Industry reacts warily to Netflix revolution

Posted by Lydia Leavitt

Remember going to the video store and browsing, only to find the movie you wanted was sold out? What about the insane late fees, remember that?

This rather painful memory is exactly what prompted Reed Hastings to create Netflix, the streaming store that singlehandedly revolutionized the way we consume movies.

Since Netflix's inception, Blockbuster has been forced to cut about 12,000 employees from the storefronts and redesign its entire business model focusing on a new subscription DVD business.

Industry reacts warily to Netflix revolutionBut employees angry about losing their jobs aren't the only ones feeling threatened by Netflix. 



There is talk over TV execs wondering whether Netflix's streaming content will eventually mean the end of paying for expensive cable service.

Good for the consumers, not so good for the purveyors.

Some CEOs are openly wary of Netflix like Jeff Bewkes of Time Warner who refused to license HBO content to Netflix while openly questioning the company's motives.

Another CEO, Phil Kent of Turner Broadcasting Systems (owned by Time Warner) went as far as to warn TV executives not to sell streaming right to Netflix.

"We've been telling our suppliers - the various studios that we buy from - that in the future, [Netflix streaming deals are] going to have a significant impact on what we're going to be willing to pay for programming or even bid at all," Kent confirmed during a recent investors meeting.

Although execs remain wary, almost every major content creator (movie studios, TV studios, etc.) has a streaming deal with Netflix.  



"Even though it has a detrimental effect on their business, everyone keeps feeding them content," BTIG Research analyst Richard Greenfield says.

Clearly, the company maintains a strong hold over the way we consume media. 



Netflix logoFor example, Netflix accounts for a fifth of the downstream traffic on U.S. broadband networks.

Netflix is "absolutely a friend to producers and distributors - they are found money that is monetizing library assets as DVD sales fall," says Mark Cuban, whose investments include 2929 Entertainment, Landmark Theatres, HDTV and HDNet.

Aside from streaming movies, Netflix is offering library options where users can tap into last season's episodes of their favorite TV show. This is a welcome change for TV execs and content producers that normally don't make much profit off of older content.

Netflix is leading the revolution to decrease the cost of streaming premium content. 

Content creators love Netflix because it means they can make more money, streaming to more people. Content distributors hate the service mostly because it means they will have to lower their exorbitant prices in order to compete.

Netflix is facing some competition, though.

"Right now, there's essentially one buyer and lots of sellers," Wedbush Securities analyst Michael Pachter says.

"But God save Netflix if Amazon, Google, Apple or Microsoft get in the subscription movie and TV business. Google has more money than God; if Netflix offers $100 million, expect Google to offer $500 million to get it exclusively for themselves."

(Via Hollywood Reporter)