Netflix is a diabetic eating at MacDonalds & HP has a brain   September 2, 2011

September 2, 2011

This week, I have repeated two statements I thought I would never utter.  No, I didn’t say “hey, that’s one badass Camry you have there” — but it’s damn close.

hewlett packard is brilliantStatement 1: HP is perceptive & brilliant.  Realizing they had made a fatal decision with their tech platform (webOS tablet), they did not opt for the dumb decision that so many US companies go for.  Usually, a company rides a bad tech decision down, like a very slowly sinking ship.  Submitted for your approval: Motorola’s RAZR which turned into the ROKR which turned into a failed division which turned into complete patent liquidation.  Yikes, failure on an epic scale and it can all be traced back to an awful tech decision.  And this is all over the place:

  • Apple’s attempt at allowing 3rd parties to build Macs (upside: allowed Jobs to buy back into Apple for dirt cheap)
  • Border’s stupid, junky, and expensive Kobo e-reader and now, bankruptcy
  • Sirius & XM had great ideas and just couldn’t quite make the tech small or easy enough for anyone (if I can’t use it … then you’ve got a prob)
  • Could Palm make a cool phone?  ever?  technological darwinism.  Too bad, because their Exchange & Outlook integration is still unparalleled
  • Lotus Notes, 1-2-3, and everything else they made.  Lotus dominated in the DOS era and then just sort of sat on their butts once Windows came along.  Phhht!

Anyway, HP decided not to follow that path and dumped their tablets for $100 and scored a massive win.  WebOS is kinda ok and also kinda not (big reason is the lack of apps), but it’s just one of many low-resource OS’s out there now … iOS, Chrome OS, Android, Moblin (now MeeGo).  App developers can probably only build for 1 or 2.  So webOS is probably not one of them.  Dying platform webOS was formerly a punchline, but within a week, it’s relevant because of suddenly huge market saturation.  A major manufacturer has a $100 tablet?  Hell yeah, I’ll buy one, I don’t care what’s on it.  It’s cheaper than a baby camera or a GPS.

So HP put on a clinic on how to bail out a slowly sinking ship.  The same CEOs that I previously mocked are now acting in an impressive manner … yikes!

Statement 2: Netflix is a dying dinosaur.  My favorite company ever made a disastrous choice when they decided to increase & complicate their fees by creating one fee for streaming video and one for physical DVD rentals.  Archaic and complex billing is the domain of the most reviled of all industries — phone carriers (AT&T, Sprint, and all those vomitous pigs).  Can you decipher your phone bill?  Why do you sign up for a contract at $70/month and end up paying $90/month?  I hate them, like we all do, and yet I pay them, like we all do.  Deep loathing is the natural universal response to complex billing (loans, telephone, cable, etc.).

Netflix has proven that the honeymoon is over by unnecessarily eliminating the simplified billing.  Their service may even be worth what they are saying it is … but you can’t pull that shit and not expect an immense and immediate backlash from your client base.  If they just would have let existing customers get grandfathered in on the old billing and then apply NEW billing to NEW users, all would have been dandy.

The downward slide began there and now Starz (who provides Netflix with rights to stream new movies from Disney and Sony) is bailing out on Netflix.  I bet 30% of streaming video is kid’s stuff and 99% of THAT is Disney.  When you are in line at Costco and your 3-year-old begins getting that shifty frown that means “tantrum ahead”, you’re five finger taps away from getting her Cinderella fix from Netflix. You might even deal with that crappy billing system to have a surefire meltdown-stopper at your fingertips.  Oh, but not anymore.

Why did Starz do it?  It cannot be coincidence that Netflix made a hugely backhanded and crappy maneuver with its userbase.  Perhaps, Starz is savvy enough to realize that the unsinkable behemoth has momentarily exposed a weak side.  Now is the time to strike or, with all of the recent expensive infrastructure and asset acquisition, Netflix is over-extended.  I would never characterize Netflix as a particularly vulnerable company, but due to a series of poor decisions, they might have just given themselves the ultimate smackdown.  They can’t afford to battle a large competitor … SOOOOO Starz may be angling to launch their own streaming service, after realizing just what a monster pile of internet gold they are sitting on.  Might they be prepping to feast cheaply on the corpse of Netflix’s streaming infrastructure.

As Radiohead sang in “Just”, “You do it to yourself, you do, and that’s what really hurts.”

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