Will Netflix Go the Way of Blockbuster?

Netflix the once dominant leader in CTV is quickly losing share. A quick history lesson here may help to explain why.

Netflix innovated in the movie rentals business by disintermediating Blockbuster years ago by mailing CDs to users. They moved to a digital model and quickly took the ownership position when companies like Fox, NBC, Paramount, Disney and others had either nascent or non-existent streaming businesses by taking the libraries of these programmers and studios to market.

Will Netflix be the next Blockbuster? Did they simply wait too long to adopt and change and have now been overcome by competition? Big investors are pulling away from the streaming giant and their stock is stumbling amid subscriber growth and revenue challenges. If they do not quickly either find a tremendous amount of new content to keep subscribers or adopt an ad-supported model to keep afloat to cover the costs of operating and content creation, they might be.

In the last few years, while Netflix increased subscriber fees and invested heavily in new content, their competition went to work to do what Netflix did to Blockbuster -- disintermediate them. If Netflix does not pivot fast, they too may be another MBA course we study.

When you own an incredible library and are the 800-pound gorilla, you can sustain yourself and your growth. But these days are over for Netflix because they failed to take the lead on ad models and other things when they had a clear ownership and leadership position. Netflix no longer has the best library, despite having some truly incredible award-winning originals. They have lost a good pool of their most watched content as Disney, Fox, Paramount, NBC, Discovery and others have launched competitive streaming solutions and ad-supported models to defray costs and pulled their libraries back into their own platforms. While Netflix could have been the dominant platform and ad-revenue generator, they too have lost this opportunity as their competition have built massive businesses while they sat idle.

Netflix has remained steadfast on a non-ad model and if they do not act soon, even that option may be too late. If they see a mass exodus of subscribers, their value to advertisers will diminish -- and they already see what has happened with the streamer's content.

The huge and very exciting thing is that if Netflix does move fast, not only could an ad-supported model truly take them to another level, but it will also truly transform the CTV business for the positive. A successful ad model for Netflix could mean an additional 50% of ad-supported supply which would not only allow Hastings and his team to truly invest and deliver incredible content, but it would also likely lead to many new innovations in targeting and attribution if done well.

I am huge fan of Netflix and have been for years. I do, however, think that if this opportunity is not properly seized and done so in short-order, we will eventually be teaching about this in an MBA course.

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