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With all the Netflix headlines from the past two weeks, it is worth contrasting them with a series of events that began with former Netflix Co-CEO—and now Executive Chairman—Reed Hastings’ book tour for “No Rules Rules”. Then, he told the New York Times in an interview that two of the best authors in the entertainment industry were Neal Gabler, who wrote the definitive biography of Walt Disney, and Bob Iger, who had been running Disney. The not-so-subtle message: Netflix was building a library to be the next Disney.
In 2021 Hastings added a competitive angle in this story to investors: “We’re very fired up about catching [Disney] in family animation, maybe eventually passing them, we’ll see.” Netflix was building its own “Storytelling Moats”—the storytelling expertise and the deep content libraries of studios—to produce blockbusters to compete with its legacy media competition.
Three years later, a “Storytelling Moat” is not longer an existentially important long-term corporate objective. Netflix’s animation division has been reduced by one-third. Co-CEO Greg Peters—who replaced Hastings—recently told Stratechery’s Ben Thompson that “we are able to invest in some kinds of storytelling that others are not immediately disposed or well suited to produce.” He offered the example of “Casa de Papel” or “Money Heist”, in which a local producer had "pretty modest success" in Spain, then Netflix picked it up and made it a global show. “Squid Game” is another example.
Effectively, the lesson Netflix learned before any of its competition mirrors my conclusion from last week’s “Monetizing Mickey Mouse, "Superman" and "Batman" In The Public Domain”: “Blockbusters seem to be a relic of decaying linear and theatrical business models.” The paths to recouping its 2021 "Storytelling Moat"-type investment in Roald Dahl Story Co.—which owns characters and creations like “Charlie and the Chocolate Factory” and “Matilda” (in the top 1% of titles streamed in last December's “What We Watched” report)—for $700 million are a bit wonkier and less tried and true than the blockbuster model in linear and theatrical.
Netflix is educating the market towards the conclusion that the blockbuster model for "Storytelling Moats" is antiquated. The concept of a "spectrum"is winning and the Zeitgeist seems to be fragmenting towards the local.
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At the Netflix Upfront—something that Hastings had strategically ruled out until its Q1 2022 earnings call two years ago—Netflix touted originals like “The Umbrella Academy”—three titles in the top 6% of “What We Watched”—and “Cobra Kai”—four titles in the top ...