White Rabbit
“The man who chases two rabbits, catches neither.” ~ Confucius.
Last night, Netflix just broke another amazing record. The shares of Comcast dived in 5.5% last night, losing more than $6B in valuation and for the first time in history, making its fierce competitor, Netflix, worth more than the biggest cable company in the world (see data below).
The main reason is that everyone on this planet knows exactly where Netflix is heading, and that is to become the first place you’ll look for content.
The case for Comcast is way more complicated. Let’s go back to last night, the reason for the stock drop is the very high bid that Comcast is willing to pay in order to put its hands on Fox assets. According to the press, Comcast will pay $60B in an all-cash deal. It means that between the decision of becoming a great telecommunications company or a media company like Netflix, Comcast decided to become the latter.
Yes, Comcast already owns NBC, Universal studios and DreamWorks, but at the end of the day, it is also the biggest ISP in the US with more than 25 million subscribers.
We are entering a 5G era, where high speed internet and connectivity of many IOT devices with is about to become a serious challenge to internet providers. Comcast has the best fiber optics infrastructure in place and probably counting on itself that it will win this war, however, it is almost next to impossible to become a market leader in two totally different segments. The companies that are somehow able to do that, are the tech companies like Amazon (commerce & prime video), Apple (iPhone & services like iCloud & music) and Google (Search & Android).
The reason for that is one — a culture of insanely high R&D budgets that allow those companies to achieve technological breakthroughs or advantages that makes it hard for the non-tech companies to be able to compete.
Netflix on the other hand, and although it has a brilliant technogy comes up with a crystal clear vision of its future and where it is heading, as its founder and CEO, Reed Hestings, said in the last earning call: “Objectively, we’re much more of a media company in that way than pure tech”. Hestings also provided figures during the analysts’ call: “We’ll spend over $10 billion on content and marketing and a $1.3B on tech,”.
Netflix is intending to spend more than any other outlet in 2018, a whopping amount of $8B on original content, just to make sure that every subscriber that will log-in to the service will find something to watch.
That’s the sole purpose of Netflix and people appreicaite it.
Back to Comcast, even Comcast acknowledges that its evil bandwidth throttling against Netflix won’t make the difference for the service addicts and the company decided for the first time to change its strategy and bundle Netflix with its cable video subscription.
To sum up, it is a story of a 2500 years, from the early days of China until today — if you want to become successful, stay focused, or else someone else will eat your lunch.
Danny
Bonus — a playback for the article:
