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Netflix Needs Some Focus

22 Oct, 2012 By: Stephanie Prange

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Netflix has officially launched subscription streaming in several Scandinavian countries last week.

It was just the latest international expansion for a company that is looking to grow its way out of its domestic problems, which include competition from Hulu and Amazon. The philosophy seems to be that if Netflix can expand fast enough in the streaming arena, it will outrun all other competitors.

“We remain concerned that Netflix is expanding too quickly internationally with incremental content commitments and mixed results at a time when domestic competition is increasing,” analyst Eric Wold wrote in an Oct. 17 note.

At the same time, Netflix is trying to get into the content creation business, funding original productions such as “Lilyhammer” and “House of Cards.” The story here is that content creators and owners are making them pay too much for content, so why can’t Netflix create its own?

The missing ingredient in Netflix’s plan seems to be focus. Does it want to be an international streaming distributor or a content creator?

Certainly, Reed Hastings has made no secret of the fact that streaming is the company’s focus (even though disc rentals are the major profit center). But, even within the streaming realm, it seems to me that Netflix needs to find a target: distribution dominance both internationally and domestically, or content owner/driver.

Underneath all of Wall Street’s bleating about Netflix being a “broken model” is the question of just which model Netflix wants to follow: omnipresent distributor or content creator. I’m not sure it can be both.

In the end, the label of “first mover” can only get Netflix so far in the streaming business. And its quest to be the next AMC or HBO is up in the air as far as its original programming. The company needs to define itself more clearly, and figure out how to make money at it.

What does Netflix want to be when it grows up? A content distributor or content creator.

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