“It feels like we’re standing in a crystal clear stream like in A River Runs Through It, and we’re fly fishing, and our neighbor [HBO programing chief] Casey Bloys is up the river, and then somebody comes in with a bag full of hand grenades, pulls the pins, throws them into the river, scoops up all the fish, and then says, ‘We’re better fishers than you are!” Okay, that’s some beautiful fish that just got blown out of the river.”
-- FX Networks CEO John Landgraf, August 2018
Netflix’s recent struggles reminded me of the quote, above, which FX Networks CEO John Landgraf delivered to the semi-annual State of the TV industry speech at the Television Critics Association (TCA) back in 2018. That visual of fishing with hand grenades was a funhouse mirror on Netflix’s spend ($8.9B in 2017 and $12B in 2018). In 2017 Netflix had become the market leader in spend (topping ESPN, which also spent more than $8B on sports rights in 2017).
Landgraf was criticizing how Netflix had been leveraging the raw power of greater content spend to produce inferior content where HBO and FX had been leveraging skill and tried and true processes of creative development to produce superior content.
Now investors are asking whether the strategy of fishing with grenades is the problem: Disney and Warner Bros. Discovery have recently walked by promises of more spend in response to investor concerns (and Warner Bros. Discovery saw its stock upgraded by Cowen). Netflix still plans on spending $18B in 2022, so it seems to believe fishing with grenades is not a problem (yet).
But there is the question of how much time Netflix has before it loses the confidence of investors, or worse, the engagement of subscribers to churn. Its move into an ad-supported model is in response to those concerns. That, too, raises another important question: how will fishing with grenades compete with Free Ad-Supported Services and YouTube?
In other words, fishing with grenades has always been perceived as a quantity vs. quality problem, but four years later, it seems to reflect deeper and more structural challenges within Netflix.
If I were to rephrase Netflix’s business logic of fishing with hand grenades more favorably, I would describe Netflix as a software company that funds culture to feed its distribution software.
Meaning, I believe Netflix’s platform and distribution ...