In the long list of S&P companies releasing their first quarter earnings this week, the most eagerly anticipated report has got to be that of streaming giant NETFLIX.
NETFLIX (NFLX) has taken the home entertainment industry by storm and is by far the leader in the continuously growing list of streaming services currently on the market. Following a year where staying home was a necessity for a majority of the world, a quarantine that helped lead to sensational numbers for stay-at-home stocks and streaming services like NETFLIX, many on Wall Street are curious if the company can sustain their record-breaking growth in a post-pandemic world.
The Rise of NETFLIX
It’s hard to believe but NETFLIX has been around for over 23 years this year… Over its time growing from a little California start-up to the powerhouse it is today, it has been largely to blame for the death of several of its competitors in the entertainment industry.
When NETFLIX came around in 1997, there was one name that dominated the home video rental market… that name was Blockbuster! Blockbuster had managed to rule the home video sector since the late 80’s and was considered by many to be the “unbeatable giant” of the video rental industry.
Many of us (this author included) have very fond memories of Friday nights perusing the “NEWLY RELEASED” VHS titles that lined our local store’s shelves. In those days it was almost unfathomable to consider that this company that more or less created the video rental industry would see the beginning of its demise in the few years ahead…
Out With the Old, In With The New!
The story of dominance in the entertainment industry is an interesting one, spanning back at least to the early 20th century. You see, like NETFLIX was doing to Blockbuster, television and the home video industry had done to theater chains in the years before.
For those of us old enough to remember, going to the show at the local theater was a treat. And we’re not talking about a couple hours at a 12-theater multiplex like AMC… We’re talking about dressing up to spend an evening at one of the many theater palaces that sprang up across America in the early 20th century.
My local theater was The Paramount (still standing to this day)…
… designed with a Greek courtyard motif and an open sky concept that, itself alone, was reason enough to get dressed up for an evening out. Opened in 1929, it was there where you could go to see the latest roadshow presentation of epics like Ben Hur, Lawrence of Arabia or The Sound of Music which would include your very own movie program — like you would receive at an actual theatrical production — filled with movie stills and bits of info about the film you were about to enjoy and adding to the “event” atmosphere going to the movie theater projected.
By the mid 60’s these films of epic scale had become the norm in Hollywood as it was their way of competing with the convenience of an invention taking over the entertainment industry known as television. Hollywood offered prestige and scale, but television offered convenience and soon the classic studios of Hollywood found themselves and their products second in line behind the convenient 12-inch screen that had made its way into America’s hearts and homes.
Yes, the Hollywood the world knew was dead, the victim to a lesser beast known as television, proving that convenience is a powerful weapon for one to yield. And despite the creation of “New Hollywood” by future film legends like Martin Scorsese, Steven Spielberg and Francis Ford Coppola, it would only be a matter of time before home video and rental chains like Blockbuster would start to cut into theater profits once again.
Convenience is Key!
Like television and the home video market did to the film industry, NETFLIX did to the video rental markets and is currently doing to television.
By the late 90’s, NETFLIX founders had realized that with the recent wide-spread acceptance of the DVD format, shipping a disc to customers instead of a bulky VHS tape would be much easier, allowing customers to cut the trip to and from the video store down to a simple walk to your mailbox, proving the power of convenience once again.
And when the walk to the mailbox became too much of a hassle for Americans, NETFLIX helped create and popularize today’s streaming services, enabling you to switch from new program to new program without ever even getting out of your chair — or your pajamas for that matter.
Television offered something theaters could not… convenience. In the case of Blockbuster, NETFLIX offered one thing that Blockbuster could not… CONVENIENCE! (Do you see a pattern here?) And despite last ditch efforts by Blockbuster to copy the NETFLIX formula by offering its customers by mail rental services similar to that of NETFLIX, by the late 2000’s it was obvious the end had come for the rental giant.
Today, the name Blockbuster is unknown to many of the future generation while NETFLIX is a name known to even the youngest of citizens. Proving yet again how much things can change in such a short amount of time.
The Future of the Streaming Giant
Over the course of one lifetime, the movie viewing experience has gone from a formal evening out to a sloppy evening in, but this author’s “old fashioned” views do not appear to be the norm as reports continue to show theater ticket and home video sales plummeting all while streaming services like NETFLIX continue to multiply like rabbits.
This Tuesday’s first quarter reports will soon give eager investors a good indication of what the future could hold for NETFLIX as time rolls on and the public continues to venture further out into the world once again.
We may be far from the end of NETFLIX but don’t let its current reign as leader fool you into a false sense of comfort. Like so many before it, NETFLIX could see the end sooner than it and its investors would prefer. Just remember, history does have a way of repeating itself…
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