The New York Times has a article on how media companies like Time Warner are getting angry as Neflix continues to drink their milkshakes.
Like any disruptive technology, the incumbent’s first reaction is to kill the new innovative kid on the block rather than take notes and adapt.
Netflix is disrupting media distribution because they’re taking advantage of asymmetric competition, a term picked up from Horace Dediu’s wonderful tech blog of the same (abbreviated) name, Asymco. They’re able to distribute the content of big media companies over the web, sans hardware for one monthly price. This from a company that up until recently made most of their money mailing out little red envelopes.
The language these old media guys use is telling, like Jeffrey L. Bewkes, CEO of Time Warner, viewing Netflix as an army from a tiny country:
It’s a little bit like, is the Albanian army going to take over the world? I don’t think so.
It reminds me of Palm’s former CEO Ed Colligan reacting in 2006 to the iPhone (2 months before it was introduced):
We’ve learned and struggled for a few years here figuring out how to make a decent phone, PC guys are not going to just figure this out. They’re not going to just walk in.
As we know, Apple did just ‘walk in’ and ended up drinking almost 40% of all industry profits from mobile phones. It doesn’t mean Netflix is guaranteed success, but it does mean we should continue to keep an eye on them.
This reaction to Netflix is why I think we’re seeing business deals happen like Comcast’s merger with NBC. In short, the distributors want to control the content. It’s bullshit if you ask me. The Comcast deal potentially opens the door for more like it, further pulling the buying power from individuals.
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