business news in context, analysis with attitude

by Kevin Coupe

Netflix Inc. issued its third quarter results yesterday, and here was the number that seemed most noteworthy - that as of September 30, it is likely that Netflix had more subscribers (almost 30 million) than HBO (about 28.7 million).

It is a remarkable turnaround for a company that not that long ago, reeling from a public relations debacle created by pricing changes that seemed to annoy virtually every customer it had, was being relegated to the "irrelevant" and "arrogant" files by many pundits and analysts.

What seems clear is that the company's leadership has always known what Netflix is about - content, not a distribution system. While others saw those familiar red envelopes as being reflective of the Netflix business model, CEO/founder Reed Hastings has long said that he didn't care about DVDs or streaming or whatever technologies developed. He was interested in being a company that provided entertainment. About technology, he was relatively agnostic.

In pursuing that goal, Netflix also understood that it was not competing with the likes of Redbox and Blockbuster, but rather was competing for customer attention with companies like HBO, Lifetime, and the ABC/CBS/Fox/NBC universe. To do so, Netflix knew it needed to have proprietary and differentiated content ... which it created, with names like "House of Cards" "Orange Is The New Black," and the revival of "Arrested Development." And now, Netflix reportedly is negotiating with cable providers about the creation of a Netflix cable channel that could further extend its reach.

In this competitive battle - which, it seems to me, has parallels in other industries - it is all about constant innovation, persistent forward movement, and absolute fealty to the strategic vision.

It is the prototypical Eye-Opener.
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