Catalyst Quote & Comment: Lee Iacocca On People Who Want Economy

Illustrating the point

This past week we had the coincidental opportunity to write at some length about Netflix’s new plan for “people who want economy”, in an article that illustrates the very point of the Catalyst Quote: Netflix’s Clever Price Framing Will Ring The Register On Ad-Supported Plan

In the article, we show that “economy” in the subscription price of the new Netflix plan requires subscribers to come pretty close to “paying any price to get it.” Specifically:

  • Subscribers must (based on viewing habits of “average” Netflix-subscribing households) watch up to 15 hours of combined ad time for less than $1 / hour in “compensation” (as defined by reduction in their monthly subscription fee)
  • They must settle for 720p, down from the 1080i resolution HD viewers have come to expect
  • Some limited subset of Netflix’s content will not be included in the “economy” subscriptions

It is of course the first item that strikes us as “paying any price”, but any of our opinions is probably utterly unrepresentative for the decision makers in the households who will embrace this plan.  It is for this reason that we were bullish enough on the plan’s prospects to put our views out there on Seeking Alpha, the world’s largest investor site. In effect, we are merely siding with Lee Iacocca’s well-expressed wisdom, but with the luxury of narrowing the stance to only refer to a very distinct segment of consumers.

Fine-tuning the point

Quotes are memorable because they may sound like universal truths. In practice, they rarely are.  So for every quote we feature at EBITDA Catalyst, we will provide some caveats, if we believe without them the quote could be misunderstood or misapplied.  The following caveats apply to Lee Iacocca’s quote, in our view:

  • “People” may not cut it anymore as a way to describe consumers. There is a more nuanced reality out there. Just as some consumers will pay any price for “economy” as we expect some will in the Netflix example, there are plenty of consumers who will “pay any price” to get as far away as possible from anything conceivably suggesting economy.  Enter luxury brands and their, just as emphatically declared, consumers.
  • It remains a hopeless exercise in relativity to describe consumers affluent enough to pay for the privilege to watch streaming Netflix on the kind of high-speed networks able to carry it at scale, as “paying any price” … while maybe some could do better keeping all those hours away from watching ads, virtually all could do a lot worse by simply being born / living in less fortunate places, where “economy” takes a much deeper meaning. Mr. Iacocca was most likely thinking of “his” people / buyers.

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