Netflix shows that migrating to digital is very tough but the other option is death
date
Sep 28, 2011
slug
2011-netflix-shows-that-migrating-to-digital-is-very-tough-but-the-other-option-is-death
status
Published
tags
Netflix
digital
death
newspapers
transition
type
Post
ogImage
summary
Netflix's turbulent digital migration serves as a cautionary tale for print media facing inevitable decline.
Last week, one of GigaOm's columnists, Matt Ingram, wrote a column making an interesting analysis-warning about how the turbulent transition of Netflix's business model is a warning to newspapers that do not know how to migrate their subscription base. The possible parallel to be drawn is the following: newspapers and print media are patients in need of high-risk surgery, without which, death is certain.
Ingram's comparison is more than pertinent because in all the criticism that is being made to Netflix's ill-fated attempt to separate the DVD operation (considered destined to die in the near future) from streaming, nobody criticizes Netflix for doing something. "In history, most cases of companies that closed were because they tried to change too slowly; only a few perished because they tried to change faster than necessary," argued Reed Hastings, Netflix's CEO, when apologizing to users for mistakes in his strategic maneuvers.
The difficulty of transition exists because century-old companies have an administrative culture of reverence for journalistic tradition, their processes, hierarchies, and the famous "we-are" syndrome, which normally leads to major financial disasters because the director of that famous newspaper refuses to accept that his newspaper, with decades of experience, may not know how to do something. There is a great fear of owners risking what they see as certain for the uncertain (and of the immense quantity of incompetent/outdated/bureaucratic directors who live off their political connections). The problem is that what the status quo considers right is that their business is doing well, when in fact, what is certain is that it will end soon.
According to the Economist, by 2020, ad revenue will be 30% less, newspaper circulation will have dropped by 50%, and classified revenue will have almost disappeared, being equivalent to 10% of today. We are not here reinterpreting the analysis of a marginal thinker but of the most serious and conservative analyst of global economic policy. News companies founded on print operations need to stop imagining that they can wait for the generational change to migrate their revenues. They will go bankrupt, break, be bought by more agile companies, and so on. The print market will not disappear, but its revenues will be furiously drained by others more efficient, with the ability to hit niches with more accuracy and receive purchase demands from them.