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Know the Limits

Written by Briton Ryle
Posted June 3, 2019

When I first started watching Netflix, I was amazed at the quality of the original content. Bloodline, just fantastic; House of Cards, also really good. And if you expanded the search parameters, you get Game of Thrones and Breaking Bad. All truly top-notch shows. 

I remember thinking there was a ton of really good writers out there. And I theorized that maybe the number of opportunities to write had greatly expanded with Netflix, HBO, and Amazon Prime. And so new talent was being discovered and nurtured. 

In economic terms, the opportunities that Netflix et al. provide for content producers are demand. The writers, actors, and directors that create the shows are supply.

And for a time there, demand was strong and was getting fulfilled with some really great content. 

Sucker that I am, I was thinking, huh, it's like a golden age for creativity. 

But if you've watched any new original series on Netflix lately, or even better, that last season of Game of Thrones, you are seeing that maybe "golden age" is a bit dramatic...

Now, I have to tell you: I did not watch that last season of GoT. Don't get me wrong: I loved the series. I didn't start watching it until maybe season three or four. And I learned that I really like to have a solid backlog of a series so I can binge when I get the chance. I'm not big on being in the same place every Sunday night at 9 p.m. (Nielsen stopped calling me 20 years ago...)

Plus, GoT jilted me. Left me at the altar, as it were. I mean, here we are, about to culminate what has been a really fantastic relationship, and GoT says, you know what, I'm not ready to move forward with what's coming; I think I need some time alone, to think about things, see ya in a couple years.

And I'm supposed to be fine with this? Two years later, I'm supposed to say, "Oh my god, I missed you so much, I'm so glad you decided to come back to me"? Yeah, SCREW THAT. I am definitely NOT your huckleberry.

Anyway. I didn't watch it, but I understand that the quality of the last GoT series was disappointing. I mean, in one episode, somebody left a to-go cup of SBUX coffee in plain view of the cameras, and it made it all the way through production to actual airing. Viewers who actually hadn't lost their attention to detail noticed it.

I really feel like I won this one. Because I am well aware that I am particular to the point of being difficult — sometimes even downright grumpy. But I stand by my likes and dislikes with as much good humor as I can muster. And then GoT comes begging back, and it's like it put on 50 pounds, it's walking on a peg leg, and it has a glass eye, and I'm like, mmmhmmm. 

Creativity Bubble

Netflix and Amazon Prime are the two companies that have created this new demand for content. And they are funding the expansion of content with subscription fees. Netflix is spending around $10 billion this year on content. Amazon is spending around $7 billion on music and video this year.

The point here is that demand is as high as it's ever been. And there's a crapwad of new money getting thrown at content creators. So there is a lot of incentive to be a content creator these days.

But there's one thing demand and cash can't create: good content. And in fact, it could be argued that a ton of cash flying around will inevitably result in more bad content being produced. All you need is "production" in your company name, hire somebody who won an obscure film festival award, and boom, you're making movies for Netflix. 

OK, I admit, I don't actually know if it's that easy. But I have my suspicions...

Because I haven't watched a Netflix series that was worth a damn in a long time. I think the last one I saw that I really liked was Bordertown, and that one is made in Finway! And I gotta say: Finwegian is about the weirdest sounding language I ever heard. Russian is downright melodic in comparison. (Also, if you're from Finland or Norway, please forgive the "Finwegian" crack. I find it hilarious, and I clearly can't help myself.)

Ultimately, I don't mind if Netflix or Amazon has a content problem that affects their numbers. There's still a newness to streaming services that will eventually hit a wall (maybe when Disney+ comes along?). 

But there is one area where I think we're seeing too much money chasing too little substance: the venture capital and IPO market...

Count Your Buzzwords Before You Invest 

I've told you how I feel about Uber and Lyft. It seems to me their business model is simply to steal the taxicabs' business model. I think they depend heavily on the "sharing economy" and "shaft your employees" things. And I think they lose too much money.

Plus, I think autonomous cars are too far from viability to save Uber and Lyft. 

These days, you get the right buzzwords into your business model, and the venture guys feel like they can sell it to the investing public. 

As in, I was pretty bullish on Beyond Meat (NASDAQ: BYND) as it came public. Plant-based meat is a cool idea — I can see it getting buzz and sales. But it was like the very day the company went public that a brand new Beyond Meat section popped up at my local Safeway. 

This is not an accident or a coincidence. This is the venture that nurtured Beyond Meat at work, trying to ensure that the company is a success and their investment grows bigly. 

So today, I'm looking at the descriptions of a couple companies that want to go public soon.

Crowdstrike says:

[We want to] reinvent security for the cloud era... cyberattackers had a decided, asymmetric advantage over existing security products. We turned the tables on the adversaries by taking a fundamentally new approach that leverages the network effects of crowdsourced data applied to modern technologies such as AI, cloud computing, and graph databases. 

Revolve is:

The next-generation fashion retailer for millennial consumers. As a trusted, premium lifestyle brand, and a go-to online source for discovery and inspiration... Our dynamic platform connects a deeply engaged community of millions of consumers, thousands of global fashion influencers, and more than 500 emerging, established and owned brands.

Even Slack, which we use here at Angel Publishing, says:

Slack is a new layer of the business technology stack that brings together people, applications, and data – a single place where people can effectively work together, access hundreds of thousands of critical applications and services, and find important information to do their best work.

Clearly, these companies are really good at "leveraging buzzwords to create an exciting investing experience." Whether they will ever produce profits for their investors is another question. 

Until next time,

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Briton Ryle

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A 21-year veteran of the newsletter business, Briton Ryle is the editor of The Wealth Advisory income stock newsletter, with a focus on top-quality dividend growth stocks and REITs. Briton also manages the Real Income Trader advisory service, where his readers take regular cash payouts using a low-risk covered call option strategy. He also contributes a weekly column to the Wealth Daily e-letter. To learn more about Briton, click here.

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