It's a classic case of killing the golden goose.
Upset by the success of Netflix, media giant Time Warner is trying to set a trap by provoking them in the press. An industry that is famous for its sharp business deals is crying foul and having the equivalent of a PR tantrum in response to Netflix and their recent deal with Starz. Industry leaders are surprised by the outcome, which also publicly acknowledges a drop in cable subscribers and premium add-ons for television service possibly due to the increase in Netflix subcribers (and the availability of Hulu and YouTube). Time Warner is only the loudest voice among many, as this trend has been tracked for 18 months now and the news isn't good for overpriced cable packages. The media giants will get together now, and stage new structures in a bid to take out Netflix or price their rights so high that it will force Netflix to price themselves out of business.
The only problem is, Netflix has already won the war, and they did so quietly and without being guilty of anything besides making a hell of a business deal. I have some pretty smart friends and they think this could work out just the opposite, but I am going out on a limb and will predict that behind the scenes this was all pulled off while misdirecting the issue towards bandwidth and supply.
Why do I think so? Don't tell me the execs didn't realize the impact Starz would have on the competition. In an age of shrinking entertainment budgets as the middle class teeters on the edge of going hungry, consumers are going to change the tide of business power, because when times are tight catering to the customers is the only way to win. MGM already went bankdrupt, and the media companies that want to survive will do so by participating in the Netflix entertainment model. There is a temporary threat to raise the cost dramatically to license content, but that's a hollow threat. Telecommunication companies have invested billions in expanding the number of areas and the highest data delivery to their customers for a reason. Phone lines and rabbit ears are a thing of the past. So is paying an insane price for the delivery of digital content. Cable service and Internet service has become redundant, and the smart move is to participate in the data delivery and let Netflix create the need for the new premier entertainment delivery - the Internet.
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6 comments:
Netflix will be bankrupt in five years. Their business model is complete shit.
I think Netflix will be fine. It's cable companies who are in trouble. I know more than a few people who have dropped their pay TV channels and just simply gotten Netflix instead.
Bullshit.
Stock has gone from $45 to $200 this year. Can you say 'next dot com bubble'? I knew you could. They want to go global? Who's going to have the free money to spend on Netflix when the global economy is going under?
Hope you don't have any NFLX stock Bon! If you do SELL NOW.
Well now if you're right, the Romans will be dangerously low on the circuses part of the bread and circuses. I dunnae think the Powers That Be are going to stand for that.
Actually if anon is right and Netflix is extremely overvalued then it may not last into 2012.
The CFO just dumped his stock and left the company, cashing out at over $200 a share.
Google's waiting for the the stock to crash before they buy them out.
jeez, i hope not. i love netflix.
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