Netflix once buried Blockbuster, turning Friday night rentals into a relic. But the ground is shifting again, and this time, Netflix could be on the losing side.
Early-stage AI tools like Showrunner are already generating episodes South Park episodes that rack up 80 million views, and original shows like Exit Valley. No studios, no budgets, no permission.
The founder's vision for the future is even bolder: creative control over the stories you actually care about. Imagine remixing Star Wars after Disney's takeover, or finally settling the Game of Thrones debate by rewriting the final season yourself – all with a single prompt from your couch.
This isn't to say Netflix is about to collapse. With 250 million subscribers and strong profits, it's still the clear leader. But the dynamics fit a familiar pattern of previous disruption cycles, where incumbents get stuck protecting short-term profits, while scrappy outsiders bet on future shifts in consumer behavior. At first, those behaviors look niche, and then they compound. Fast.
This cycle has valuable lessons for anyone building products today.
Four lessons from Showrunner's approach
Blockbuster was rich. It didn’t matter.
Blockbuster was pulling in billions when Netflix showed up. Executives assumed that kind of dominance would protect them. It didn’t. Netflix is profitable today, but those numbers don’t shield it from a shift in user behavior. A healthy balance sheet isn’t a moat when technology makes something users want suddenly possible.
Scrappy often wins (if the shift is big enough).
Netflix's first streaming product was clunky: a tiny catalog, Internet Explorer-only, and buggy. But it didn’t matter. The shift from discs → internet streaming was so powerful that “good enough” won.
Showrunner’s AI episodes feel rough today, but they don’t need to be polished. They just need to be credible enough to hint at the future and prove people want it.User behavior = moat.
Netflix built its empire on passive watching: sit back, scroll, hit play. AI flips that model. Showrunner’s alpha testing revealed users don’t just consume; they play. People wanted to cast themselves (and their friends) in the show. That’s a completely different kind of engagement that streaming platforms aren’t built for. It’s also why Amazon has already invested in Showrunner, and why Disney is in licensing talks.
What made you strong can make you slow.
Blockbuster couldn’t give up on late fees. Netflix can’t easily walk away from studio deals and billion-dollar productions. The very things investors reward (like subscriber growth and new TV shows) make it harder to take risky bets on what consumers might want. That’s the innovator’s dilemma in action: your strengths turn into shackles. And by the time the giants react, the outsiders have already scaled.
Netflix vs. Blockbuster was one of the clearest examples of this cycle. AI vs. streaming could be next. Still, even Showrunner’s founder admits his vision isn’t guaranteed. People might ultimately prefer passive consumption.
But that uncertainty is exactly the point. The question isn’t whether AI replaces Netflix. It’s whether a new way of consuming content compounds faster than incumbents expect.
The future always looks scrappy at first. The winners are the ones who see past the rough edges and get to work. Paul Graham put it best: “Live in the future, then build what’s missing.”
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I break down the full story here
Video Chapters
(00:38) How Blockbuster shaped Friday nights
(01:11) Netflix’s unlikely origin story
(01:44) Betting it all on the internet
(02:35) Inside the streaming wars
(03:12) The rise of streaming fatigue
(03:39) When AI wrote nine South Park episodes
(04:32) Meet Showrunner: TV made by AI
(05:22) Casting you and your friends in your own show
(05:52) Remixing Star Wars
(06:25) Why Amazon has already invested
(06:46) Why Netflix can’t build this in-house
(07:34) Changing Game of Thrones’ ending
(07:58) Could AI replace Netflix?
Transcript
AI could replace Netflix the same way Netflix replaced video rentals. Here's how it works. While that's generating, let's break down the last time. Hollywood ignored a game-changing technology like this. It's a cleanest example of the innovator's dilemma when big companies go for short-term profits over long-term shifts.
A concept explained perfectly by Steve Jobs in this clip
It's 1998. Friday nights had a ritual. You drive to the blockbuster store, walk those blue and yellow aisles lined with videotapes, grab some overpriced candy and rent a movie for the weekend.
At its peak, blockbuster was making $6 billion a year with 800 million of that coming from late fees. That's how much money they made off people forgetting to return. Shrek Blockbuster looked invincible. It was drunk on its own dominance, fat on profits, and blind to change until one scrappy startup deleted their entire business model, all because of a single late fee.
In 1998, Reed Hastings got hit with a $40 charge for Titanic. He was pissed, but it gave him an idea. What if you could rent DVDs by mail with no late fees at all? He called it Netflix. At the time, fewer than 10% of American households owned a DVD player, but Reid bet on adoption. By 2004, nearly 70% of homes had one. was thriving. Then in 2007, he pivoted.
Internet speeds were getting faster. He said, forget disks. We're going all in on streaming.
The first version was Scrappy. A tiny catalog that only worked on Internet Explorer, but streaming caught fire fast. By the time Blockbuster launched their own service, it was too late. Within three years, Netflix had 20 million subscribers and Blockbuster was bankrupt.
But here's the irony. In 2000, Reed flew to Blockbuster's HQ and offered to sell Netflix to them for $50 million. Executives laughed him out of the room. That's the innovator's dilemma in action.
Blockbuster was so focused on running physical stores and making money from late rentals. They couldn't imagine a world without them.
What if I told you that today Netflix is the new blockbuster and we're going to see history repeat itself despite being profitable With 250 million subscribers worldwide, Netflix is locked in a spend to win arms race with Disney, Amazon, and Apple. The industry now burns over a hundred billion dollars a year on content to win the streaming wars.
This spend is colliding with a clear signal. Churn is climbing in the us. Nearly 40% of people cancel at least one service every six months.
Some are calling it streaming fatigue. Almost half of consumers say they overpay, they're frustrated. Too many subscriptions, weaker content and more ads. The gold rush is over. Investors reward, short-term subscriber growth. Not risky innovation, but just like in Blockbuster's day, the disruption won't come from another giant.
It'll come from a scrappy outsider.
Because what if people don't just wanna watch shows? They wanna make them instead. That's the bet behind showrunner ai. Now you might be thinking, this is just AI swap, it can't replace an actual TV show. But what if I told you it actually had in 2023 showrunner's, early model produced nine South Park episodes. These were unauthorized. The original creators had nothing to do with them. Here's an example. Clip
Reactions were mixed. Some were impressed by how good they were. Others thought they were soulless. But the point is, people watched, they racked up over 80 million views online. No studio, no budget, no permission. Just AI
What's cool about Showrunner now is you can actually make your own shows and in a few seconds I'll show you how. In 2024, they launched an original called Exit Valley. It's a satire of Silicon Valley featuring AI versions of Sam Altman, Elon Musk. Here's how it works. You write a short, prompt, cast the characters, pick a scene and generate the episode.
Let's check in on our prompt from earlier.
I thought that was pretty good. And other clips from Exit Valley have also gone viral. There's already a hundred thousand people on the wait list for showrunner's official platform launch. They're also working on several more original shows, But what's more interesting is user behavior. In early testing, one thing stood out. People didn't just wanna spin up new storylines. They wanted to create a character and cast themselves in the show, not just watching, starring. That's a completely different consumer behavior than what Netflix was built for.
Showrunner's founder Edward Saachi believes the tech is going to improve quickly. And yes, he's the son of the advertising legend behind Saachi and Saachi.
He's also a Emmy-winning storyteller who worked on VR at Oculus. His vision is for a future where TV is playable, people create original shows, cast their entire friend group, and remix the IP they already love.
Imagine opening Disney Plus and clicking remix Star Wars. You could rewrite canon or explore thousands of fan made storylines after the controversial Disney takeover. You can bet fans would jump on that. imagine never having to argue over how a story should have ended. You could just settle the debate in cinematic quality.
Think of Game of Thrones. Nearly 2 million fans signed a petition demanding a remake of the final season.
Showrunner's vision is why Amazon has already invested and Disney is in licensing talks, not because they believe in it, but because it's too dangerous to ignore, maybe even as a hedge against streaming itself.
One important note, showrunner has some limitations. Episodes are animated. Shorts, one-off stories, and the comedy often falls flat.
It is scrappy, but remember, so was Netflix's first streaming service
At this point, you're probably wondering, couldn't Netflix just build this in-house? In theory, yes, but here's the innovator's dilemma in action. Netflix is tied to billion dollar productions and studio deals. It's the same way Blockbuster was tied to retail leases. That makes pivoting much harder. Instead, Netflix is using AI for visuals, dubbing and feed recommendations Useful but not transformative.
Netflix is handcuffed. It's focused on safe bets that increase its stock price. Apple, Amazon, and Disney are breathing down its neck, taking their eye off the ball. To build new tech could cost them market share, but if showrunner takes off, Netflix might find themselves in the same situation. They put blockbuster in one where a new technology unlocks an entirely new way to consume and interact with content. That's the impossible choice. Protect profits today or build the tech that disrupts you tomorrow.
The future might look like this. It's Friday night. Instead of scrolling Netflix for 20 minutes, you can describe the exact show you want and it's made on the spot. Don't like the ending, remake it. Want 10 more episodes? Get them instantly. Or better yet, your group chat lights up. Check out this Game of Thrones episode I made where John Snow becomes king. Suddenly your couch is a studio and your group chat is the TV network.
Blockbuster laughed at Netflix, then vanished. Streamers now risk laughing at AI generated content. It won't be Netflix or Disney that decides the future. It'll be people like you. How AI could replace Netflix. Not with one hit show, but with millions of stories all at once. And just like Blockbuster, by the time they see the threat, it could already be too late.
