Thursday, 04 May 2017 00:44

Netflix's biggest competitor? Sleep



According to Netflix CEO Reed Hastings, Netflix’s biggest competitor is the human need to close your eyes for a third of the day. Photograph: Alamy Stock Photo

When you’re a globe-spanning technology firm, you need to keep a paranoid eye on the competition. But sometimes it can be hard to work out what the competition is: disruption can come from the most unlikely corners.

But even given that, Netflix has an odd definition of what it has to compete with. Not Amazon Video, not YouTube, not even old-fashioned broadcasters. No, according to the company’s chief executive, Reed Hastings, Netflix’s biggest competitor is the pesky human need to close your eyes and sleep for a third of the day.

Asked about the company’s competitors at Netflix’s earnings call, Hastings said that he isn’t really concerned about Amazon and HBO “because the market is just so vast”.

“You know, think about it, when you watch a show from Netflix and you get addicted to it, you stay up late at night. We’re competing with sleep, on the margin. And so, it’s a very large pool of time.”

The company and its more traditional competitors, he said, are like “two drops of water in the ocean of both time and spending for people”.

“And so Amazon could do great work, and it would be very hard for it to directly affect us. It’s just — home entertainment is not a zero-sum game. And again, HBO’s success, despite our tremendous success, is a good way to illustrate that.”

Netflix isn’t the only company to have an unusual idea of who it’s competing with. Perhaps the most famous – or infamous – example in recent years is Uber, which realised a few years before everyone else that its true rival wasn’t fellow cab app Lyft, but Google’s self-driving car project.

The company has argued that an in-house autonomous driving capability is crucial to its long-term success as a company. “If we are not tied for first” to develop the technology, Uber’s chief executive Travis Kalanick said last year, “then the person who is in first, or the entity that’s in first, then rolls out a ride-sharing network that is far cheaper or far higher-quality than Uber’s, then Uber is no longer a thing.”

In Uber’s stated vision of the future, the only thing that’s important is surviving long enough to fire all its drivers and replace them with robots. And, to a certain extent, the company is right. If another company develops, or licenses, self-driving car technology before Uber’s own in-house product is ready, it will be very easy for them to undercut the company on price – a disaster for a market as sensitive to small differences in cost as cab hire.

Sometimes, tech firms have a different view of their competition than everyone else because of the sheer scale on which they operate. Google may think Google+ is a Facebook competitor, for instance; but Facebook thinks its competitors are video games and TV. You aren’t going to leave Facebook for another social network, and it knows that, so its job is to maximise the amount of time you actually spend using it. For that, it needs to be more compelling than all the other things you could be doing with your time.

Then there are the companies who haven’t really realised the scale of the battles they’ve got themselves into. Take Square, the payments firm founded by Twitter boss Jack Dorsey. It’s just announced a move to Britain, the fifth country it is launching in, and one of the first with a strong, established company in the same line of business: Swedish startup iZettle. Both companies market smartphone-based point-of-sale systems to small businesses and sole traders, and are already quietly engaged in a price war. So it’s reasonable to think of them as competitors, right?

But both companies have a much bigger fight on the horizon, one which may, in the long-term, make allies of them. That’s against the app economy: those companies that used to describe themselves as “Uber for haircuts/plumbers/flowers/coffee” and are now rapidly rebranding to something a bit less inflammatory.

After all, what’s the chance of success for your payments app for small businesses if all those small businesses are actually making their sales through tightly integrated vertical apps that combine advertising to customers, taking payments, and sharing feedback?

Even that’s for nothing if the Amazons of the world get their way. For Square and iZettle to survive, there needs to still be a high street on which small businesses can take payments. A world of two-hour courier deliveries is a world in which Jack Dorsey goes back to only being the chief executive of one company.

Keeping an eye on the strategic battles is a smart thing for any company to do, but it can also be a distraction from the day to day business of actually winning customers over from the competition.

For Netflix, at least, its talk of fighting against the human need to sleep is currently just the pontification of its slightly freewheeling chief executive. When it comes down to the actual work, the company’s ploughing more money than ever into the content it needs to beat Amazon and HBO, not the amphetamines it needs to beat sleep.

Though if it did pivot in that way, it could probably raise its subscription fees a bit.

This article was published in by Alex Hern



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