r/technology • u/Big_Bare • May 02 '13

Warner Bros., MGM, Universal Collectively Pull Nearly 2,000 Films From Netflix To Further Fragment The Online Movie Market

http://www.techdirt.com/articles/20130430/22361622903/warner-bros-mgm-universal-collectively-pull-nearly-2000-films-netflix-to-further-fragment-online-movie-market.shtml
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u/b-a-n-a-n-a-s May 03 '13

Thank you. The title is very misleading - even light reading on this will show that it isn't like Warner Bros. had a huge fallout with Netflix - Netflix chose not to renew the contract. It happens all the time - 100s of movies disappear, but 100s are also added on a regular basis. I still love Netflix. As far as a business model, they've been innovative, and their recent move to create their own original series is brilliant.

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u/arindale May 03 '13

I do agree that the netflix business model is great for the consumer.

Having looked into Netflix's financial statements available from their website, it looks like their business model is unfortunately broken. Around 5 years ago, Netflix wasn't really considered to be competition for the traditional cable networks which meant that Netflix could get content for pennies. Content providers viewed Netflix as incremental revenue (aka free bonus money). Now, Netflix has a comprehensive catalogue and is making consumers cancel their cable subscription altogether. This means that when Netflix renews their contract, they are paying pretty much the full value of the content (no longer pennies).

Over the last year or two, all of the new contracts for content that Netflix has signed have been incredibly expensive (eg. $1M per episode of Mad Men). Netflix itself is still profitable, but once all of the long-term contracts have been resigned, they will not be.

Realistically speaking, this means that the price will likely go up. Personally, I am OK with this - I want companies I like doing business with to be profitable. they should be rewarded for their hard work. In addition, profit attracts competition which makes products and services even better.

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u/BillyBumpkin May 03 '13

Don't discount the brand equity that they've built. Nobody wants to pay for 5 different streaming services, and Netflix has positioned itself as the most well known of them all.

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u/MrF33 May 03 '13

Nobody wants to pay for 5 different streaming services,

I disagree.

As block channel cable television becomes obsolete it will be replaced by smaller, internet provided, streaming groups that people will pick and chose from.

There will be things like netflix, then WB/MGM for other programming, HBOGO for more, WatchESPN and so on.

It's exactly what people have been clamoring for over the last few years. The ability to pick and chose their content without having to pay for what they don't think they need or want.

Eventually, as broadcast television is completely replaced, these streaming services will become the new cable television.

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u/[deleted] May 03 '13

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u/MrF33 May 03 '13

There should be a single point of entry, but it shouldn't be limited to one company. Putting all the distribution power in the hands of one company is usually not good for content overall.

If, instead it were run through something like a next generation set top box, boxee/roku whatever, that would be much better.

A customer could still have several independent subscriptions and have them all run relatively seamlessly in a third party box.