Wait, 2,000 Netflix movies to disappear as of today? You can’t be serious. Hold on, let me check if any of my movies survived. Caged Fury, are you there? Women’s Prison Massacre? The Big Bird Cage? Why were there so many women-in-prison films in my queue, and where did they go? No, no, no!
If you’re a subscriber to the service that allows you to watch movies for free online for a small subscription price, then you probably had a reaction similar to mine upon hearing the news that several Netflix movies would disappear Wednesday. And yes, we’re with you. It sucks.
Sucks really bad, in fact. Perhaps enough to make you consider canceling. This isn’t the first time it’s happened, and likely won’t be the last. But we’re not ready to give up on the red-and-black for the disappearance of these 2,000 Netflix movies because we’ve been down that road before and ended up regretting it. Begrudgingly, I have to admit to being one of those people who broke out the pitchfork and went after CEO Reed Hastings when he decided, rather dumbly, to split the service into two companies in 2011.
The decision remains a misstep in the sense that Netflix stock prices toppled from around $300 per share to approximately $60 inside of a year.
The company also acknowledged it was a mistake by backtracking on the decision.
They did not back down, however, on another unpopular move made around the same time — to raise prices by about 60 percent. Combined, these were terrible moves in the short term causing current subscribers like me to leave while vowing we would never come back.
But I came back, and I’ll weather this storm because the memory of that near-catastrophe taught me what a smart company Netflix is. They understood you can’t keep giving customers what they want if you’re losing money. Content providers were putting too much of a squeeze on them after looking at how profitable they had become in the role of facilitator.
Netflix may have wanted to raise prices, but that’s not the reason they went through with it. They did it because it was smart business no matter how many of us left them in the short term.
As a result, their shares have rebounded from all-time lows to around $212 per share (as of Wednesday), a swing of around $152 in less than two years. The company is just $88 away from returning to its all-time high despite making two short-term decisions that nearly crippled its stock value and eroded consumer confidence for good.
The company will continue to be profitable — in fact, their 1Q results revealed 3 million additional streaming members, pushing the company ahead of HBO in US subscribers for the first time — because they’ve made decisions like moving in to original content while maintaining positive vendor relationships with other companies and, like it or not, bumping up prices to where they need to be in order to maintain margins.
They also continue to forge ahead in the international market:
While the 2,000 Netflix movies to disappear today will likely result in a brief blow to frustrated consumers, we will continue to come back, because in the long run, the lost content will be replaced by new deals and new movies.
Netflix understands what it must do to survive, and they will continue to do it no matter what. If they could recover from the tsunami that struck in 2011, they’ll get through the 2,000 Netflix movies to disappear today, and any other challenge that lies ahead.
While Warner and Paramount have moved in to the digital realms with subscription services of their own, content providers are in the position of being a fragmented market. Universal wants you to watch their movies before you do Sony’s, and they’re willing to hit the grandest digital stage to make sure that happens.
Netflix created a reputation as a content facilitator and established its brand before moving toward developing its own content. Now with shows like Hemlock Grove and House of Cards, it’s quietly hooking customers with exclusives to supplement the previously established business model.
Movie studios, television networks, and cable channels, are in a position where they must decide to work together to crush Netflix or play ball and continue to provide enough content to make it an attractive service. Since Netflix has been through the fire, and it’s stronger than ever, we’re willing to bet studios will return to the service sooner or later since it’s easier to look out for themselves and deal with one enemy than to get in bed with several.
Meanwhile, Netflix will continue forging ahead with its own series and (probably) films. They’ve attracted top talents like Kevin Spacey and Eli Roth, and there’s no reason to think that will end. Will it replace the 2,000 Netflix movies to disappear today? No, but it doesn’t have to.
What’s the lesson for the entrepreneur?
Sometimes sure money looks like a good thing until you start to weigh the long-term prospects. If you cannot sustain a business model, then it’s worth it to take your losses and learn from the problem now so long as you’re making long-term decisions that place you in a position of profitability.
So the 2,000 Netflix movies to disappear today are but a bump in the road to long-term profitability; and that’s a lesson your entrepreneurial efforts need to learn quickly in order to find success.