Netflix talks Apple, but is not Apple
Paramount, Warner Bros Discovery, and Comcast — just another international TV company that is dependent on the same economic equation.
Netflix talks Apple, but is not Apple
Maybe that’s why we rarely hear the FAANG acronym any longer — the one that used to lump Netflix in with Facebook (now Meta), Apple, Amazon and Google as a high-growth tech superpower.
Today, Netflix’s more important memberships are with Thinkbox, the UK commercial TV marketing body, and Barb, the UK television measurement company. While Wall Street executives may have been happy to value Netflix purely on the basis of whatever metrics the company decided to reveal, advertisers need more reassurances. Netflix needs to build trust with advertisers by being part of established measurement systems.Interestingly, Netflix shares fell by more than 8% on Friday following its earnings announcement, suggesting that analysts may smell a rat. The decision to no longer issue subscriber numbers did sound like a familiar tech company move, like when Apple decided in 2018 to stop talking about how many iPhones it sold.
But here’s the difference: Apple is a true tech monopoly. Netflix is not.
Apple has market dominance in affluent smartphone users, meaning it can charge a 30% tax on any app maker’s revenue if a customer downloads it from Apple’s App Store. In one swift move, it can blow a hole in another tech giant’s advertising strategy, as it has done with Meta and Spotify.
Indeed, Netflix, as an app maker for Apple’s iOS, must pay the tax too. According to SensorTower, Netflix generated $16m in iOS mobile app revenue last month. Spread over a year, it means well over $50m is being siphoned off to Apple from Netflix.
That doesn’t make Netflix a FAANG. That makes it a FAAG-end. Which is appropriate, given the smoke and mirrors of “investor relations”.
Ad-free was always a blip
Why many were wrong about Netflix is because they assumed the internet had changed the rules of media.
When Netflix achieved a breakeven year in 2021, this was a big deal because the company had become cash-flow-positive purely by taking money from subscriptions. It seemed to justify founder Reed Hastings’ decision to ramp up spending on content in 2012 and double down on its first-mover advantage.
Then, every time Netflix announced a rise in quarterly subscriptions, its stock went up. So it had to keep spending on content and marketing to lure in more subscribers, otherwise the Wall Street music would stop. The reckoning came in 2022 when the pandemic subsided — we rediscovered hobbies other than watching TV. And hence ads.
It’s estimated that Netflix spent just under $10bn between 2011 and 2020 to get to where it is today.
Was it worth it?
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