Volume 68: ESL gets the boot and Netflix drops.

1. Big bank’s bad idea gets booted.

tl;dr: Groupthink European Super League lasts 48 hours.

So, the European Super League came and went leaving behind nothing but recriminations, resignations, apologies, bad blood between clubs and their fans, weakened political power for all the clubs involved, and an ethics rating downgrade for JP Morgan Chase.

Nice job. Well done, idiots. Only football chairmen egged on by an investment bank could screw something up this badly, this fast.

It’s easy to understand the why and the why now of this. The impact of the CV19 pandemic on the finances of European Football has been horrendous, and particularly so for iconic clubs that find themselves with mountains of debt, vast player salaries, and what looks awfully like future bankruptcy.

With that in mind, twelve clubs, along with JP Morgan Chase, hatched an idea to create a new “super league” built around the franchise model of the NFL, with its guaranteed payouts, salary caps for players, and no means of relegation. This wasn’t just an enticement to the greedy; it was a get-out-of-jail-free card for the mismanaged.

But, as is so often the case with severe cases of executive-level groupthink, fans weren’t just unimpressed; they were universally adamant at how much they despised what they viewed as a brazen attempt to co-opt their clubs in the interests of finance, leading to the kind of spontaneous protest we’ve seen before in this pandemic. I mean, what do you expect when people are this on edge?

What’s particularly notable amid this shambles isn’t just that the way the ESL has made Uefa look good in the same way that THE FACEBOOK being so utterly awful gives Google air-cover for being slightly less bad. It’s how completely out-of-touch club execs have proven to be.

Take Andrea Agnelli, Chairman of Italian giants Juventus, as he patronizingly talks about younger fans wanting football to be like video games while neatly ignoring the fact that the real problem isn’t football being crowded out by a $2.99 video game; it’s that 18-24-year-olds can’t afford to be fans. They can’t afford the tickets, they can’t afford the travel, they can’t afford the subscription TV packages, and they can’t afford the home and away replica kits.

Which, brings me neatly to our tendency to obsess over shiny objects that don’t particularly matter while at the same time ignoring the glaringly obvious that does. In the same way that football chairmen quote video games to excuse their own mismanagement, we’ve become obsessed with things like 5G and augmented reality. Which is fine, except when we’re also resolutely ignoring what’s under our very noses. Like unprecedented student debt that acts as a permanent drag on GDP, or homes being completely unaffordable, or declining standards of living for Gen Z versus every previous generation, or unaffordable healthcare, or massive youth depression, or political polarization, or existential climate dread, or the fact that the vast majority of the wealth in the country is held by the over 50’s while advertising resolutely fetishizes youth. And the list goes on.

I remember attending a focus group a few years ago where 20 and 30 something-year-olds were discussing both their financial challenges and the perceived benefits of renting rather than owning their own homes. Only to find myself horrified when an entitled, homeowning individual behind the mirrored glass, between bites of takeout Thai food and chugs of Diet Coke from a Big Gulp bucket, formulated the tortured theory that because younger people prefer to rent music from Spotify, they also have a preference for renting their homes. I didn’t see that at all. What I saw was the self-justification of knowing they’d never be able to afford their own home. That wasn’t preference, it was making the best of a bad lot.

Anyway, the ESL is a complete bust, and if nothing else, it demonstrates the perils of groupthink and fantasy insights used to justify our own greed and management failures when the obvious is sitting right there in front of us.

Oh, and it’s not lost on me that we fans are hypocrites too. The very same people decrying the “greed” of the ESL are the ones most loudly screaming that their club must “buy Haaland’ for $121m. or Mbappe for $176m. You just can’t win. (But seriously, Liverpool. Buy Mbappe)

2. Netflix slides 10% as subscriptions slow. Interbrand’s analysis is…gibberish.

tl;dr: The game is afoot to re-frame the business to the market.

Netflix has been one of the most successfully disruptive businesses in media over the past twenty years. There were thousands of Blockbuster stores when it started, and no one believed Netflix could touch them. Today there is one.

The upward trajectory of Netflix has represented something of a social contract between the business and the financial markets. A contract that’s basically gone like this “You keep growing your subscriber base, and we’ll keep giving you capital.” And it worked, with the share price rising over 50% in just the past year as pandemic enforced lockdowns spiked subscriber numbers.

But, after every party comes the inevitable hangover. And in Netflix’s case, the hangover hit with a vengeance this week as subscriber growth slowed to a crawl and investors bailed, dropping their share price by 10% in a day and a further 7 or so percent since.

The muppets over at Interbrand have something to say about it, but I can’t for the life of me figure out what it is. Something, something, play, nonsense…no water cooler conversations at work to discuss the latest Netflix show…nonsense, Disney, something, TikTok, nonsense, synergistic, nonsense, nonsense. (I seriously wish Interbrand would learn how to communicate. I’m fed up trying to decipher their gibberish masquerading as intelligence. It just makes everyone in branding look bad). Anyway, far from that unintelligible drivel, what’s happening in the market is actually a fairly normal thing that happens when a growth stock shifts from growth mode to a more stable plateau of earnings.

Yes, the streaming market is a lot more competitive right now, and no, it shouldn’t be surprising that Netflix isn’t winning new subscriber numbers or that this massive increase in competition is causing some moderate share declines. Why? Because they’re the ones that already have the subscribers. What we see in streaming isn’t a wholesale replacement. People generally aren’t just subscribing to a single platform. Actually, surprisingly few people seem to be leaving Netflix to subscribe to Disney; they’re mostly choosing both. This means that if you look at Netflix and Disney on a subscriber growth chart (or HBO Max for that matter), it looks like Netflix is losing. But subscriber growth isn’t necessarily all that matters. What matters is scale, and in scale, Netflix is currently unsurpassed. (Now, Disney is a whole different powerhouse story, but that’s for another time).

No other company on earth creates as much entertainment content as fast, at such consistently high quality, and that as many people will watch as Netflix does. They have some of the best talent in the industry, they have massive subscriber volume, they have one of the biggest brands, and most importantly, they’re finally making money.

This is why it should come as no surprise to see Netflix using its free cash flow to pay down debt and start buying back its own stock (much as I’d massively prefer to see that particular tranche of money flowing into content).

The streaming wars are only just getting started. The newer players are bleeding money in their efforts to achieve scale, and while it isn’t clear which will win, we can easily bet on one thing. Once the smoke clears, Netflix will still be around. (Not that Netflix should rest on their laurels, or that they couldn’t or shouldn’t innovate more in content discovery. It’s way too hard to find stuff their algorithm hasn’t decided you should see).

Anyway, this week’s stock market correction has little to do with the Netflix brand weakening. It’s much more about a shift in their business narrative. This isn’t a growth business anymore. This is a more stable business with profits to manage. And that narrative is going to take a few more cycles to play out.

3. Has strategy and marketing become the same thing?

tl;dr: Top professor recommends some internal M&A.

If you haven’t heard of Roger Martin, he’s well worth paying attention to as one of a long line of interesting and provocative Canadian management thinkers.

As a part of his ongoing series called “playing to win,” he recently posited that marketing and strategy have become the same thing, so they should merge to eliminate duplicity.

Now, like all the most interesting ideas, this is one that I looked at first and went “that’s interesting” followed by “but it doesn’t really make sense” and then “but maybe it does, if I squint a bit” and ever since it’s just been kind of sitting with me and won’t go away. A bit like that bad smell in the refrigerator that requires you to root through and turn everything upside down to find the cause.

Although I think his reasoning in the article is overly simplistic and rather overly deferential to the authority that product marketers in tech companies really have, there’s definitely merit here. It would certainly solve problems I’ve witnessed with strategy teams that seem out of touch and marketing teams that aren’t forward-thinking enough about the business. It would also be highly likely to elevate both functions in the eyes of the C-suite if you combined their strengths into one.

It does make me wonder though if, practically speaking, it isn’t a bit of an academics flight of fantasy. Let’s face it, in many corporations, strategy teams do little more than look for M&A opportunities, while marketing focuses on this quarter’s lead gen metrics. The idea that you can merge both of these pieces of lead in order to create gold is, perhaps, ludicrous.

However, it doesn’t have to be that way. If we pursue this idea to its logical conclusion and build on the best of both fields, it would solve two of the biggest problems in marketing today. Namely how to re-establish marketing as the strategic interface between the company and the customer, and how to take that understanding and use it to shape the direction of the company.

I’m not sure where this leads exactly; I’m still rooting around in the smelly refrigerator of my mind trying to figure it out. But it’s really interesting.