In another thread, krazyeyes wrote; “Just curious DP . . . what would Netflix have to do for you to post something positive about them?”

krazyeyes, I think I point out in every one of these posts, in some way, that they have pushed the envelope and built out two great ideas.

What I keep writing about with Netflix is not that they are bad or the service is bad. Others have complained about some of the details. I have not.

What I am writing about, against a tide of rose-colored media lust for this company, is that a major tide is turning. And people – especially the media – are so busy cheering on a company that beat the system with an innovative idea and hard work that they don’t want to acknowledge the treacherous path ahead.

Regardless of public statements to the contrary, Netflix itself sees the edge of the cliff. There is no other way to explain the huge content deals they are making. The public tends to see the service and the success with subscribers and the innovation and disregard the details. But the details today are not the same for Netflix – or any company seeking to be in the ongoing streaming business – as they were just 18 months ago.

Here’s an analogy. Banana Republic. I was an early fan of the stores. And early on, they really were out finding things that they weren’t manufacturing, but finding all over the world. As they grew, they added some manufactured goods, mostly favorites they couldn’t fulfill demand for by purchasing as they found it. Then, they were bought by The Gap and almost immediately, they became a style brand and the idea of one-offs showing up in the store lessened drastically. Within a couple of years, the business was a slightly higher end version of The Gap. And that is where it remains today.

Nothing wrong with that.

But it’s not what it was. It’s not what I loved when I happened upon it 30 (or so) years ago .

Netflix has gone from cleverly seeing DVD as an opportunity to skip the brick & mortar and to use the mail for home delivery, making more money per wholesale purchased DVD than a business with more physical overhead. Great. They got into content ownership for a moment… numbers didn’t work… they got out. Smart cookies. DVD continues sliding and Reed Hastings & Co get serious about streaming. They move a lot faster than big corporations and they realize that they are able to rape & pillage the majors, really, and build a very strong streaming base by paying a small percentage of what pay-TV pays for content by dealing with the pay-TV companies, who have rights that aren’t being exploited. Brilliant.

And the company grew. And the subscriber base rose. And the stock price went through the roof.

And then, all those companies who were happy to be getting a little something extra in their pay-TV deals because of streaming noticed.

That was when the game became bigger than Netflix or any other service provider (aka middle man).

This is not a criticism of Netflix. They have seen the future. And that’s why they are risking so much to try to get ahead of the tidal wave. They’ll say absolutely not, but I would say that they are looking to be another Banana Republic. They are a brand name with good customer relationships and a very, very healthy subscriber base already. I will be surprised if a consortium of 3 major library companies, at least 2 of which are ongoing major studios, doesn’t buy Netflix by 2014 as their streaming base. Reed Hastings has already started selling off chunks of his stock. But something like Sony/MGM/NBComcastUniversal seems like the right fit. WB is already heading down their own in-house path, as Time-Warner already has in the cable business. Disney is going to be the crown jewel of the streaming business and will either marry Apple or find their own way some other way. Fox doesn’t always play well with others. Lionsgate is a very valuable commodity, but a bit schizo about what it wants to be as a business.

The only really funky possibility is Netflix becoming so overvalued by the market that it buys/merges with Viacom… in which case, they have the Paramount and CBS libraries in house and probably end up buying or dealing with Lionsgate as well.

Point it, there is a tipping point where the cost of content and the availability of the technology turn a company like Netflix into a service business for the studios it is sharing revenues with… unless it becomes one of those studios.

The one scenario that seems impossible to me is that Netflix keeps doing business as it is now doing for more than the next 2 years. The brand and the reality of their product and the massive costs they are now incurring make for a house of cards. Can’t work.

But they can adapt. And they have before. And it is 100% clear that they are already 3 steps ahead of the media coverage of their story. We’re all screaming, “Look at the butterfly!,” and they are already in the cocoon, figuring out what butterfly they will be next.

And getting back to me – ah, ME! – this is how I cover this industry. It is very, very rarely because I have a personal connection or interest in something. I despise it when the media starts becoming obsessed with a story that they refuse to really think about. It’s Pretty Girl Syndrome. The media gets blinded by the surface and rarely gets serious about what’s under the hood. And then there are these media analysts who are insane self-promoters who throw out junk stats left and right. (Just read a piece this morning about Apple’s next announcement and how the last people to look to for insight about what will be announced are The Analysts, who TechCrunch claims are wrong over 98% of the time.) So media “reports” their opinions like its gospel…. even if the same analyst gets shown to be wrong over and over and over again.

I have no problem with Paramount. But they were floating on distribution-only deals for a few years. And when they started making movies again, due out this year, I immediately wrote about this potentially being their very best year under Brad Grey. They don’t even need to have the highest grosses they have had. But the net and profit picture looks better in 2011 than it has in a very long time.

I have no problem with Warner Bros. They make massive movies and are always at the top or near the top of the Market Share chart. But Market Share is bullshit. So I look at the details, for them as for every other studio. Have a savaged a couple of their movies? Yes. Have I sung to the high heavens about some of their movies? Absolutely. Including movies that it seems like no one else would support.

And I am not in love with Fox. But just like every other studio, there is the surface the public sees – the movies – and there is the business, which is rarely dug into. I get along with some of the people over there who are hated. But that’s true of every studio. And I assure you that there are people at Fox who think I am just a loud mouth asshole. (And sometimes, I guess I am.)

Writing about movies is 50/50, personal and professional. You have personal reactions to films. Nature of the beast. And there are objective ideas. And as a critic, one must balance these out to be fair, smart, and useful to readers.

Writing about the movie business is 100% about the business for me. Some of my very favorite people in this business have been known to say to me – often – that I hate ALL of their movies. It’s a bit exaggerated, but like every other sane adult, 80% of what comes out is negligible. And in that other 20%, there is a range of like and love and dislike and hate. At a studio, that usually means that there are 3 or 4 movies a year about which someone is actually considering my opinion seriously. And if I am lukewarm or dislike 3 of the 4, I hate ALL their films.

Does it matter, really? No. They are going to market the films and perhaps awards-chase the films and I am just a voice to be forgotten, ignored, or to jiggle loose some sense of what the negatives might be.

But back to the business side… what I don’t do is go along with the pitch. And 90% of what you read about the movies business – maybe more – is coming from publicists – personal, studio, or corporate – and it’s not just about protecting clients. It’s about positioning the whole machine. And when a top studio exec talks to a journalist for publication (on the record or on background), the spin is all the more acute.

Also, I have learned a lot about how this machine works over the last 15 years. When someone passionately tells me that my source on something like a production cost number is wrong, I don’t take that with a grain of salt. I take it seriously. I also have to take sources who tell me things that people don’t like to read seriously. I also have to seriously consider whether the team I believe in – like WGA or SAG – is making strong choices, no matter how well intended.

It fascinates me when people get upset with me and claim that I see my self as some self-appointed moral guardian. Well, I’m a writer and I’m an editor. What the fuck do you think the job is? This is when journalists make me nuts. At what point do we so disconnect from reality that we forget that we are judging all day long. We choose what to write. We choose to believe or disbelieve our sources, either seeking out more sources or not. What makes so many journalists think they are above judgment?

From the very start of my work as a journalist, I felt that if we were going to judge every single thing about Hollywood every day, we were up for debate as well. It’s only fair. Not to be hunted like witches or Communists. But that we have a responsibility that comes with our bylines to reach as hard as we can for truth and not just for today’s fishwrap. We are all going to get it wrong sometimes. I get it wrong too. But i have learned, the hard way, that the thrill of the chase can mess up your perspective badly. You want every story to be fresh and exciting. You want everything to be EXCLUSIVE. You want to be the best at your job. But particularly now, with every week being speed week, it’s harder to be heard… so journalists get louder and sloppier, lowering their own standards and the rest of our standards with them. Because you know, the people handing out the info in the movie business are not interested in you, they are interested in getting their version of events to the most people possible. To them, it’s math. So if you are going to question them in a real way – and not just scream at their staff members and then bend over and give them the best —-job of their life – you aren’t going to get what you want. So eventually, it becomes a competition for who can take it and give it hardest, fastest, wettest.

Proud moments.

Who am I to judge? No one. I am another person. i just have better seats than many of you. And the silent majority around here has better seats to a lot of this than I do. That’s why they are sources and not journalists.

I am just trying to jailbreak perspective. And I can’t worry whether that sounds arrogant. That’s the dictionary definition of the job.

It’s not personal. It’s strictly business.

And when it is personal, it’s my business to tip you to that.

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