It would seem that old school media is beginning to tire of Netflix, a company it once whole heartedly embraced for what it could do for them when it came to the DVD business. Now that the company is migrating more and more to its Watch Instantly streaming platform, it seems that some of that luster the company once enjoyed is wearing off. And if the comments of one CEO are anything to go by, Netflix is in for a rough year in 2011.
Chief executive of Time Warner Jeffrey L. Bewkes was interviewed by The New York Times on Sunday, and his distaste for the streaming media/DVDs-by-mail was more than a little obvious. Apparently Mr. Bewkes feels the company is overhyped, saying, “It’s a little bit like, is the Albanian army going to take over the world? I don’t think so.”
It seems that Mr. Bewkes feels that the problem started in 2008 when the Starz cable channel licensed its catalog to Netflix for $25 million a year for three years. This was the first major deal for the new media company and it gave them momentum to build out the Watch Instantly service, as well as go on to make deals with other other companies. The deal is up for renewal in 2011, and some analysts are expecting the price to skyrocket to $250 million a year. “At $8 to $10, [Netflix] doesn’t have the economics to support high-value programming,” the TimeWarner chief said.
The general tone of the interview was very much, “You’ve enjoyed your ride Netflix, but now it’s time to pay us a heck of a lot more.” As evidence mounts that consumers are cutting the cable cord, and DVD sales are quickly dwindling, of course the older companies are going to get nervous about other companies getting rich off of their content when they can’t seem to figure out this new fangled Interwebs for themselves. There is some movement behind a new service called TV Everywhere that would allow people who can prove they have a cable subscription to watch it anywhere and time they want, but does anyone really want to go back to giving the cable companies even more money?
Part of the issue here isn’t just Netflix offering people what they want, consumers are just simply tired of being gouged by the cable companies. Prices continue to go up with no increase in service, and the providers just expected us to sit back and keep taking it. Another solution popped up that gave us the same content at a reasonable price, and we jumped all over it. It is estimated that Netflix accounts for up to a fifth of all Internet traffic during peak times of the day, so obviously we’re still watching a lot of shows, but it’s just in the way we choose, and at a price that better suits us.
The problem with situations like this is that the proverbial genie has been let out of the bottle, and once that happens, it is awfully hard to put it back in. Between Netflix and Hulu, customers are quickly adjusting to watching things for free or for a nominal monthly fee. They are seeing only what they want, and not paying for channels they have no interest in. The idea of going back to these large, cumbersome channel packages is going to be a pill many people will refuse to swallow. I would imagine DVD rentals would pick back up, but if companies think sales will go back up, I think they may be in for a rude awakening.
You let this genie out, media companies by making those original deals with Netflix, so don’t go trying to make them out to be some sort of evil company for giving consumers what they wanted, and what you agreed to. Sure, price Netflix into oblivion if you want, but don’t expect us all to come back to you begging your forgiveness when we were “unfaithful” to you.
What say you? Is it too late for old media companies to win us all back? Has Netflix gone too far?