People have been telling me for years now that Netflix is the next big thing and will change the entertainment world forever.
As much I loved the product (digital streaming platform showing latest flicks catering to audiences of all ages and tastes), I got curious to understand its business model.
Unfortunately, it did not take me long to feel disappointed. Business experts called me an “Old world” thinker.
But whatever the thought process may be, I don’t know what else could be the primary objective of a business other than to earn cash flows for it’s owners (sooner or later).
The meteoric rise of Netflix warped the media industry forcing companies like Disney and AT&T to embrace a business model that is fundamentally broken: Spend billions of dollars to create an endless supply of content, then sell monthly access to this deluxe all-you-can-eat buffet for little more than the cost to have dinner at McDonald’s.
Netflix is debt ridden and is burning cash like any thing. Oddly enough, with Hollywood / Bollywood on hiatus, Netflix’s content costs have been pushed off, creating an unusual instance of positive cash flow.
But the question is once the lockdowns are lifted, will the cash flows hold?
Amit Chopra, Business Consultant, IIM KASHIPUR
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