NFLX – Demand Ownership Lessons
I didn't understand $Netflix(NFLX)$ 10 years ago, but I learned lessons from that mistake.
1. Users > Profits: In a digital business, it's critical to reach scale. Profits don't matter on the path to scale.
2. Delay Taking Price: Margins are low? Who cares! See #1.
3. Suppliers eventually have to bend the knee to the one who owns demand.
You don't say, "I'm going to watch Sony's K-Pop tonight." You say, "I'm going to watch Netflix."
Demand matters above all else.
Owning the customer is the ultimate goal.
The companies we CHOOSE to interact with are the ultimate winners on the market.
The biggest winner in streaming today is probably ESPN/Disney.
There was a real threat that Paramount Skydance would be a big player in sports after the $7.7 billion UFC deal.
Peacock has the NBA and NFL.
Then there's Apple, Amazon, and Netflix, who view sports as churn mitigation, not a core offering.
Too many bidders, all desperate for sports, was bad for ESPN.
So, WBD goes to Netflix instead of Paramount or Peacock, which leaves those two in a weaker position. Are they going to be able to put in a big bid for the NFL when that deal comes up? No!
ESPN becomes the biggest sports streaming platform with both the most subscribers and the most revenue from sports.
Disney still has to deal with Apple, Amazon, YouTube, and Netflix in streaming, but sports isn't core to what any of them do. ESPN is ALL SPORTS!
ESPN essentially has a monopoly on sports now. Anyone who signs with anyone else is playing in a smaller pond or is a side show. Who wants that?
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