Compete. Launching. Rival. Tough.
These four words are closest to the set of words consisting of (Disney+, Apple TV+, Amazon Prime, Netflix, Hulu, YouTube, WarnerMedia, and Peacock) in a word2vec analysis we performed on 300 business articles published in September. All articles contained the phrase streaming services. Word2vec processes raw text and positions words in a high dimensional vector space where semantically similar words are placed at nearby points.
Competing streaming services such as Disney+ and Apple TV+ launch next month, and other rival services such as WarnerMedia’s HBO Max and Comcast’s Peacock are prepping on the launch pad for early next year. We’re about to witness one of the toughest competitive battles in corporate history.
Here are the formal results of the word2vec analysis (scores are very close to 1 indicating these words are highly proximate to our target list of industry players):
('compete', 0.960),
('launching', 0.942),
('rival', 0.941),
('tough', 0.939)
Tough indeed!
In Strategies for Surviving a Shakeout, a classic piece written some 20 years ago, George Day of Wharton described initial boom times and subsequent seismic-shift shakeouts that strike a previously stable industry.
The origin of the boom is a competency predator that develops a new business model, often mastering a technology utilized to enter the market and expand regionally. This predator is able “to come out of nowhere and grab large shares in markets that welcome the new level of service or sharply reduced costs.”
Netflix.
Day continues: “For industry incumbents, removal of their isolating mechanism feels like the disruptive movements of the earth’s crust when the tectonic plates shift…. High levels of profitability or promises of huge capital gains draw new competitors like magnets. It is axiomatic in economics that every opportunity bears the seed of its own reversal. A glut of competitors is especially likely when contagious enthusiasm sweeps through an industry.”
A subsequent bust is triggered by factors such as:
In assessing shakeout survival, a company must develop scenarios addressing questions such as:
What makes the streaming market so fascinating is the important role that video streaming plays in selling significant ancillary products and services. For example,
* Amazon: e-commerce & cloud services
* Apple: hardware
* Disney: merchandise & theme parks
* Netflix: ???
Netflix??? Despite buoyancy in its share price immediately after announcing its latest Q3 results, Netflix appears naked compared to other players -- from an ancillary market perspective. And this nudity raises doubts about its staying power.
Forecasts by analysts who honor Netflix with high target valuations typically assume the company will be able to raise subscription prices. Netflix competitors have put a damper on this degree of freedom.
In addition, the price paid to attract top creative talent continues to escalate. Any pullback in talent acquisition will threaten Netflix’s historically favorable value/price ratio.
Netflix must address the rhino in the room poised to gore its valuation – free cash flow. Although the company reports positive net income, it suffers from sizable negative free cash flow that results from its current business model.
Although Netflix vehemently denies any future move to embrace advertising, the cash flow spigot from this ancillary service will need to be turned on to stop the rhino from puncturing share value.
These four words are closest to the set of words consisting of (Disney+, Apple TV+, Amazon Prime, Netflix, Hulu, YouTube, WarnerMedia, and Peacock) in a word2vec analysis we performed on 300 business articles published in September. All articles contained the phrase streaming services. Word2vec processes raw text and positions words in a high dimensional vector space where semantically similar words are placed at nearby points.Competing streaming services such as Disney+ and Apple TV+ launch next month, and other rival services such as WarnerMedia’s HBO Max and Comcast’s Peacock are prepping on the launch pad for early next year. We’re about to witness one of the toughest competitive battles in corporate history.
Here are the formal results of the word2vec analysis (scores are very close to 1 indicating these words are highly proximate to our target list of industry players):
('compete', 0.960),
('launching', 0.942),
('rival', 0.941),
('tough', 0.939)
Tough indeed!
In Strategies for Surviving a Shakeout, a classic piece written some 20 years ago, George Day of Wharton described initial boom times and subsequent seismic-shift shakeouts that strike a previously stable industry.
The origin of the boom is a competency predator that develops a new business model, often mastering a technology utilized to enter the market and expand regionally. This predator is able “to come out of nowhere and grab large shares in markets that welcome the new level of service or sharply reduced costs.”
Netflix.
Day continues: “For industry incumbents, removal of their isolating mechanism feels like the disruptive movements of the earth’s crust when the tectonic plates shift…. High levels of profitability or promises of huge capital gains draw new competitors like magnets. It is axiomatic in economics that every opportunity bears the seed of its own reversal. A glut of competitors is especially likely when contagious enthusiasm sweeps through an industry.”
A subsequent bust is triggered by factors such as:
- A price war that squeezes out weaker participants
- Overly optimistic forecasts
- Resource shortages
- Risk capital that runs short
In assessing shakeout survival, a company must develop scenarios addressing questions such as:
- How many competitors can the market ultimately support?
- Which competitors have staying power, and which do not?
- Can my company benefit by hastening the arrival of a shakeout?
What makes the streaming market so fascinating is the important role that video streaming plays in selling significant ancillary products and services. For example,
* Amazon: e-commerce & cloud services
* Apple: hardware
* Disney: merchandise & theme parks
* Netflix: ???
Netflix??? Despite buoyancy in its share price immediately after announcing its latest Q3 results, Netflix appears naked compared to other players -- from an ancillary market perspective. And this nudity raises doubts about its staying power.
Forecasts by analysts who honor Netflix with high target valuations typically assume the company will be able to raise subscription prices. Netflix competitors have put a damper on this degree of freedom.
In addition, the price paid to attract top creative talent continues to escalate. Any pullback in talent acquisition will threaten Netflix’s historically favorable value/price ratio.
Netflix must address the rhino in the room poised to gore its valuation – free cash flow. Although the company reports positive net income, it suffers from sizable negative free cash flow that results from its current business model.
Although Netflix vehemently denies any future move to embrace advertising, the cash flow spigot from this ancillary service will need to be turned on to stop the rhino from puncturing share value.
