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A Market Working! What Will They Think of Next!

By 20 December 2010 One Comment

At Alley Insider, Netflix CEO Reed Hastings discusses why he thinks those who short his stock are making a mistake. It is an interesting discussion generally, for its insight into how a shrewd executive views the development of content delivery via the Internet, but for purposes of Digital Society’s focus on Net Neutrality, the most interesting comment is Hastings’ view of his big source of competitive advantage — happy customers:

The core competitive barrier for direct competitors is brand/subscriber-evangelism. Our large subscriber base is very happy with Netflix, and tells their friends about Netflix. That means that the cost of acquiring the incremental 1m subscribers is lower for us than for a competitor, and thus our net additions are higher. There are also lots of other smaller competitive barriers, but the happy subscriber base is the big one.

It has long been known in business that customer interaction is more potent than the most expensive advertising, and the Internet is taking this to a whole new dimension because customer interaction now takes place among millions of strangers, not just in small groups.

Given this, how is it conceivable that the management of one of the major ISP brands — Verizon; Comcast; AT&T; whatever — would tick off its customers by cutting them off from content they desire? Indeed, as Hastings points out, anyone who creates demanded content can force the ISPs to pay them rather the reverse.

So why is the FCC considering an elaborate regulatory structure which will certainly slow down the speed of innovation and adaptation to protect against a hypothetical possible harm that has not in fact occurred in the past and which no business could inflict on consumers without cutting its own throat as a result of wide, and loud, outrage?

I swear, I become more of conspiracy theorist every day. So for Net Neutrality, cui bono?

Image from Rev. Xanatos Satanicos Bombasticos (ClintJCL)’s photostream

One Comment »

  • George Ou said:

    The market is anticipating what might happen when they have to pay Starz 10 times more for content or if they lose Starz.