retail news in context, analysis with attitude

by Kevin Coupe

Everybody worries about the competition. But sometimes, the competition you really need to worry about is the competition that used to be your business partner, that used to be part of your supply chain, that used to stand shoulder-to-shoulder with you in catering to consumers. Or worse, that seemed to be in a different segment of the business altogether, before deciding that in order to grow, it needed to expand onto your territory.

Think it can’t happen to you?

That’s probably what the folks at HBO thought about Netflix, which over the past few years has helped to completely rewrite the rules of video rental, disrupting the supply chain that Blockbuster thought it dominated and, in the process, almost putting the once-giant video rental chain out of business.

Netflix has been flexing its muscles in a variety of directions, moving aggressively to gain an advantage in the video streaming business. And now, it actually is competing with pay-cable channels such as HBO for original content - potentially rewriting some more rules in the process.

The Wall Street Journal reports that Netflix “is in advanced talks to distribute a forthcoming television series directed by David Fincher and starring Kevin Spacey ... The discussions for the series - a political drama called ‘House of Cards’ based on a British miniseries - is part of a growing behind-the-scenes push by Netflix to secure from Hollywood production companies more original shows that will run initially on Netflix's streaming Internet service, according to a person familiar with Netflix's plans.”

In other words, if this all works out, Netflix won’t be just a distributor of other people’s programming. It’ll actually be developing and distributing original programming ... and it isn’t hard to imagine that at some point it will start developing and producing its own movies and television series.

It is sort of like the move to private label that has changed the balance of power to some degree in the supermarket business. At some point, distributors of product start to realize that in order to differentiate themselves in the marketplace they have to have product that nobody else has. In this case, Netflix is hoping to have exclusive rights to a series that won;t be carried by HBO or Showtime and won’t be available in Redbox kiosks.

Think this can’t happen to you?

Well, think again. Because everybody is looking for an edge, everybody is looking for a differential advantage, everybody is looking for that disruptive product or service, everybody is looking to rewrite thew rules in their favor, and everybody is potential competition.

And if there are companies out there that are not looking to do these things ... well, the odds are pretty good that in the long run, these companies are going to be the victims of the companies that do.

That’s our Thursday Eye-Opener.
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