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Probably Not “Just Competition from Blockbuster” July 24, 2007

Posted by David Card in Media.

Regular readers know that I’m a long-tail skeptic. Oh, there is one for sure, but few companies can make it supplying only the tail. Hits still matter, and usage concentration exists even online (Figure 2). In a 2006 big-picture Jupiter report, I suggested that continued explosive Netflix subscriber growth could prove me wrong, or show signs of changes in the Pareto principle power distribution law (the 80/20 rule).

    Long-tail content probably won’t reverse the Pareto principle, ever, but even a change from the 80-20 rule to a 70-30 ratio would be a dramatic reshaping of business. If Netflix’s subscriber growth continues, and its user patterns don’t change, it would be an indicator of such an evolution. If Netflix’s growth slows much, don’t expect any fundamental shifts.

The jury’s still out, but deliberations are heating up.

    Netflix ended the second quarter with 6.74 million subscribers, up 30% from 5.17 million a year earlier. However, the company lost 55,000 subscribers from last quarter. Netflix again cut its subscriber outlook, saying it expects to end the fourth quarter with 6.8 million to 7.3 million subscribers.
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