No, they’re not related, but both are providing some news this short work week here in the US!
HP’s numbers seem to illustrate a point I’ve been making about the IT spending plans of enterprises. Storage was their big product star, gaining about 25% where other product areas gained less than 10% in sales. The reason that’s interesting is that storage is the component of IT spending where the most money comes from departmental rather than project budgets. Orderly growth of company information drives storage demand, and so it’s immune to project slowdowns of the type we’re seeing elsewhere. It’s also true that HP’s revenues are more biased toward departmental budget spending than other vendors because of their focus on areas like laptops, desktops, and printing that are also more “refresh” than strategic in terms of budgeting.
The larger storage growth seems to argue for an HP gain in market share, but it’s not totally clear that’s happening based on our enterprise surveys. HP didn’t gain in strategic or product influence in the storage area, but they do appear to be benefitting from the account control they have in the small-enterprise-and-down space. It looks like their sales force is doing a better job of selling storage, and thus gaining an advantage at a more tactical level. However, we did note that the primary storage players like EMC lost a bit of strategic credibility, which suggests that the enterprise buyer is looking to more full-service players for advice. Bad news for the specialists, if true.
Netflix announced a streaming-only service, about two years after they should have in my view. The new service costs about eight bucks per month and provides access to about half the Netflix film library. Comments from their CEO sound to me like he’s preparing stockholders and customers for a shift to an online model; pricing on the old mail-the-DVD service is going up too. For the broader market, there are three interesting things about the new Netflix strategy. First, it may presage a war between TV and movie content. Second, it brings the focus on the question of whether ads play a part in premium streaming because Hulu’s premium service still shows ads and Netflix doesn’t. Third, it opens the question of whether consumers, service providers, and content players like Netflix might not now unite to try to encourage deployment of premium handling options for Internet streaming.
The TV/movie and ad/pay dynamics are related, I think. TV has always been ad-funded and consumers don’t expect to pay for premium TV experiences, but movies have always been for-pay and that’s what Netflix is known for. The big question now is whether we might see studios and other content resources pushing to produce for-pay content in shorter formats to compete with ad-sponsored TV, and whether the increasing intrusion of advertising into viewing traditional channelized video will contaminate the user’s enjoyment of television to the point they’d either flee to online (where presumably ads would follow) or to a pure pay model. The problem with the latter is that securing all the current TV content in pay form would cost users about three times as much as they currently pay for subscription TV services, and it’s far from clear whether a price of a third the current level would sustain Netflix’s interest, or anyone else’s on the producer/distributer side.
