Category Archives: Investments

Why Netflix Will Become THE Global Distribution Channel for Filmed Art & Entertainment.

House of Cards Promo(Editor’s note: I wrote this piece originally in response to this article from TheStreet.com:  Amazon vs. Netflix: Jeff Bezos Could Squash Reed Hastings Like a Bug)

A) I’ve been an HBO subscriber since the 80’s, watched almost everything on it, and “House of Cards” is totally as good as anything that has ever been on HBO, better than most. (I’ve seen the first three episodes, and wait until you see Spacey’s mind blowing performance in #3). B) Netflix is not competing against Amazon, nor HBO. I’m a subscriber to Netflix and Amazon instant, and even together their cost is 1/10th of my DISH bill. And if HBO had a stand alone $10/mo app, I’d sub to it too, and my cost would still be way lower, but more importantly my value would be greater. Think about the power of that: Greater Value and Much Less Cost. Netflix is competing against cable & satellite TV. And they are going to crush them. C) It’s about distribution. Hollywood cares as much about distribution as it does cash money. Perhaps even more so. Netflix has 30 million subs and growing. How many “Instant” subs are there? 30 million people all seeing “House of Cards” promoted on the front page of Netflix. That’s powerful. How much is that worth? And it’s growing. And it’s Global. Being released Globally at the same time as its being released in the US. I think that is a first ever for any TV show or Motion Picture. That is very attractive to the best writers, actors, producers and directors. Netflix and it’s model are the future: Digitization, Globalization, and Urbanization, and their endgame is to be THE Global distribution channel of filmed digital arts and entertainment, and they will succeed. They’ve already entered escape velocity. 5 years from now they’ll have at least 100 million subs, but more likely closer to a quarter billion. And once again, it’s not the $8/mo from those subs that’s the real power. It’s the distribution and reach of the platform and brand.
You see, at the end of the day, it’s all about distribution. Yahoo Finance gives you distribution for this article about Netflix. Google Finance doesn’t. Luckily, Finance is one category Yahoo does lead in. I leaned this from Dave McClure on Twitter: Business = Value + Distribution. There’s no question about Netflix’s value proposition. So, all these years it’s main focus of energy has been in building distribution, and now it has succeeded and will continue to grow massively.

Considering an Investment in Pandora ($P) in Light of Spotify, Rdio, and Songza

I really fell in love with Pandora a year or two ago. I think the market cap was treading around 2 billion. I told myself that if the Market Cap hit 1.5 billion, I’d make an investment. Well, I haven’t logged it, but it seems like it must have bounced off 1.5 billion about 7 or 8 times in the last year and a half. Seems like it’s bounced between about $9.50-and $11.50 about the same many or more times during this period. From that perspective it seems it would make a great “Channeling” stock, as the traders call them.

But then, a couple months ago, I subscribed to Spotify, and from a consumer point of view I haven’t looked back. I love it so much. I thought I might still use Pandora occasionally for “discovery” but since then Spotify has launched their own “Radio” feature. So, for myself, I literally can find no reason to use Pandora anymore.

Still, I have Pandora (P) on my “Stock Watch” list. I still believe it’s part of the bigger paradigm of all media moving to the digital. So I still think it would probably be a good investment, just on the general paradigm itself. It’s hard for me to make an investment in a product that I don’t use, though. If, however that changes, and they launch some new features that make me want to use it again, I’m sure I’ll even be more excited.

Being in this state of wondering whether to invest or not, I was happy to come across this GigaOm article today: Despite New Competition Pandora Grows It’s Users

The take away is that Pandora is still growing fast in registered users and total minutes per month of listening, but the number of minutes per registered user is actually decreasing, which is weird, until I think about it: I’m a registered user, and my usage has dropped to Zero because Spotify finally picked me off. Back when I was in love with Pandora, I thought, I’d never pay a subscription, but I think seeing Spotify constantly in my Facebook Newsfeed finally wore me down. Like Ogilvy said about advertising: The first time you see an ad, you curse it. The tenth time you see it, you’re writing a check out for the product. Anyway, the GigaOm post inspired me to comment on his site, which I copy and paste here:

“I was a big Pandora fan last year, and I told myself I’d make an investment at a 1.5 billion market cap, which it’s close to now, and has bounced off of several times, but since I’ve become a Spotify Subscriber, or actually since Spotify launched their “Radio” feature, I don’t see any need to go back to Pandora. That’s what keeps me from making an investment, myself. I don’t use it. But I do believe it will grow with the whole digital revolution, as you mention. It definitely had a head start on mobile and has brand recognition.
Once crucial feature of Spotify and Rdio, which seems so vane and egotistical, yet very potent, is the sharing what you listen to to Facebook. I mean even if I own an album, I usually will prefer to listen to it on Spotify, to show everyone what I’m listening to, especially if the record or artist is considered “hip.” I guess Pandora has this feature, but I never see it in my feed. I constantly see Rdio and Spotify in my feed though, which obviously is also free and invaluable advertising for them too. I don’t know why Pandora doesn’t copy all of Spotify’s features (assuming they can) just as Spotify has copied one of the crucial features of Pandora: Discovery.”