Wetpaint CEO Ben Elowitz on the Future of Digital Media
Change is hard. Change is scary. Change is costly. Change is essential.
This is no more true anywhere than in today’s unbelievably dynamic digital media business.
In February of this year, I outlined the characteristics that define great leadership in this tumultuous digital media industry – and will determine who ultimately succeeds. I published it in my Media Success newsletter that month (reprinted below), and it has remained a sidebar feature ever since, as the definition of a perfect game.
The 7 Variables For Media Success
Those with these seven attributes will win in media.
His extremely controversial and determined decision this week to split his company in two is both phenomenally ballsy and smart.
Hastings sees where the world is going, and, instead of resisting, he is getting out in front. He knows that his DVD service today is immensely profitable, and yet it is on a long slow ramp toward zero. And, at the same time, Internet-delivered video is a whole new, and far more valuable, business.
It’s the same dynamic throughout most large old media businesses. And yet – unlike many in old media – Reed is doing something aggressive about it.
Rather than playing to short-term profits on the DVD business, he is turning full-tilt to the business with the greatest strategic value. If I’m not convincing on this point, please read Mark Suster’s trenchant analysis.
Yes, Hastings communicated his new strategy poorly. But he admits as much in his widely distributed apology. So, with this mea culpa now delivered and digested, let’s get off Hastings’ back, and get back to the most interesting dynamics at play here:
Far beyond any villainy on Hastings’ part, and far beyond any damage to his customer base for changing his product line, I suggest looking for someone else to blame by pointing the finger at Wall Street.
The Street talks about its desire to see long-term strategic vision; but whenever it’s there, right in plain sight, investors collectively blink – and then sell, sell, sell. Indeed, the current sell-off of Netlfix’s stock is one of the most alarming signs of the Street’s misunderstanding of media’s strategic future. And now, looking forward, I pity any CEO who turns to Wall Street for strategic validation.
Let’s keep the spotlight on Netflix, though.
I wholeheartedly agree with Hastings.
And there’s no question – in my view, at least – that broadband-delivered content represents the much more important and valuable business opportunity for his company. The fact that he decided to split the service lines at Netflix simply confirms openly what was already inevitable, if previously hushed.
For some reason, Wall Street just doesn’t get it. And, in my opinion, its punishing resistance to Hastings’ moves is akin to pummeling AOL for thinking beyond dial-up service; yet, as we all know, that company is a decade overdue in figuring out its next wave.
I’m a believer in facing facts, truth-telling, marketplace opportunity, and getting to the sweet spot first.
So, having said that, I’m putting my money on it. Yesterday, I bought Netflix shares. It’s the first single stock purchase I’ve made in media in a couple of years; and I made the buy after seeing a CEO – who has all the variables dialed in to achieve on the next big opportunity in media – do the absolute right thing.