Netflix to buy Warner Bros. (business lesson inside)
Probably the most important wealth-building lesson I've learned
I want to talk about this Netflix - Warner Bros. deal because I think there’s a business lesson in here.
First, I’m going to quickly highlight the deal:
Netflix (NFLX) to acquire Warner Bros. Discovery (WBD) studio & streaming assets for $72 Billion plus debt.
This includes the WB film and TV studios, HBO & HBO Max.
The newly created Discovery Global will house CNN and its other portfolio of cable networks.
All right, with that out of the way, let’s get into the lesson:
Netflix’s issue from the very beginning was assets.
When they started, they began as a better service than Blockbuster (remember those guys?). Delivering movies to households in a more convenient way.
They evolved with the changing times, Blockbuster did not, and now there’s only one left.
(That’s its own lesson.)
What Netflix didn’t have was content they owned.
When they started streaming, they licensed everything.
Which was fine because nobody else was really streaming things and they quickly gobbled up market share by basically being the only game in town.
That strategy can work until competitors with better assets come in and start rivaling you.
Which, indeed, has happened.
Each major studio created their own streaming platforms so they could benefit from the audience without renting out their content to other platforms.
This is how we’ve ended up with Disney+ and Paramount+ and HBO Max and Peacock, etc.
It’s also why Netflix started cooking up their own original shows.
It turns out that wealth is owning income-generating assets.
The other studios owned the assets, licensed them out to Netflix (for a short time), created their own platforms, and then took the license back. (Okay, actually they just wouldn’t renew the licensing contracts when they were up and Netflix lost its right to stream said content.)
Now, there are a lot of ways to own income-generating assets.
Many rich people go into real estate.
Those are physical assets you can do all kinds of things with: improve & flip, rent out, build on, sit & wait for the market to increase, etc.
I’ve never been a real estate person.
But I do like the stock market.
And shares of stock are also assets that can be used to generate income.
I prefer to use my cash as collateral for shares of stock, and generate income by selling Puts.
Like 90% of what I do is sell Puts for profit.
Simple.
And it turns my cash into an income-generating asset. In fact, I target 1.5% per week, which is more than doubling my account value each year.
The premium brings me more cash to generate more income and on and on it compounds.
But that’s me.
You do what you want.
No matter how you choose to build your own wealth, remember these words from Naval Ravikant:
“Wealth is assets that earn while you sleep.”
(i.e., income-generating assets)
— Ricky Ketchum