Content and the Nascent Behemoths
The boundaries between the world of broadcast media, which include CBS, NBC and HBO, and the world of the Internet, with firms like Netflix, Hulu and Amazon, are colliding . As consumers watch content directly on the Internet, the market for entertainment is redefined from large, vertically integrated companies to well-curated libraries of content, such as Amazon, Netflix and Hulu. These libraries will license and distribute content from varied sources, but the model of broadcast television as both content producer and distributor has been shattered. In fact, the world of broadcast media delivered via cable is threatened. The threat of consumers cutting the cord, or access via cable, is real, although sports content via Disney-owned ESPN, remains within the realm of cable. World Cup Soccer fans, like myself, had to be creative in finding access to live coverage in 2014!
The four players in the entertainment world are being split and reassembled - creators, distributors, deliverers and users.
Amidst the scramble in this colliding world, is the rise of a behemoth, Netflix, which is merging delivery, distribution and creation of content. Particularly noteworthy is the recent blurring of distinction between OTT platforms as pure distributors of content and creators of content. Amazon and Netflix distribute content over the Internet but also create content; hence they are located on the right side of Fig. 5.1. Verizon’s recent purchase of Yahoo’s Internet business suggests the emergence of a behemoth, where content, distribution and delivery are merged.7 Similarly, television networks, as distributors, have ownership stakes in the content company, Hulu.8
Netflix is as much a global entertainment company as a technology company - it set up its own content distribution network in 2011 with servers in multiple locations. It transformed television viewing by empowering consumers with viewing options as to time and length of viewing sessions. Called streaming video on-demand (SVOD), Netflix purchased the rights to Mad Men from American Movie Classics and placed the entire first four seasons of Mad Men online - bingeing took off . Early in 2016, Netflix launched its global content network in 130 new countries simultaneously . With a vertically integrated supply chain consisting of global IT infrastructure (which captures the interface and delivery aspects), data to target users, and content, Netflix, with 75 million subscribers, is focused on capturing the global entertainment market - quite possibly becoming the new MGM.9 A global premiere like Daredevil is engineered by locating content files for the movie on local servers around the world. To avoid congestion on the transoceanic cables that form the Internet’s backbone between continents, Netflix has Open Connect appliances that act as a localized content delivery network at strategic, high- density locations.
Solving the content delivery problem locally leaves open the question of content itself. Regional content must have global appeal, so when “Netflix does Bollywood, for instance, it will do whatever version of Bollywood it thinks has the best chances for success not just in India, but in Arizona” . Despite the powerful distribution technology, the aspiration to universally appealing content also raises something of an existential question: If Netflix engineers a Bollywood production to the point that it has universal appeal, will whatever that looks like simply be a regression to the mean? Is Bollywood via Arizona still Bollywood at all? Or does making a movie or show that’s all things to all people just become mush? 
This relates to the issue of cultural homogeneity that I brought up in Chap. 1 and define later in this chapter.
Globalizing content faces several hurdles such as local governments, ISPs and local competition. Protectionism can keep Netflix out of a country entirely, while a lack of interest from an ISP in Open Connect can result in a jagged streaming experience. Local content creators might not want to integrate with the Netflix ecosystem as in Brazil’s Globo, one of the largest commercial television networks in the world, and the largest in Latin America, which has not yet licensed any content to Netflix at all. Importantly, local video-on-demand or over-the-top streaming services are more familiar with the market and the language and have a first mover advantage.