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Comment by metalsahu | Hacker News Reader

I don't think its just a matter of economics, Netflix doesn't have a choice if they have to survive long-term. Thanks to the internet, the power is shifting from content providers to content creators and they risk turning into a dumb pipe at the mercy of whimsical broadcasters who can choose to stream their show directly to their viewers. Reed Hastings has said that it is a race for how fast Netflix can become HBO before HBO becomes Netflix. They need to produce their own shows else soon they will only get access to B-grade content.

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"...they risk turning into a dumb pipe".

That's their problem, they don't own the pipes either. They don't own the pipes and they don't own the content (before House of Cards). Up to now they provided...well...a useful cute little UI, but it's hard to make a lot of profit for a prolonged period of time on that. So they either go into pipe building or content building. Content building has the better leverage to the large customer base they've got, and in that context producing House of Cards makes perfect sense. I hopes it works out for them.

Their infrastructure is valuable, especially the code they have which determines what quality of video they can send you without stuttering or buffering which was better than anything else at the time. That was what got them my money.

The service Netflix provides is licensing and aggregation, plus the UI and convenience. I'd say the first two are the ones most closely worth U$ 7.99 to me.

IMO, licensing and aggregation are the "hard" problems, not UI or streaming or whatever.

I've been watching documentaries on Netflix. They're already stuck with B-grade content in some areas.

Netflix's big long-term advantage is buying power.

They have 30 million users spending $100/yr. Assume they spend half their income on content. That's $1.5bn/yr. That's a huge amount of money, and it's only going to get bigger as they grow and expand into new territories.

Increasingly, Netflix revenue is so high that it will seem inconceivable for content owners to turn them down in a gamble to go it alone and increasingly hard for anyone to compete.

I am extremely bullish on Netflix. I think they have a sound business model with huge upsides and the downsides are hugely overstated.

They are spending about 71% on content. Before they hit 40M subscribers they could produce 13 hours of House of Cards level content per week. That would surely be something.

For 8$.

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