[Traster]

This is a very natural phenomenon, and there's an obvious reason. When you're a growth stage company you're valued as a growth stage company, your Price:Earnings ratio will be high, because investors are already pricing in the future earnings. As your growth slows your P/E ratio drops because investors no longer expect your earnings to go up. This is fine, it's the natural process when you're saturating your market. But it causes all sorts of problems - all your engineers are paid in stock for example, and now they're underpaid versus the industry. That's fine, you don't need the same quality of engineers when you've dominated a market. You've built the thing. It's done. Let them go and build the next thing.

But the engineers aren't the only ones who are paid in stock - so are all the executives. And they want money! So you must keep the growth up. So at this point you do what Netflix is doing - start exploring other markets that you can use your existing skills to dominate. Now most likely that will fail, because by nature, you're taking the money from the home run you hit and betting on hitting another even bigger home run. For every 1 Netflix there were 10 failed competitors. But Netflix now has to try and be another Netflix, but will most likely spend their money creating 1 of those 10 failed competitors.

[bborud]

There is actually another way: become more. Google and Amazon are companies who kept growing because the scope of what they did kept growing. And they kept getting better at what made them big in the first place at least for another decade. Go back 20 years in time, and Google was a search engine. Today they are much, much more than that. Go back 25 years in time, and Amazon was a book store.

Netflix is just a movie service. And it is a movie service that hasn't gotten any better for a very long time. The fact that I have to spend a lot of time finding content to watch and Netflix mostly showing me the surface layer of content over and over again is extremely frustrating. It just isn't a good experience. They are about as frustrating as every other service on the market because they deliver an experience that isn't anything special: it is just as bad as every other competitor.

If they have no ambition to deliver a better service than everyone else, then why would they attract more users, and more importantly, have more users pay more for their service?

Right now Netflix is an acceptable service, but nothing more. They still have some way to go on quality. And if they started becoming the company that dares to do things a bit differently, and to do things better, this could be a platform to launch into other areas.

[sdevonoes]

> And they kept getting better at what made them big in the first place at least for another decade. Go back 20 years in time, and Google was a search engine. Today they are much, much more than that. Go back 25 years in time, and Amazon was a book store.

Perhaps you picked up two bad examples. Google search is worst than ever (for their users ofc, not for the ones who get money out of it). My experience as a customer in Amazon is equally bad: bad quality products (I have to spent hours filtering and double checking in order to say "yes, that's the item I want"), reviews over 4.0 that nowadays mean nothing, intrusive ads everywhere (e.g., I searched for boots in Google image search, and suddenly all the ads in other websites are about boots sold at Amazon).

I used to trust Google (I bought domains from them, used Gmail, I even bought their Nexus 5!), but not anymore precisely because how big they have became: almost-zero human customer support, they can ban you anytime they want and give you zero reasonable excuses.

[Semaphor]

> Google search is worst than ever

> My experience as a customer in Amazon is equally bad

But is that generally the case? From what I hear, non-tech people still love google (the vast, vast majority of people) and my personal experience with Amazon is pretty decent as well (though I’m not in the US, so maybe it’s not as much of an issue here) despite their search being bad.

[Ntrails]

> my personal experience with Amazon is pretty decent as well

Considering the endless dark pattern manipulation to get people signed up for Prime etc, the intolerably bad search, the hard to manage/judge "sellers", the god awful semi storefronts within a storefront from actual brands etc etc.

It is just not low hassle anymore, at every stage I'm paying extra attention lest I'm getting screwed. Turns out I'd rather go to a bookstore or a hardware store or whatever at this point. Even accounting for travel time it's lower stress.

[Semaphor]

I’ve been a prime customer ever since Prime became a thing in Germany, so I can’t talk about that. Search I already agreed (though it’s not intolerably bad, it’s barely worse than google), but the rest I have no issues with, I can see who sells what and I don’t even know where to find storefronts, all my buying is done by searching for the products or finding deeplinks.

[Retric]

I have heard non tech people starting to complain about both Google and Amazon significantly more.

[bborud]

...hence "at least for another decade" :-)

[Traster]

Yeah this is what I mean by hitting another home run. I think Amazon has truly successfully done this multiple times. Apple has done this to some extent - although they haven't really gone far past their core expertise. Google and Facebook not as much, they just happen to have businesses with massive total addressable markets that cover for all manner of sins.

But is that even the right thing to be doing? I'd argue Netflix would be doing a hell of a lot more for it's share holders to take the profits from the successful business they've built and hand it back to shareholders, rather than start gambling that money on building new businesses that are unlikely to succeed. This is what's happening right now with Facebook. It's a social media company gambling share holder cash on becoming a completely different business with almost 0% chance of success.

[hackernewds]

Great companies are not just defined by their products. Example for Google and Amazon is to illustrate that they've built a _system_ (consisting of brand, culture, values, etc) that can explore, prototype and execute in multiple different areas from scratch, and without being first to market.

[gcthomas]

Google has grown by using ad revenue to buy comoetitors or companies that do something interesting, then squeeze them for every penny of profit or dump them.

Google has a dominant search engine, a browser and massively intrusive ad placement system threaded through everything they offer. Gmail was a Hotmail clone. Android, Fitbit, Maps, Nest, and Google Earth were acquired. YouTube was bought after it out competed Google's offering. Even the advertising tech was acquired, with AdMob, DoubleClick invented outside Google.

They are dominant mostly because they have not been bothered by antitrust actions. That, at least, looks like it might happen sometime relatively soon.

[extra88]

Netflix's growth for a while has been in not just licensing TV and movies to stream but to become a studio producing TV and movies to stream (and even to show in movie theaters). They've also grown in the TV categories they offer (through production and licensing), like unscripted "reality" TV and anime. If you don't value their growth, you're not likely to give them credit for it.

They are also working on growing into at least one new area, video games.

[KoftaBob]

Well said. I would've rather seen Netflix continue their revenue growth by expanding into other verticals, rather than by continuously increasing their monthly price, which in my opinion is a very uninspired/lazy way of increasing revenue.

If anything, one of the best forms of competitive market capitalism is when a company that's successful in one sector, invests in entering a new one, thereby adding competition to whatever that new sector is. Shareholders get more growth out of the company, consumers in that sector get more competition for their $, win-win.

[Overtonwindow]

Maybe this is because Netflix is a publicly traded company? with similar publicly traded companies, there is always a constant pressure to push up the value, and earn more money. Maybe they should take it private

[dgb23]

> That's fine, you don't need the same quality of engineers when you've dominated a market. You've built the thing. It's done. Let them go and build the next thing.

> But the engineers aren't the only ones who are paid in stock - so are all the executives. And they want money! So you must keep the growth up.

This might be why so many (not all) great software services and products eventually turn into crap. They start out focused and well made, caring about their users and workers. Then the owners and decision makers try to squeeze everything out of it and carelessly add bloat, while "optimizing" internal processes into oblivion. And all that because some people simply cannot get enough stuff, is a business' goal always to extract value and power for the few despite already having massive market share, a good name and happy customers?

There is another path: invest in the long term by putting workers and customers first. Give back, invest in R&D, education, open source, social stability, the _quality_ of their product, growth of their workers and relationship with their customers.

If this was the common path of successful companies, we would live in a different, fairer, more sustainable advanced society.

[xavxav]

Sure, but as I'm sure you're aware, the current system makes this model impossible for all but the most niche products: a faster growing, better funded (because they are growing faster) product will outspend you until you die. The existing VC model is hostile to 'slow growth' companies and products.

[cardamomo]

Then change the model!

I see the value in your point--it reflects our current reality--but we should never lose sight of the fact that we can replace systems that don't serve our best interests. Yes, it takes hard work, but maintaining the status quo is not the only way forward.

[infinitezest]

I mean fair enough but isn't that the problem? That people would like to change the system but the exact mechanism for doing so is not at all obvious.

[falcolas]

Based on the earlier comments, it feels like step 1 is to renegotiate salaries away from stock. It makes sense when you can't afford reasonable salaries, but it's not something that's been written in stone.

Also, don't hire executives who have a demonstrated history of making bad decisions for a business' long term stability in the name of "shareholder value".

[maccolgan]

The other problem is the insane attrition and low tenure rates that directly disincentivizes any investment in individuals.

[johnfn]

No, not really. If you change the model you’ll immediately be out-competed by anyone who didn’t change the model.

[dgb23]

It's not impossible in a real sense. Many SMBs do this, large players do it somewhat sometimes in some areas and have proven this strategy to work on some level. I want _more_ of that and I think it would be better for pretty much everyone in the long term.

My comment above isn't nearly as nuanced as it could be - I'm pressuring a pain point that I think needs more attention. But I'm optimistic, It seems like sustainability awareness and long term, holistic / system thinking is growing.

[orzig]

I was at a company whose P/E was super high as we saturated our market. The CEO would publicly state that the price didn't make sense to him, and we tried to find more home runs. In the end, inevitably slowing (but still positive and profitable!) growth caused a panic and investor-mandated layoffs.

I'm sure it could have been handled better, but elegantly transitioning out of hypergrowth is a surprisingly hard problem, even when you recognize it as such.

[darkr]

> all your engineers are paid in stock for example, and now they're underpaid versus the industry.

I was under the impression that Netflix generally doesn't offer stock to engineers, but instead pays above market salaries.

[sudden_dystopia]

This is not a “natural phenomenon”. It’s a phenomena that is a result of being a publicly traded company since investors demand growth. Stay private and you can set your own goals. Growth has to end at some point other wise public companies are really just little “Clippies” optimizing for growth and destroying everything in its path.

[throwanem]

You use the word "nature" and its cognates surprisingly frequently in this description of an entirely artificial set of processes.

[pembrook]

If you want to quibble the semantics, we can take this even further.

I’m not sure if you’re aware, but humans are of the biological class mammalia. We are nature.

If we’re nature, then everything we do is natural.

Unless you want to enshrine Netflix’s market position in law, Companies, like species, will always compete with each other.

Companies in our civilizations, like species in our forests, will expand until the limits of TAM or outcompetition by a predator company.

[throwanem]

When you need to define the concept of artifice out of existence, and hope your audience fails to notice, in order to sustain your argument, what does that say about the argument?

[pembrook]

And thus, we have reached the logical endpoint of semantic debate, ie. no longer confronting the underlying ideas in GP's comment.

If you replace the word "natural" with "artificial" in GP's comment, it doesn't change anything about what he/she was saying.