• Netflix was founded by Marc Randolph and funded by Reed Hastings, who eventually took over as CEO.
• In 2004, Blockbuster launched Blockbuster Online, which caused Netflix’s stock to plunge.
• Netflix waited out Blockbuster, knowing that the company was carrying $1 billion in debt and would eventually have to raise prices.
• Blockbuster responded by cutting prices and launching Total Access, which was a great bargain for customers.
• Netflix eventually offered to buy Blockbuster Online, but the offer was declined.
• In recent years, Netflix has faced competition from other streaming services, which has caused revenue growth to slow.
• Netflix believes that some of its competitors will seek to build sustainable, profitable businesses in streaming, and that its focus as a pure-play streaming business is an advantage.
• Netflix is now profitable and generating positive free cash flow, while its competitors are struggling to make money in streaming.
• Netflix has an advantage as a pure-play streaming business, and its aim is to be the first choice in entertainment.
• Netflix gets less leverage off of its international content than it once hoped for, and its old content holds less value than bulls once assumed.
• Reed Hastings stepped up to the CEO role and shifted the company’s culture away from Randolph’s family of creators to a top-down organization.
• Hastings excelled at execution, but the chief task for Netflix going forward is creativity and producing compelling content at scale.
Published January 23, 2023
Visit Stratechery to read Ben Thompson’s original post Netflix’s New Chapter
