By David Poland email@example.com
Hulu Pays For High Loyalty Content That Mainstream-Chasing Netflix Can’t Afford
This is another step in the direction things are heading… one I didn’t really expect.
The Criterion Collection, the dominant cineaste’s Home Entertainment label, is moving to Hulu after about 18 months streaming on Netflix. And they are moving the whole thing. Over 150 titles right now. And over 800 titles, once the last of what Netflix’s streaming rights expire.
Because Netflix is spending so much on its other content deals, now all quite expensive, that a mid-range deal like Criterion is too expensive and not highly prioritized enough to get done. That opened the door for Hulu.
But here is my take… in a few years, Criterion and the like will be all that is left to Netflix… and depending on how the business model evolves – remember, Hulu is owned by studios – perhaps to Hulu. Some business will have to be the streaming home of indie product. The numbers will not be nearly as big as for mainstream product. But it will be a viable business because, like Disney and kids, the loyalty to high-end product is enough to drive subscriptions. Not 30 million subscriptions. But maybe – pulling a number out of the air – 5 million… when combined with other product?
There will come a tipping point studios and library owners see the potential for more profit in making their product available directly and not through Netflix, which cannot afford to keep expanding their slice of the market or to pay the kind of rates it is now paying for a slice of the market. And keep in mind, only starts streaming after DVDs are released and sometimes 28 days after that.
And when that day comes, if Hulu remains aggressive or other players make serious entries into the business, Netflix will be left with either a very small slice of the market or be forced to sell itself – essentially, if not literally – to one or two studios to front what will essentially be an in-house post-theatrical streaming business. That’s when content like Criterion will be critical.
What a lot of people seem to forget about the internet is that it isn’t brand loyal. It’s true that there may not be a clear Sony brand, for example, that screams to people to buy a channel of only Sony product. But on the web, packaging is a matter of will, not real estate. Somewhere, there is a server that holds this studio’s movies (and TV shows) or that studio’s movies (and TV shows). You want all the studios? Here’s a price. You want 3 of the studios? Here’s a price. Just 1? Here’s a price. Set-up doesn’t require a proprietary wire going into your house. Access is not any more challenging than a strong wi-fi signal.
As long as Netflix feels to people like the cheapest, most complete way to access movies, they will have a massive subscriber base. But that reality is becoming less true and the illusion, as they spend more and more for content, is becoming harder to maintain. Losing Criterion is a big deal to people who love movie history. Netflix is one step closer to really streaming aging content from studios that is available on a somewhat inconsistent basis.
Some have painted me as a Netflix basher. But I’m not. I’m just a realist. The only way Netflix 3.0: The Streaming Era really works is with a lot more subscribers or a lot lot price for the content they are streaming. And if that price comes down, some studios will find that tipping point and stop making their product available to Netflix to stream. It’s not an attitude about Netflix. It’s just math.
There will be plenty of streaming. More than you ever imagined. And with better quality to more devices. But to stay alive in the market that they led experimentation into, they are going to have to have yet another great idea that keeps them from being cannibalized by their current content providers.