Netflix briefly overtook Disney this week to become the most valuable ‘pure media’ company in the world, worth a staggering £113.5 billionn.
The rise in Netflix’s shares follows recent figures showing phenomenal growth, with more than 125m subscribers in more than 190 countries and viewers watching around 140m hours of its programmes each day.
If it keeps going at this pace, Netflix predicts 360 million subscribers by 2030.
Sign of the times: Netflix is a great example of how innovation is not solely brought about by new devices, ideas or methods, but by the process of uncovering new ways to do things
Netflix is a great example of how innovation is not solely brought about by new devices, ideas or methods, but by the process of uncovering new ways to do things.
Starting in 1997 as a DVD rental service with a million subscribers, it was at first only a repository for other firms’ content.
By investing billions of dollars in brilliant new programmes – from the House Of Cards to the The Crown – and buying others, Netflix has revolutionised television broadcasting and brought cinema into our living rooms. Signing up the Obamas in a new production deal is genius.
Like Jeff Bezos of Amazon, Netflix’s Reed Hastings has an uncanny feel for what consumers want before they know it themselves, from entertainment to buying things. Ultimately, they are both in the retail content business. It’s Netflix’s success that has driven Disney to launch its own streaming service next year, and why it wants to buy 21st Century Fox for even more content.
There are lessons to be had from these dynamic US goliaths for Britain’s struggling companies, retailers such as Marks & Spencer and legacy companies such as BT. What Netflix and Amazon have in common is great leaders with vision and flair who go hell for leather to achieve their aim. They know where they are going, and are bold enough to experiment along the way.
It’s this sort of buzz that is sorely needed at Marks & Spencer, which announced shocking financial results this week. The once mighty M&S – the first UK retailer to make £1 billionn pre-tax profit, under the legendary Sir Richard Greenbury – saw profits fall by two thirds to £66.8 million.
We all know why. Too many stores, clothing sales moving online, the growth of home delivery of food eating away at its business, problems with warehouses, the march of the discounters and glamorous rivals popping up online and on the high street.
What made the results so disappointing was the way chief executive Steve Rowe talked again about a ‘transformation plan’ and the ‘velocity of change’. These were the same words the last four chief executives all used to describe their attempts to get M&S back on form, going back to 2000. They failed. Rowe needs to mug up a bit on his US peers – ‘never tell, but show’.
Should long-suffering investors and customers believe him this time round? There are two reasons why M&S might be ‘transforming’. Emboldened by chairman Archie Norman, Rowe is taking the drastic decisions that should have been made years ago. Second, in Norman M&S has a leader for the first time who understands retailing and content. Before joining M&S last year, he spent six years as chairman of ITV, during which he and Adam Crozier transformed it into a successful programme-maker with hits such as Poldark and Victoria, which ITV has sold to Netflix.
Inside M&S, Norman is jokingly nicknamed ‘Snape’, after the wizard from the Harry Potter books who is constantly lurking in the background, questioning everything and poking his nose where he shouldn’t. Good. It’s time M&S had some magic. Hold the shares a little longer.
Numbers of the Beast
Only fools and City economists believe the ONS monthly retail sales figures. So says Nick Bubb, retail supremo, who has been weighing up the ONS’s numbers for decades and rarely gets the mood wrong.
Yet the ONS always gets the numbers wrong, he says, because it measures volume and not value. Which is why the ONS revised figures for April – showing a 1.6 per cent rise – are too optimistic, as they are not adjusted for the early Easter and the Beast from the East. A better guide to consumer spending is the recent bleaker BRC-KPMG retail survey, which says life remains tough.
More worrying is that business investment is paralysed. It’s why interest rates will not be raised this year, and why Theresa May must pull her Cabinet together, get bolshy with Brussels and lift the gloom. Once lost, confidence is hard to regain.