Matt HealeyFriday,25 January 2013

The Snap

Tweet: “@jimcramer: $NFLX is not generic. it is not me-too. It has 28 million people so it has won. You can “win” a category you know.”

The Download

Netflix’s shift from a DVD rental and delivery service to an online content library has been impressive. Factor in that they are now investing in original content and this is a strong business model. But the strength of the Netflix business model is only part of this story. The rest of this story is about the telcos continuing to become utilities, and their services above simple transport being delivered by OTT players. As I have written about before, the telcos do not have the mindset required to deliver services. They have grown up in the regulated monopoly environment where customers were required to use them. Choices were limited through government regulation that spared competition. This is still the case today — you can not simply switch to any telco, you have to use the one that is approved for your zip code. The same goes for the cable companies. The telcos have fought very hard to keep this situation through legal challenges, because once they are exposed to competition they will be in trouble. You can see this in all of the markets were they have gone up against an OTT. They consistently lose. The most visible example of this to me is the telcos’ losses in Asian SMS markets to Whatsapp. Based on what Netflix is doing, I can easily see a situation where I only buy data from the telcos/cable companies, and then get content from an OTT like Netflix. They will be equivalent of the power company.

Hat Tips

Jim Cramer, What Would Ari Do?, WhatsApp, Image Credit: Flickr

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