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The Envelope, Please?

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Pulitzer Prize-winning historian Garry Wills wrote that on Inauguration Day 1977, Gerald Ford handed his successor Jimmy Carter three envelopes and instructed him, “Open these one at a time as problems become overwhelming.”

A year into his presidency, Carter opened the first envelope, and the note inside said, “Attack Jerry Ford,” so he did. A year later, Carter opened the second envelope. It said, “Attack the Federal Reserve.” He did. Three years in, beset by multiple crises, Carter opened the third envelope. The note read, “Prepare three envelopes.”

One might imagine Blockbuster Video’s John Antioco (who in 2000 famously laughed off Netflix’s co-founders’ attempt to sell him their startup for $50 million) presenting Netflix’s Reed Hastings with three envelopes the day Netflix claimed the entertainment media delivery crown. Antioco might have recommended opening the envelopes as churn rates climbed or subscriber loss rose.

Inside the first envelope, Hastings might have found a note that read, “Start selling ads.” In July 2022, Netflix announced an ad-supported tier set to debut by the end of the year, with Microsoft providing the underlying tech.

The note in the second envelope might have read, “Start releasing shows one episode at a time (even though you said you never would). More waiting, less churning.” Perhaps Hastings peeked at Envelope 2 before splitting season 4 of Stranger Things into two “volumes” released a month apart, the first step on a slippery slope.

What might the third envelope have revealed?

Admittedly, living and dying by quarterly earnings summaries and short-term shareholder valuations is something we’re all susceptible to in the post-Jack Welch era and would do well to avoid. Maybe we just need to (Netflix and) chill.

Then again, Evan Shapiro made an excellent point during Streaming Media Connect when he said that every Netflix price hike raises hackles and accelerates churn, but Amazon Prime increases often go practically unnoticed because the price hike is distributed across so many other services that it isn’t regarded as streaming price-gouging per se. That’s one challenge Netflix faces when compared with this particular rival that’s unlikely to ever go away.

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