Cash

Spending To Dominance

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Everything is on Netflix. Not only the Boss and Tay-Tay, but all the comedians, if you’re susceptible to hype, you’re aware that Ellen DeGeneres is launching a comedy special. How did this happen?

THEY SPENT!

Just like Michael Rapino. Word in the business was that he was overpaying for assets, that the company didn’t show a profit, now Live Nation dominates the concert business. How did this happen? Rapino SPENT!

When he first took the gig, Rapino tried to instill order, tried to get acts to take less. But that didn’t work. Then he flipped the script, realizing if he didn’t pay the acts, someone else would. So, he gave them all the ticket revenue and made it up on ancillaries, sponsorship, ticketing…

And now Live Nation is the dominant player.

Not that Rapino gets enough publicity. That’s all saved for the recording side, supposedly flashier, supposedly driving the business. Then again, unless you’re a superstar, you’re not getting rich on streaming, all the income is from the road, and that’s what Live Nation pays for. Record labels are always trying to teach the acts a lesson as they rip them off. I’m not saying every concert promoter is honest to a fault, but there’s a lot less scuttlebutt about being ripped-off by the promoter than the label, the record label’s business model is theft, and they own the masters to boot, do you think this will go on forever? NO!

And Netflix was supposed to be a repository for reruns. After it was supposed to be a DVD by mail service.

Netflix switches to streaming and there are howls!

But unlike the music business, Reed Hastings, et al, knew that it’s about on demand, no one wants to wait for anything these days, you deliver it immediately, and people will pay for convenience.

Then Netflix started making its own shows. HBO and Showtime laughed, they were the kings of the marketplace. Meanwhile, it’s nearly impossible to get a show made on HBO, they green-light very little. Whereas Netflix gave you a blank slate, they were the most artist-friendly company in the business. So all the artists went there.

And there are a limited number of artists.

The canard was that the internet was going to surface an untold number of overlooked artists, those who were rejected by the system, but were deserving of attention. That turned out to be untrue. To garner mass attention is a skill very few have. Therefore, you’ve got to pay for it. And in Hollywood, if you’ve got a track record, studios/outlets OVERPAY for it. Better to invest on unfavorable terms with a proven winner than an unknown. (This is what the unknowns are unaware of, opportunity cost, risk…if you’ve got no track record, it’s an uphill battle.)

Meanwhile, we kept hearing that licenses for old shows were gonna run out.

That’s why Netflix made new shows, that they controlled.

And Disney is behind the 8 ball. Just because it’s Disney… Can you say SONY? Used to be you overpaid for Sony product, now you buy Samsung and forget about it. There’s a first mover advantage in tech, usually the established players never equal the dominance of the upstarts.

Meanwhile, AT&T buys Time Warner and tries to instill order. This is the lesson of Steve Jobs, beware of bringing in adult supervision, John Sculley could balance the books, he just could not innovate and inspire.

And all the time Wall Street says no.

Until it says yes.

The Street is not wise, the Street is to be played.

The monolith in this paradigm is Amazon, which spent and spent and was excoriated by the Street until it ended up dominant. Furthermore, Amazon made mistakes, and paid for them. Never mind the Fire phone, how about the changes in distribution, the opening and closing of warehouses… Isn’t it funny that corporations can waste money on their way to dominance, but if the government wastes one dollar taxpayers are up in arms.

You’ve got to invest. Which Netflix has done. It now owns comedy, HBO is an also-ran, it’s got boxing.

And networks overpay for sports and live events, as ratings tumble, hoping advertisers will continue to pay highly for an ever smaller sliver of the population, upon the argument that this is the best way to reach mass.

And Netflix has no advertising at all. People hate ads. And they’ll pay to get rid of them, this is the essence of Spotify Premium and Sirius XM music channels. Asking people to sit and wait in an on demand world is anathema.

But the bottom line is dominance pays dividends. In costs, in attention, in furtherance of your mission. You lose money until you rake it in. Not that every startup succeeds, then again, they are oftentimes undercapitalized with a suspect mission and they’re not playing for all the marbles.

That’s the essence of today, running the table, otherwise you’re an also-ran. And it’s gonna get worse. We’ve seen consolidation in tech platforms/companies, one movie wins every week, the long tail is for suckers, people living in backwaters trying to stay alive.

Oh, maybe you say you’re happy in your backwater, but you’re lying, everybody wants to reach more people, everybody wants to make more money, and in today’s world, if you’re not busy succeeding, you’re failing.

So, Reed Hastings had the vision. And he raised the money. And he led the audience.

This applies across the board, this is why television is decimating film and music in mindshare and money. And it’s why video games and esports are so big.

Then again, this world is one of winners and losers, and most are afraid to play the game.

Meanwhile, there are no jobs guaranteed for life and oftentimes you can’t make it on your salary. So if you personally are not fighting to get ahead, you’re falling behind.


That’s America today.

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