Why Netflix Isn’t Really a Tech Company

Hurray for a FAANG! Netflix reported fabulous results Monday. It added 7 million subscribers, including a few in the relatively mature United States. Revenue and earnings soared, as did forecasts of negative cash flows. Netflix’s already high-flying stock price jumped further in after-market trading.

So this is really good news for the group of mega-cap tech companies, right? Not necessarily. Unlike Facebook, Netflix unabashedly is a media company. Yes, it uses technology well, as any high-achieving company must. But beyond its early innovations of ordering online, then algorithmically suggesting things to watch (a la the early days of Tivo), and, finally, leaning into streaming, Netflix is an old-fashioned entertainment studio. It pays up for quality fare and charges a healthy price for consumers to consume it.

The beauty of this, as Aaron reported yesterday and Breakingviews analyzed, is how Netflix uses customer data. It collects a lot of it, for sure. But it doesn’t turn around and share any of it, as the formerly uninformed now understand Facebook does. Instead Netflix crunches the consumer data it holds to aid its recommendation engines and to decide what additional programs to commission. Netflix doesn’t want to share that data with anyone else. It sells no advertising and releases no ratings. It cares about finding an audience for its show, though. Not for nothing, Netflix is a lavish marketer, spending heavily on advertising across digital, print, and broadcast media.

Netflix (NFLX) also is an unlikely monopolist. The same is true for Apple (AAPL) and Amazon: For all their might they have small percentages of the smartphone and retail markets, just as Netflix remains a low-marketshare if frighteningly powerful studio. Facebook (FB) and Google (GOOGL) tread far closer to the dominance line—and may pay the price before Washington and Brussels are done with them.