4 min read

The emperor has no clothes

Netflix. Without the content, who cares about the tech?
The emperor has no clothes
Netflix without content
Netflix. Without the content, who cares about the tech?

Show Notes

Hey folks, welcome to The Imposters Club, the podcast for misfits in tech. I'm your host Teddy Kim, and let's talk about Netflix. It's been a bad week for Netflix. You may have heard the news that HBO is pulling the show Friends from the Netflix platform. Yep, Friends is moving over to HBO's streaming service. HBO is owned by Warner media. Another hugely popular show is The Office, and that show is owned by NBC Universal. And guess what NBCU is pulling The Office out of Netflix and putting the show on its own streaming service. But wait, there is more. To add insult to injury, Disney is planning to move all of its shows over to its own streaming platform, Disney plus. Disney owns the most popular movies that bring in the most eyeballs in revenue. So this is a pretty big blow for Netflix. So where does that leave Netflix?

Well, they just lost a lot of eyeballs and investors are running scared. And that begs the question, without content, what is Netflix really? Well, without content, it's just software. Now for a long time, that was good enough, nobody else had the technical chops to build a platform that can handle 15% of the world's downstream internet traffic. Yes, you heard me right. The scary thing is that number has actually gone down. At certain points, Netflix accounted for 25% of the world's downstream internet traffic.

So what's going on? And how did Netflix go from being an unstoppable behemoth to just another company battling for eyeballs? Well, in the very first episode of The Imposters Club we talked about assets and commodities. When two goods are commonly available and can only be differentiated on price, then a commodity market exists for that good. Goods that are very easy to differentiate, present a unique value proposition. That type of good is an asset.

For a long time, Netflix's technical capabilities gave it incredible leverage. Nobody else could do the stuff that they were doing so they could go out and negotiate crazy contracts with content producers like Disney and Disney had no choice but to capitulate. Netflix essentially operated a toll road that delivered entertainment to the masses. Hey, if you want people to watch your show, you have to pay the toll. Netflix investors loved it until content companies started to build their own toll roads.

Is it hubris for a bunch of content companies to think they can hang with the pointy heads of Silicon Valley? How can Disney think they have the technical chops to build a streaming platform? Well, it's not that crazy. Technological advantage has a very short shelf life because tech isn't that hard to figure out and duplicate. All technology eventually becomes commoditized. I could list a million examples but let me start with one. Not too long ago, AWS was the only way to do the cloud, maybe Heroku if you're feeling charitable, but nowadays, the cloud is a commodity, indisputably so, and you can choose between GCP, Azure and some new thing from Oracle. Other people figured it out and now there are lots of options.

Content is different, content is uniquely difficult to commoditize because it appeals to individual tastes. The person who likes The Lion King is likely not the same person who likes Spider-Man. The ability to understand viewer's tastes and to read cultural and demographic trends is an entertainment company's core competence. Their success is a function of their human empathy, and the tech is just a detail.

The asset to commodity arc doesn't just apply to institutions. As an individual techie, your career is defined by the asset to commodity arc. Tell me if this sounds familiar, you learn a skill and get paid for doing it. Then more people figure out how to do the thing and you find it harder to stand out from the crowd. So you learn the new trendy way to do the same thing you were doing before. Pretty soon the hot new tech becomes commoditized or obsolete and you have to start over. Inevitably, you come to the realization that success at your job is a function of your human empathy. The tech is just a detail.

So where does that leave you? As a techie, you face a very important choice. Imagine you have $100 to invest in yourself, are you going to invest it all in a skill that will inevitably become commoditized, or are you going to invest some of your money and skills that have a longer shelf life. Skills like public speaking and professional writing are durable. If you possess those skills, your professional life has no expiration date, and you're really not at any risk of obsolescence. But does anybody really think that we're gonna be talking about React or Webpack five years from now?

Let's take a lesson from Netflix. Without content, Netflix is just software. As it turns out, when your stock is down, your software suddenly becomes a lot less interesting. Nobody's writing about Netflix's innovations in the data center anymore. People are still paying attention for sure, but it's because they're waiting for something bad to happen.

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