Time Warner Views Netflix as a Fading Star

http://www.nytimes.com/2010/12/13/business/media/13bewkes.html?_r=1&src=twr

by donohoe • 16 years ago

47 44 16 years ago

nytimes.com

taylorwc• 16 years ago

I think the right word for TWC's view is 'delusional.'

erreon• 16 years ago

Blockbuster didn't think they were gonna be a challenge either.

chc• 16 years ago

Several times in this article, they make it sound like Netflix is competing with cable. But in reality, Netflix only streams TV shows that are already out on DVD. iTunes is the service competing with cable, both on the PC and Apple TV.

brucehart• 16 years ago

Netflix isn't competing with cable in terms of getting eyeballs for the same content, but it is competing with cable in terms of time spent on entertainment. I know several people who have canceled their cable subscription because they found they had plenty of things to watch with a $10/month Netflix subscription and no longer found a $50-100/month cable subscription to be a good value.

Qz• 16 years ago

I skip Cable based on Hulu alone. Still paying my share of 50$ for cable internet though.

adamc2• 16 years ago

I'm such a person. If you can live without sports (or only the sports available locally via over-the-air) and you don't need to see the latest/greatest shows, cable TV isn't a great value proposition. I don't mind waiting a year or two to watch something; there are plenty of alternatives in the meantime.

That's the essential problem that the industry has to deal with: there is way more content than most of us have time for.

chime2• 16 years ago

I'm another person who cancelled cable and started watching things I normally wouldn't on Netflix. I'm rewatching the Doctor Who new series now and loving every minute of it. Wife and I watched Dead Like Me, Arrested Development, Pushing Daises, and lots of documentaries and movies.

jdludlow• 16 years ago

It's currently rare, but Netflix does offer some shows prior to DVD release. For example, Party Down Season 2 episodes were available on Netflix the same week that they were originally broadcast. They've since been removed, and I assume will be back once the DVDs are out.

On a tiny scale they're experimenting with a hybrid model of "instantly available" and "waiting for DVD."

Cushman• 16 years ago

Netflix responds, "Who?"

protomyth3• 16 years ago

It isn't so far fetched. Time Warner is a producer of content and has a large library. It doesn't seem unreasonable for content producers to cut out the middle man and have a streaming service of their own. Disney in particular could very well build a Netflix clone of their content. Aggregated services like Netflix allow for more content and smaller library owner participation, but one wonders at what size of library could $5 a month be justified? How about $10?

adamc2• 16 years ago

Speaking as a netflix subscriber, the problems I see with this are: 1) many of these libraries, on their own, wouldn't even be worth $5 a month to me 2) I don't want to have to buy a bunch of different services and somehow integrate them. Maybe if they all showed up as Roku channels... but netflix is available across many different devices. Few other services are so ubiquitous.

Honestly, if netflix failed and nothing took its place, I expect we'd just buy/rent dvds for a few years and wait it out. But I don't think they are going to fail. The sad truth is that there is so much content out there that it's pretty easy to live without the latest.

DanielN• 16 years ago

Isn't that what Hulu is to some extent. I guess it's different forms of media (tv vs. movies) so one could convince themselves that they don't compete, but this seems in the same vain to me.

ericd• 16 years ago

The thing is that 1 service with 5x content >> 5 services with x content each. Being able to find everything in one place is a very large benefit from a consumer perspective.

protomyth3• 16 years ago

The thing is they don't all have same size libraries. If Disney took all content off Netflix and created its own service, then it probably could do it itself. Time Warner might be close to that size. Other need to be part of an aggregation.

dasil0033• 16 years ago

Aside from the aggregation points from other responses, I think such a venture might fail at a fundamental product design level. These content companies don't have any particular know-how in that area, and they are going to be very greedy as they cling to their dying business model. It's just not a good recipe for a successful consumer product.

protomyth3• 16 years ago

Looking at the ABC app for the iPad and Hulu, I am pretty sure they can figure it out if pushed.

p_nathan• 16 years ago

Cable is on its way out. Maybe not today, maybe not next year, maybe not in five years. But it is surpassed and supplanted by the Internet.

Movies, news and TV shows will continue, and online pricing will, in the course of time, adjust to reflect a profit margin that doesn't involve existing cable TV.

That doesn't mean Netflix is going to rule - it's much more reasonable in my opinion to assume a cabal of motion picture industry will form and cut out the middle-men.

My 0.02c.

cobralibre• 16 years ago

That doesn't mean Netflix is going to rule - it's much more reasonable in my opinion to assume a cabal of motion picture industry will form and cut out the middle-men.

And it's a pity that you're almost certainly right, since Netflix actually does what it does well.

rdtsc• 16 years ago

Am I the only one who actually thinks they are scared and worried if they find the need to downplay Netflix and condescendingly compare it to the Albanian army taking over the world?

If it isn't a threat, why bother even talking about it...

Do the corporate PR types and CxOs really think they are being smart and sly when they all of the sudden, out of the blue start telling everyone "we are doing very well, we are not afraid of anyone, everything is fine" and not arouse suspicion?

Last time this kind of excessive chest pounding and excessive boasting happened in a company I worked for, a week later we read from CNN financial news that we have been sold to some no-name equity holding company... and it wasn't because we were great, it was because things were going South.

Now what I am interested in, does the management actually brainwash themselves to believe their own lies or do they know things are bad and just try to lie and talk their way out of the problem with pure "leadership" and "decisive" chest pounding...

dasil0033• 16 years ago

I tend to think the smartest among them realize that the world is changing and big budget entertainment will increasingly have to compete with more and more free and low-cost entertainment options on the internet, but what are they supposed to do about that? The only rational thing is to extract as much value from their content as they can while they can. Freezing out NetFlix may well help profits in the short-term, which is the best they can hope for with the way the market is going. Eventually they will have to take less for streaming deals, but we are still a ways from that point.

sielskr• 16 years ago

"big budget entertainment will increasingly have to compete with more and more free and low-cost entertainment options on the internet"

By "free and low-cost entertainment options" do you mean pirated content? I do not see non-pirated content competing effectively with big-budget movies and television the way that non-pirated textual content (blogs, sites like HN) competes effectively with newspapers and magazines.

earl2• 16 years ago

Here's my take: There is no threat to the studios.

1 - Netflix thinks streaming is the future.

2 - dvds are covered by first sale; streams are not

3 - ergo, netflix needs a license to stream, which they didn't need for dvds

4 - they got this by a clever backdoor agreement with Starz for a paltry $25MM. This agreement ends soon.

5 - the studios are now aware of this and want a lot more money, maybe so much to make it uneconomical for netflix

6 - this is a huge and growing piece of netflix' income, yet still a small piece of the studios'. Therefore, the studios most likely have all the cards in a negotiation.

7 - the closest comps are "hundreds of millions" that cable companies pay the studios, so expect the studios to expect that type of money from netflix

8 - to the extend that cable companies are worried netflix streaming cannibalizes their offerings, they are of course communicating this to the studios

9 - the studios are well aware which parties pay them hundreds of millions of dollars a year, and which parties don't

10 - I hope netflix pulls this out.

loewenskind• 16 years ago

Why doesn't Netflix or someone make their own studio? The main thing holding media back at this point is the existing studios and distributors wanting a ridiculously high cut of everything. Personally, rather than trying to find a way to play nice with those guys, I'd rather cut them out entirely.

mayukh• 16 years ago

I had the same thought as some have expressed here, Time Warner taking a shot at Netflix,,really? Time Warner ??

But the article makes some valid points. When Netflix started it wasn't viewed as a direct threat to the content owners. Nflix served as the physical distribution arm (and a very very efficient one at that) for media houses. But now with streaming the game is changing.

Each of the players can now setup their own web based distribution base, why would they need Netflix anymore?

Plus there's more competition now. When Netflix launched it was the only one that did what it did (true bb tried, but they were poorly run). With streaming in addition to each Media conglomerates own websites there's also Hulu and lets not forget big dog Google (Youtube and Google TV).

In short content owners have options now, that didn't before. I trust Netflix will come out of this strong, they're a great company with some really smart people, but its not going to be easy

bennesvig• 16 years ago

Maybe fade slightly, but cable companies are ready to supernova.

aresant• 16 years ago

Netflix's greatest coup to date has been integration with so many hardware manufacturers - the bulk of net-connected TVs & consoles have Netflix on there as a gimmie.

But Amazon is catching up - found them on my most recent Sony TV purchase, they're on ROKU (originally a Netflix device), etc.

With that option I find myself using Netflix less and less because the streaming content just ain't that great and Amazon's streaming on-demand service, while more expensive today, gives better content.

The recent rumor of Amazon considering bundling a FREE streaming service with Amazon Prime is very compelling and, unlike Blockbuster & the studios, they can compete in online commerce and have the pockets to play with the studios.

ref - http://technolog.msnbc.msn.com/_news/2010/12/07/5605985-amaz...

j2d2j2d2• 16 years ago

I do too, unfortunately. I got bored of their streamable selection a little while back.

If they updated it or got more of the main library in there, I'd be all about it again though.

aracena• 16 years ago

"Who in the hell wants to hear actors talk?" Harry Warner

OpieCunningham2• 16 years ago

Yeah, that guys company sure didn't last very long.

jey2• 16 years ago

“It’s a little bit like, is the Albanian army going to take over the world?” said Jeffrey L. Bewkes, the chief executive of Time Warner, in an interview last week. “I don’t think so.”

Someone please throw a dozen copies of The Innovator's Dilemma[1] at this guy. Maybe the TW board will wake up and fire him before he runs their company into the ground.

1. http://en.wikipedia.org/wiki/Disruptive_technology

Thuraash2• 16 years ago

I don't think you're giving Bewkes due credit. It seems like the point wasn't lost on him at all; the industry seems to have realized that the wave is going by, and they got caught flat-footed. See:

"Time Warner’s HBO is in the process of introducing a new online service, HBO GO, which will be available to authenticated HBO subscribers. Mr. Bewkes has also led an industry initiative he has called TV Everywhere, whose idea is to offer cable network programming online for anyone who is a verified cable subscriber. "

They're trying to take advantage of the economies and at least some of the capabilities of the digital distribution platform without losing a huge chunk of profits (subscribers). It makes sense to try and diminish their digital-distribution competition (including Netflix) for business reasons. Netflix jumped the gun on them by hopping on the digital platform first, and at very subsidized prices, so the conglomerates have to play catch-up. Don't forget, though, that this kitty got claws: big media can still price Netflix out of the game, or at least out of this ridiculous growth phase, since they do own/create the content that Netflix thrives on, and can raise prices.

jey2• 16 years ago

Nah, that seems like a classic textbook late response of a company caught empty-handed by a disruption. The very pressures you cite to preserve their existing business will ultimately kill them without some IBM-style creative thinking.

Yes, it's theoretically possible that the TV industry is inefficient enough that the oligopoly can keep out new entrants, but Netflix already has way too much market share for that to work out in the cartel's favor.

chime2• 16 years ago

> Time Warner’s HBO is in the process of introducing a new online service, HBO GO, which will be available to authenticated HBO subscribers. Mr. Bewkes has also led an industry initiative he has called TV Everywhere, whose idea is to offer cable network programming online for anyone who is a verified cable subscriber.

And that's what you're doing wrong Mr. Bewkes. As I don't have cable anymore, I'll never be able to access HBO GO or TV Everywhere. I will not re-signup for cable at $75/month now that I have Netflix for $8/month, even if you add tons of tertiary services to your cable offerings. With these tactics, the most you can do is slow down customer defection to Netflix. And even then, you will never get back a single customer you already lost to Netflix. They get their users better than you get your viewers.

Get your content on Netflix and/or make your content available to any Roku/XBox/Wii/PS3/iPad/iPhone/PC/Mac like Netflix for a fair price and I'll sign up. I am no fan of DRM but I will use Silverlight if I must.

invertedlambda• 16 years ago

I would have paid attention to this article but I'm too busy streaming "Robin Hood: Men in Tights".

acangiano• 16 years ago

Speaking of fading stars: http://grab.by/grabs/47f61f006c2121a23c90dd80cb633255.png

gphil• 16 years ago

On a related note, Netflix will be joining the S&P 500 next year when they re-index.

iwwr• 16 years ago

Killing Netflix is not going to push customers back in the fold of cable TV. It will push them toward piracy.

Time Warner Views Netflix as a Fading Star

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