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The Medium delivers in-depth analyses of the media marketplace’s transformation as creators, tech companies and 10 million emerging advertisers revolutionize the business models for “premium content”.

One of the more notable details of Netflix’s founding story—as told by co-founder Marc Randolph in his memoir “That Will Never Work”—is how early investors were looking past Netflix’s pitch about its mail-order DVD business and towards a future of streaming distribution over the internet. Randolph recalls that in the fall of 1997 DVDs were perceived by people in the distribution business as “a middle step between analog VHS tapes and downloads or streaming.” Streaming as we know it now was not an inevitability, but it was something that the Internet’s architecture would enable in some form or another. 

25 years later, Netflix has sunset its DVD business—the meeting quoted above had predicted they would last only until 2002—and has moved into games, live events programming and ad-supported streaming. Wall Street now perceives Netflix to have “won the streaming wars.”

I argued in “​​Reed Hastings Steps Down (and Up)” that Executive Chairman Reed Hastings stepped down and up from the co-CEO role in large part because “Netflix’s moves into gaming and advertising both fall outside of his skillset (and the latter notoriously falls well outside of his vision).” In its Q4 2023 letter to shareholders, Netflix described how the growth opportunity as “a $600B+ opportunity revenue market across pay TV, film, games and branded advertising — and today Netflix accounts for only roughly 5% of that addressable market.” 

Streaming now seems to be a middle step between DVDs and something more advanced involving gaming, advertising and live events programming. Unlike 25 years ago, the question is now, who understands what that “something more advanced?” will be?

The long answer is Netflix management, but the short answer is Co-CEO Greg Peters.

Key Takeaway

The implication from Netflix's Q4 2023 earnings call is that there only so much a single platform can deliver for consumers in this media marketplace. Netflix is gunning to be that platform but what it will ultimately becomes in the long-run is anyone's guess.

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