Forgive me, but I just finished (finally) reading Clayton Christensen's "The Innovator's Dilemma," so naturally, this looks like another prime example to me.

It is amusing to watch the entertainment execs flail around. But apparently, it's not necessarily because they are incompetent. Ironically, it may be their actual competence in their current positions that prevents them from seeing the value in the long tail (or anything else made possible by new technology).

They have long made money a certain way. Now, a new method (internet streaming) is coming along. They would like to use it, but they can't. They can't because it doesn't satisfy their current customers.

Netflix is happy to pay for and take the deep catalog. They are new and therefore able take the risk in creating the new market.

I can't give the theory a good showing myself in a brief comment. But if you haven't read the book yet - go do it now. It's amazing how stuff he wrote ten years ago about older companies sounds like a history lesson to me today about Microsoft, Google, et al.

I think you're giving Netflix the short shrift here. Netflix entered the DVD rental service and beat Blockbuster — they were extraordinarily competent in that arena, arguably more so than most movie studio heads are at their jobs. Now they've moved outside that area of competence by getting into streaming and cannibalizing their own business before any competitors sprung up to do it. They specifically overcame the dilemma you're talking about.

I'd say competence in a business model that is broken is identical to incompetence in a current or rising business model.

If they can't convince their current customers that (whatever) is the way of the future, then I'd argue they are NOT competent. Any fool can be a yes-man and keep doing what the previous guy did because "it always worked before".

I'll second this -- Innovator's Dilemma is a great read, and after having read it, I see it happening in practice all the time.

I haven't read it, but I'm familiar. I'd say it seems spot on.

Did you read the article? I stopped when it started on wild speculation about future deals, but there were two execs quoted. Time Warner's CEO claims that Netflix is eating their lunch, and has not only cut off access to new releases but raised prices for library titles.

The unnamed Disney exec is glad to have an additional market for their library titles. They sound a good bit more clued in than anyone here is giving them credit for. (Though they clearly are fighting tooth and nail to keep consumers from realizing how poor the existing distribution channels are.)

I did. Like I said, shows you who is in the know, and who isn't. Some are good, some are bad. I'm not childish enough to think that they're all completely stupid/evil.