It is no coincidence that although, say, 90 percent of the public discourse surrounding Comcast’s recent $30 billion acquisition of NBC Universal involved the Conan O’Brien drama or the shifting fortunes of Universal Pictures, in reality, 82 percent of the new company’s profits come in through the cable channels. Well before Netflix was founded in 1997, cable channels that did little more than aggregate old movies, cartoons, or television shows boasted profit margins many times greater than those of the movie studios that had produced the creative content. In fact, the dirty little secret of the media industry is that content aggregators, not content creators, have long been the overwhelming source of value creation. In a media culture committed to the proposition that “Content is king,” the robust success of a mere redistributor is something incomprehensible and, frankly, a little unnerving, especially while those responsible for the creative lifeblood that flows through its veins struggle for profitability.

Netflix is primarily in the business of aggregating entertainment content created by other companies and selling access to it as a subscription service to consumers. But the animating force of the perceived Netflix Paradox is disbelief that a company that does what Netflix does can thrive amid the wreckage of the media industry.

Arguments abound about why Netflix should not be as successful and as highly valued as it is. Most observers expect the company to have more than 30 million subscribers by the end of the year, generating well over $3 billion in annual revenues. users, it is now the largest video service in the country. Netflix recently announced that with nearly 23 million U.S. Last December, Time Warner CEO Jeff Bewkes famously likened the relentless march of Netflix to the Albanian army’s trying to “take over the world.” That same month, in a widely read 7,000-word missive, the respected investor Whitney Tilson provided an exhaustive justification for making a huge bet against Netflix, and then had to cover his short position after the stock reached a new high a couple of months later. Among traditional-media executives and investors who like to bet on the fall of high-flying stocks, Netflix’s continual share-price appreciation and accelerating subscriber growth have sparked aggravation and even anger. In more-rarefied circles, however, the company provokes equally intense but quite different emotional reactions. This year, it even beat out reigning champion Apple, among 528 other brands, in Brand Keys’ annual survey of customer loyalty. N etflix famously engenders fierce loyalty from its ever-growing customer base.

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