Pirates And Hackers Wanted - Maybe

Michael Hedges January 27, 2014 Follow on Twitter

Innovation is a slow slog, often in the dark. There are mountains and valleys to cross. The best route is always, shall we say, scenic; signposts hard to read. Those who persevere are rewarded richly.

For those still cowering in unwired caves, Netflix is just about the hottest new media thing to tackle traditional television since HBO. From humble beginnings as a mail-order DVD service founded in 1997 it is now the most talked about streaming VOD provider. Last week co-founder and CEO Reed Hastings told an investor conference call he’s planning a “substantial European expansion” this year.

About a quarter of Netflix 44 million subscribers are outside the US, Mr. Hastings revealed. In 2011 Netflix entered the UK and Ireland, followed by Scandinavia in early 2012 and the Netherlands by the end of the year. He left expansion details to the imagination but there was a meeting at the CES in Las Vegas with French Digital Economy Minister Fleur Pellerin who emerged saying Netflix coming to France was no problem. Then spotted on the company website was a job notice for the European marketing team with English, Dutch, French and German language skills “a plus.” Analysts were quick to conjure expansion to France, Germany and Belgium.

As for Netflix possibly expanding into France, Culture Minister Aurélie Filippetti added a few frosty thoughts. “I’m not closed to new digital players especially when they offer films and TV series legally,” she said in an interview with Journal du Dimanche (January 26). “But if they want to come here, they must comply with regulations that make our (creative) industries a success.” She hopes Netflix will not “behave like a pirate,” otherwise there are “ a range of measures at our disposal.”

Netflix is headquartered in Los Gatos, California, deep in Silicon Valley. It’s trajectory mirrors that of other well-known technology-based companies growing from start-up into venture financing, IPO and international expansion. It still has a decent mail order DVD business but when high-speed internet became widely available, along with a remarkable operating system from Microsoft, the business changed. The leap into high quality television production and co-production – House of Cards, Lilyhammer, Orange Is the New Black – both shocked and thrilled the television industry.

Silicon Valley and all it represents remains the inspirational beacon for the digital age. Big German publisher Axel Springer recently opened an outreach office there from which to better sound out the latest technology buzz. Speaking at the World Economic Forum (WEF) in Davos, Switzerland European Commission Vice President for the Digital Agenda Neelie Kroes vowed to “take on Silicon Valley,” said the EC press service release (January 23).

“Europe needs thriving startups and global internet companies to become a global growth center again,” said Commissioner Kroes announcing a new accelerator – Startup Europe Partnership (SEP) – and a new think-tank – the European Digital Forum. Big telecoms – Telefonica and Orange – signed up along with the European Investment Bank and several universities. There will be meetings. There will be reports.

Competing with Silicon Valley is a daunting enterprise. It’s roots and culture are deep, two generations since the silicon chip was manufactured by the infamous William Shockley, hence the common name for the Santa Clara Valley. The region is a teaming pool of innovation and collaboration – and serious crazy – from big research universities, big business and big government. 

But Silicon Valley didn’t become a festival for high-tech startups until the 1970’s with the arrival of big venture capital firms. Apple would have never left the garage without them. Then the big law firms joined in, most specializing in intellectual property but certainly taxation as well as the region’s big money-maker – mergers and acquisitions. Nearly a half million people working in and around the technology sector reside in the region. That climate is the edge to its status as a hub for innovation and fortunes made and lost. The weather isn’t bad either; 300 days of sunshine a year.

“Politicians don’t create jobs, entrepreneurs do,” said Commissioner Kroes to the business-friendly WEF. “We’re going to support that mindset and push European start-ups beyond their comfort zone. And then we’re going to get out of the way. Sometimes the best thing a political leader can do is get out of the way.”

Of course, it’s customers who really create jobs. The idea of disruptive innovation is more appealing than the reality. And, to paraphrase a wise person, Silicon Valley wasn’t built in a day.

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