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Monday, December 13, 2010

Time Warner Views Netflix as a Fading Star

Check out this article in today's New York Times. Per Time Warner's CEO, Netflix has "jumped the shark" and will become a fading business. he refers particularly to the deals that Netflix has signed. "The relationship between Netflix and the media companies will most likely change drastically, beginning next year when a deal between the company and Starz, the pay-TV channel, to stream movies from Sony and Disney expires." And while Netflix may have signed some sweetheart deals, it can't be so quickly assumed that they will not find common ground in their renewals. As their growth soars, they remain a powerful force that seems to continue to add a strong and loyal customer base. Should programmers see that their deals are additive to the revenue stream, I doubt they will want to rock the boat too much.

Are Time Warner and the other cable operators worried? Can Netflix continue to sign content agreements that work for their business model? Welcome to a new era of competition in the cable industry.

1 comment:

  1. Worth noting that Time Warner is the parent company of HBO. People are dumping HBO in favor of Netflix.

    HBO has hitched its cart to cable's star. It has no independent play. Even HBO GO requires that you're paying a cable or satellite provider a minimum of $40 a month for the cheapest possible package that can include HBO.

    He does have a point that a lot of companies underestimated the power of streaming when Starz negotiated deals with them and that those deals are going to get more expensive. Netflix claims 16 million subscribers in the U.S. and canada while Comcast claims around 24 million.

    Netflix can always start offering value-added tiers for more content. Is $7.99 for streaming only sustainable as they go forward? No. But if they offer $15 and $25 tiers for larger content libraries...

    I may, if I can find some time next year, to start an initiative petition to force the hands of cable companies and broadcasters by revoking their state business licenses unless they agree to two things:

    1: A set monthly fee paid by rebroadcasters to terrestrial broadcasters in a market. The fee is distributed based on each broadcaster's overall monthly share of the ratings.

    2: Cable companies may charge a set montly fee for delivering the terrestrial broadcasters signals to homes within that market.

    3: The Cable Companies must offer every non-broadcast channel on an ala carte basis. They can offer bundles like sports packages and arts packages with bundle discounts, but every channel in that package has to be offered independently as well.

    If I could get my local channels for $15 a month, DVR service for $15 a month, HBO for $10 a month, and then pick $10-20 a month worth of basics that I enjoy, I'd be a cable customer again.

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