In a marked shift from his long support of Netflix as an investment, LightShed partner and analyst Rich Greenfield now says he sees the streaming giant as a possible takeover target for Apple or Amazon.
Greenfield is also highly critical of Netflix’s switch to embracing advertising. But it that’s its direction, he thinks the company should consider trying to woo to former WarnerMedia CEO Jason Kilar to help it navigate the difficult transition.
"If Apple wants to step in, buy it or Disney wants to step in and buy it, I think there are certainly crazier things that have happened and maybe that's the opportunity, right?,” Greenfield said in an interview on Friday on The Ankler Hot Seat podcast.
Greenfield has previously pointed out that Apple and Amazon are in unique positions because their business models mean that they don't have to worry about about driving short-term profits for subscription video-on-demand (SVOD), or constantly making large investments in must-see programming in order to retain subscribers.
“While I don't think they're looking to be sold and I don't think that's the plan, obviously, I can't imagine everyone is not thinking about if you want to have a 220 million global subscriber business with a growing library with incredible tech talent, there's a way to get it,” he said during the podcast, adding that “one reason people don't just abandon Netflix as a stock is that it's gotten to a size where it actually becomes an interesting chess piece."
A company looking for help in starting an ad-supported streaming business might look to Kilar — who was CEO of Hulu prior to WarnerMedia, where he launched HBO Max —- Greenfield noted. Kilar “has an entire team that’s done advertising on streaming, not once, but twice,” and that team “is right now sitting on the side,” he noted.
In Greenfield’s view, Netflix’s flip-flop on its long “religion” of “being anti-advertising” and ”coming to the conclusion that advertising might be the only answer” is “by far the scariest” aspect of its current scenario.
“As soon as you start putting ad breaks in — and remember, none of the Netflix originals were made [even thinking] about with ad breaks… I don't know if you've watched Hulu with advertising lately. The experience is literally horrible. And so what happens when you see the same ad? You start to go, ‘Oh my God! This is so painful.’ You start to get mad, maybe you leave the room, maybe you pick up a phone call. All it does is hurt engagement.”
Greenfield also questions whether Netflix is getting enough bang for its content buck.
Although “Squid Game” was
“amazing,” “for a company that's spending $17 billion on content,” it doesn’t seem that there’s been enough that has ‘really captured the zeitgeist of the
nation or of the world,” he asserted. “I don't think there's been enough for the amount they're spending... I don't think the Netflix content over the last 12 months has been good enough.
And I think that's the problem.”
Netflix isn’t the only media entity facing a streaming crisis, in Greenfield’s view.
In a post last week, he and LightShed colleagues Brandon Ross and Mark Kelley argued that, after being lured into streaming by Disney’s success and shifting content to those platforms at the expense of their already-faltering traditional TV networks, legacy media companies are now realizing that subscription-based video-on-demand may be “nowhere near” as profitable as the legacy networks.
The analysts noted that Sony and other companies that eschewed launching streaming services in favor of producing and licensing content for others — a so-called “arms dealer” strategy — are clearly outperforming the all-in legacy companies.
As a result, management teams at companies such as NBCUniversal and Paramount may need to make the “hard decision” to consider abandoning their investments in original streaming commitments to do an abrupt about-face” and become arms dealers, they argued.
Interesting POV, they do need some help to get this right and at this point really only have one shot at doing so. There are some amazing people and amazing consultants that could help quickly.
I would caution not to build this as a walled garden in my at this point. In fact this would be a massive mistake, almost as big of a mistake as it has to wait this long and let them competition start competitive services (with and without ads) and take that content library away.
I have long said that ads are the only way they survive long-term short of an aquisition. I guess I never voices the why loudly enough.
The cost of content and ability to keep subscribers is simply not aligned. It is simply not sustainable.
I am in their camp and hope they pivot quickly and consider some of the very critical elements here - like
1. Do not build a walled garden
2. Do this fully programatic. This is critical at the start. Netflix must preserve a relevant user experience and to do so they must ensure relevant ads are sold. DO NOT follow others that launched and bring in a group of big brands to kick it off because that leads to awful user experience and will lead to user attritrion. While this is sexy for Wall Street and is a nice revenue number ZERO PLATFORMS have launched this way and done so with relevant ads. It is simply impossible. The benefit of never having had an ads model is that they can learn from mistakes of the many that came before them.
3. Let the market determine your value (after setting a reasonable floor), you will see some of the highest rates in the market this way. The demand for quality CTV is simply too high.
4. Ensure proper ad seperation and ad relevance tech for DAI is implemented. There are many great companies that can help. No need to reinvent the wheel.
Lots more to discuss and do -- would love to have a conversation with Reed and how to do this right..