Content Is King
On September 18th, Netflix co-founder and CEO, Reed Hastings blogged a relatively wordy explanation behind the recent decision to restructure the Netflix subscription service. You can give it a read, yourself, here. The backlash from the social media savvy subscribers, who have been blasting negative tweets about the recent price hike, has resulted in a dramatic drop in stock value as finicky investors have been dumping shares of the once blue chip company.
Citing companies, AOL and Borders, as outfits that had gone the way of the dinosaur, Hastings paints a picture that perhaps the executives behind the decision were only acting preemptively. As mentioned in my previous blog post, Blockbuster went down hard because it did not shuffle its feet quick enough to ditch the brick and mortar business model. However far down the line it may be, Netflix sees itself faced with a similar sink or swim situation - jettison DVDs for an all digital format or wallow in the debt associated with unnecessary operating costs of shipping and stocking.
Although Netflix's recent acquisition of Qwikster as well as big studio Hollywood's reluctance to cut off their DV-dollars would indicate that DVD rentals are going nowhere, the recent string of license-to-stream acquisitions clearly indicates a shift in priorities. Netflix, as it always has, is looking to position itself for the future.
Making Moves
Recognizing the fact that in the coming years competition will be fierce among on-demand subscription services, Netflix has been shopping around for licensed titles to feature over their streaming service. Aside from resigning NBC for another two years, Netflix also managed to sign a two year non-exclusive licensing agreement with CBS back February of 2011.
Although the nature of the relationship between Netflix and CBS is not exclusive, the deal does add further value to Netflix's product. Back in August of 2010, Netlix upped the ante by putting pen to paper on a multi-year licensing agreement with Epix. The five year deal worth in the one billion dollar range allows Netflix subscribers access to "an array of new releases and library titles from EPIX streamed over the internet from Netflix - (press release)."
Granted, under this agreement, Netflix does gain a wealth of content borrowed from the very vaults of media moguls Paramount Pictures, Lions Gate Films and MGM Studios, there is a wrinkle worth noting. Netflix subscribers will have to wait a period of 90 days after content is released on EPIX before being able to view it via streaming online. It's a rather minor setback for subscribers; however, it does leave a window of opportunity for other companies to perhaps swoop in and gain traction market-wise.
Watch the Throne
Netflix's recent drop in stock value as well as the alarming number of unsubscribers has not gone unnoticed. The recently bankrupted Blockbuster issued a tweet brazenly calling out Netflix's gall for raising prices. Where does Blockbuster come off calling out its better with such bravado? Well, in an announcement made earlier this month, the second largest satellite-TV provider in Dish Network announced that they, too, would be entering the subscription-based streaming movie service industry.
This just coming off the heels of a press release issued by Starz Entertainment that they would not be renewing their streaming video deal with Netflix.
- Starz CEO, Chris Albrecht
Starz is not the only premium content provider to pull their titles from Netflix's streaming service. In anticipation of Ultraviolet's launching, Sony discontinued their content deal with Netflix whereas HBO had never gotten on board with streaming their highly-acclaimed library of episodics, most likely for the same reasons Stars opted to pull theirs.
Now that it has become all but apparent that streaming media would appear to be the heir-apparent to physical media of any format and quality, major corporations are jockeying for claims to the top spot that Netflx currently holds. Competition is healthy and the recent string of maladies befalling Netflix can only strengthen the resolve of companies, looking to challenge for the throne. We will continue to monitor the situation as it evolves in the Zarr Movies blog.
Citing companies, AOL and Borders, as outfits that had gone the way of the dinosaur, Hastings paints a picture that perhaps the executives behind the decision were only acting preemptively. As mentioned in my previous blog post, Blockbuster went down hard because it did not shuffle its feet quick enough to ditch the brick and mortar business model. However far down the line it may be, Netflix sees itself faced with a similar sink or swim situation - jettison DVDs for an all digital format or wallow in the debt associated with unnecessary operating costs of shipping and stocking.
Although Netflix's recent acquisition of Qwikster as well as big studio Hollywood's reluctance to cut off their DV-dollars would indicate that DVD rentals are going nowhere, the recent string of license-to-stream acquisitions clearly indicates a shift in priorities. Netflix, as it always has, is looking to position itself for the future.
Making Moves
"Netflix is now the only online premium subscription service with shows featured on all four broadcast networks and dozens of cable TV's biggest brands."
- Netflix chief content officer, Ted Sarando
Granted, under this agreement, Netflix does gain a wealth
"This decision is a result of our strategy to protect the premium nature of our brand by preserving the appropriate pricing and packaging of our exlusive and highly valuable content."
Starz is not the only premium content provider to pull their titles from Netflix's streaming service. In anticipation of Ultraviolet's launching, Sony discontinued their content deal with Netflix whereas HBO had never gotten on board with streaming their highly-acclaimed library of episodics, most likely for the same reasons Stars opted to pull theirs.
Now that it has become all but apparent that streaming media would appear to be the heir-apparent to physical media of any format and quality, major corporations are jockeying for claims to the top spot that Netflx currently holds. Competition is healthy and the recent string of maladies befalling Netflix can only strengthen the resolve of companies, looking to challenge for the throne. We will continue to monitor the situation as it evolves in the Zarr Movies blog.
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