and worse still they admitted it's gonna get harder to grow and they expect to lose even more subscribers netflix's share price then had a truly remarkable implosion in just a couple of days they lost 50 billion off their market cap and netflix share prices still continued to plummet rapidly things only got worse for netflix when they started talking about their new plans to try and make more money for example netflix said they wanted to crack down on password sharing this is a complete u-turn on netflix's strategy when subscribers were growing netflix even once tweeted love is sharing a password but now their growth is slowing they seem to want to make sure people aren't sharing passwords with friends or other households this was made even less popular when netflix decided to also raise their prices again it does seem to be a worrying parallel here with blockbuster which is that when growth slows they tried to squeeze more money out of existing customers which resulted in making the service worse instead of innovating to make the service better likewise netflix is considering introducing a cheaper subscription plan option that has ads on it so you'd still be paying to watch netflix but you'd be getting ads as well this idea was also met with a lot of criticism because even though netflix will continue to offer an ad free option as well you'll be paying a higher price for that now when a lot of people hear these proposed changes it's easy to think netflix are basically just being greedy and driving people away but to be fair to netflix it's not like they want to remove the good shows it's just they've lost their license rights it's not that they want to annoy users with ads it's just they're trying to find a way to keep subscribers who want lower price subscriptions and as for increasing the price in the first place well they want to raise more money to invest in making more original content since they've lost so many licenses to other people shows i think the more justified criticism of netflix is firstly the quality of shows they're making or as snl put it here's a look at one of our actual pitch meetings so this show is about a girl named jenny yes here's money go nathan netflix has been throwing absurd amounts of money into content like 100 million dollars for jerry seinfeld comedy specials 20 million dollars each to ryan reynolds the rock and gal gadot for starring in red notice netflix have literally had movies that have cost hundreds of millions of dollars each and that wasn't really an issue when netflix subscribers kept growing so rapidly but once subscriber growth slows the question becomes is this sustainable do they need to double down on truly quality content instead of just pumping out quantity and then even when netflix does make a good show they often seem to cancel it too early and people are less likely to get into a show if they know it's been cut short without a proper ending if you look at people's comments on netflix the sentiment towards them has definitely changed recently to many it feels like their value proposition has got worse less selection higher prices which is why they need to get their success ratio higher with their original shows because many of their competitors have much bigger back catalogs of content that people already love when disney plus launched they set a target of 60 to 90 million subscribers by 2024. in reality they hit 90 million by early 2022 meaning they're way ahead of schedule and doing even better than expected to make matters worse for netflix there have even been issues internally lately with some employees working out on the company in protest over some of the content netflix produced which basically led to netflix telling employees to leave if they're offended by its contents however let's play devil's advocate for a moment here is netflix really in as much trouble as some people are making out there's a lot of talk about the end of netflix but the reality is they're still the largest streaming service in the world by a wide margin they currently have around 220 million subscribers plus the fact netflix's subscriber count was down slightly for the first time in a decade it's also down to a couple of other reasons for example netflix suspended their service in russia because of the war in ukraine which caused netflix to lose seven hundred thousand subscribers if they hadn't done this then netflix subscribers would have still been up from the previous quarter and we wouldn't have had so many headlines about netflix losing subscribers secondly netflix saw a massive increase in subscribers during the pandemic so it's not actually surprising that they've dipped a little now that things are getting back to normal because not as many people are watching tv their subscriber levels are still higher than they were before the pandemic and thirdly with inflation rising so rapidly it's also not surprising some people would have cancelled their subscription these are difficult times for some people but just because they've currently stopped their netflix subscription doesn't mean netflix is now doomed to fail so basically i think whilst netflix are inevitably gonna lose some of their dominance with all this competition it's hardly the death of netflix like some people are claiming sure netflix is in a difficult situation right now and things could definitely get a lot worse if they don't make some changes but that's what they've always done and so i wouldn't necessarily bet against them you know we've gone through a lot of changes and we've always figured them out one by one we lead by a significant margin in streaming and streaming is continuing to grow around the world what is pretty clear though is that the streaming war is bad for consumers in most industries it's good for customers when there's lots of competition because it forces businesses to make their product or service better or cheaper so customers choose them instead of a competitor but with streaming actually it was much better for consumers when netflix had a near monopoly on streaming because then everything was all in one place for an affordable price now everything's fragmented across so many different services streaming was once meant to be a cheap and easy alternative to cable but now to watch everything you want you need potentially hundreds of dollars a month to get all the different subscription services and use multiple different user interfaces to try and find what you want and so for most people they now have to miss out on a lot of shows they want to watch it's kind of frustrating if someone tells you about a great show but you need a whole new subscription service to watch it which means talking about shows with other people isn't gonna be quite the same if everyone's got different subscriptions of course you could argue that all these different streaming services throwing millions and millions of dollars into original content doesn't mean more shows are being produced overall which means more variety so maybe it's not all bad but as more and more separated streaming services pop up and prices continue to increase it will be interesting if this has an effect on piracy however from netflix's perspective whilst it's true they're losing market share to other streaming services the streaming market is growing overall they may have a smaller cut of a pie but the pie is getting bigger as there's almost certainly a lot more people who are going to start streaming over the next few years as traditional tv declines plus more than a third of the world haven't even used the internet yet so there's evidently room for growth perhaps the bigger issue for netflix is not so much other streaming services but simply the general battle for attention reid himself has commented before that he views their competition as all forms of entertainment even things like video games we compete with fortnite more than hbo um meaning that fortnite gets a lot more hours of viewing and ultimately it's about competing for those hours of viewing of course this means netflix's competition even includes magnates media so please remember to subscribe since i'm gonna need all the help i can get but what reid's saying here is definitely true and in particular there is an argument that tick tock is a really serious threat to netflix tiktok gets all its content produced for free from its users in contrast to the 17 billion dollars netflix is spending this year alone on original contents tick tock also has much more data on its users and thus its recommendation algorithm is better plus you don't have to actually choose what to watch on tik tok it just auto plays unlike netflix where you can find yourself scrolling and scrolling trying to find something you want to watch plus you then have to commit maybe 20 minutes to an episode unlike tick-tock where the content is typically under 30 seconds so you can watch as long as you want now personally i don't think the rise of short film content is a good thing i don't like tick-tock or the way it operates but from a business point of view techdoc is doing incredibly as this graph shows tic toc's parent company bike dance was well behind netflix in revenue a few years ago now they make twice as much youtube is also clearly a huge threat to netflix and one of the most fascinating examples of this is that mr b squid game video got more views when it launched than the actual squid game tv show and of course youtube didn't pay a penny in production costs my point here is that to view netflix's problem solely through the lens of a streaming war isn't actually the full picture this is an attention war and even though tiktok and youtube sometimes get labelled as social media they're not really you don't tend to interact with friends like you would on facebook or instagram your feed is fully tailored to you and you're just consuming video content like you would on netflix ultimately though whilst the future does look uncertain for netflix right now this is definitely not the end of the netflix story and there are also plenty of lessons we can learn from netflix like focusing on doing one thing really well instead of diversifying and spreading yourself too thin or looking ahead to the future and pivoting to adapt to changes in technology no matter how well things are working in the presence and so it's gonna be fascinating to see whether netflix manages to do that once again having said all that if netflix really does fail to innovate and they end up going bankrupt since there is technically still one blockbuster store left it would be a pretty bittersweet irony if blockbuster actually managed to outlive netflix i hope you've enjoyed this journey through netflix's history and if you want to understand more on why tick tock is a real threat not just to netflix but many other businesses as well click here to watch my documentary on the insane story of tick tock but for now all that's left for me to say is thank you for watching this video to the end you are a legend and i'll see you in the next one cheers

Channel: MagnatesMedia

Views: 5,593,415

Keywords: Netflix, netflix movie, the netflix movie, netflix documentary, netflix history, netflix story, how does netflix make money, Why is Netflix losing subscribers?, Why is Netflix failing?, why is netflix stock down, NETFLIX, netflix, magnatesmedia, magnates media, magnetsmedia, magnetmedia, netflix vs blockbuster, how did netflix beat blockbuster, business stories, business, marketing, business movies, qwikster, marc randolph, that'll never work netflix, reed hastings, netflix culture

Id: UXZzyKTsBMw

Length: 68min 34sec (4114 seconds)

Published: Sun Jul 31 2022