Wednesday, December 5, 2012

For Netflix, Content Is King

Nothing attracts consumers to a location like great content.  The right assortment, easy to find, at the right price, can promote strong interest and high usage.  Netflix believes that to be the leader of streaming services, one must have great content that the consumer believes is worth the price to subscribe.  And no one produces family friendly content like Disney.  So in a bold move, Netflix is paying a very large sum of money to gain an exclusive window for their content, ahead of the premium cable distributors like Starz.  In fact, Starz is most hurt by this deal as they had the previous contract.  While this agreement for new releases doesn't start for a few years, "Disney has also agreed to give Netflix nonexclusive streaming rights to more of its older titles — including "Dumbo," "Pocahontas" and "Alice in Wonderland" — starting immediately."

For families watching their budgets, Disney content could be the carrot that encourages them to switch from premium services through cable to streaming services through Netflix.  The cost of a monthly Netflix subscription is certainly less than the cost of premium channels.  Still, consumers may be hard pressed to disconnect.  HBO, Showtime, and Starz have known for quite some time that distributing movies was not the only way to attract consumers.  It has led to the rise of original programming on each of these networks like "Boardwalk Empire", "Homeland", and "Spartacus".

While this Disney - Netflix agreement provides for streaming exclusivity of titles, consumers can still access these same titles through download, pay per view, and of course DVD sales. Netflix though realizes the value of content, both acquired and original, and is following a similar programming strategy as their network rivals, including their own original series, House of Cards".  It has been written that  about 50% of Netflix's budget  goes to content.  Clearly, content is king in attracting new consumers to their subscription service.

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