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David Poland

By David Poland poland@moviecitynews.com

Oh That Netflix… Oy That Hulu

So Netflix continues its steady move towards being Hulu-plus-plus.

$250 million a year, according to the NYT, for reruns from a second-tier network that has great demographics.

They took what they were allegedly offering STARZ for Sony & Disney… and spend it on CW reruns for 4 years and in the case of each show, 4 years after the show goes off the air.

It’s exclusivity is a question mark. CBS’ press release states, “The CW content can also be made available via traditional syndication windows, electronic sell-through services and, on a partial-season basis, through authenticated cable providers.” The NYT story says that syndication can only occur after the 4 year window.

$250 million a year represents 2.6 million streaming customers a year paying $8 a month. With a generous projection, $250m is about the amount of Netflix’s next income for the entire year of 2011.

This tells us a few things.

1. Netflix HAS to increase subscribers by the millions to make is a good deal for them. It may turn the media’s head for a while, but it needs to be paid for in the long term and its a big gamble.

2. Time-Warner and CW partner CBS will be popping champagne on this deal… massive and massively overpriced.

3. Netflix, on a strategic level, is getting out of the studio movie streaming business. The only exception is their current deals with Paramount and Lionsgate, as well as the Relativity deal. These will all expire in the next 4 years. Their focus now seems to be clearly on doing TV deals.

4. Studios are getting out of the Netflix business for newer feature films. In spite of recent setbacks, Netflix remains the spendthrift in the streaming content market. Why are all but one of the majors pricing themselves out of the streaming market for Netflix, leaving Netflix to go out and cherry pick demographically compelling product to try to keep a young base of committed subscribers?

Of course, Netflix still offers DVDs, so that is something Hulu doesn’t do and has never done. And if you want to stream what’s on Netflix, $8 a month is still a very good deal.

Meanwhile, The CW is getting almost $1 per Netflix customer every month, whether they watch CW shows or not. As I keep asking… if the consumer valuation on The CW is that high, how much is the value of one of the Big 4′s programming? And what is the value of the cumulative Warner Bros pool of content?

Netflix will be defined in the next 5 years not by its pricing issues, but by how it programs itself and how much it pays for that programming. The studios will keep the prices on content in as much flux as they can for as long as they can because they are hoping there are more suckers out there willing to pay insane prices to make impact. And sometime… around that 5 year mark… pricing will settle in. But until then, “Yippee Ay O Kayay!”

39 Responses to “Oh That Netflix… Oy That Hulu”

  1. Pooch says:

    This is a horrifically BAD deal for Netflix. The CW programs get terrible ratings in comparison to the Big 4. How many people really want to watch reruns of Gossip Girl or America’s Next Top Model?

    Starz had Disney, Sony, and its original programs.

    If Netflix stops showing studio movies, that eliminate a huge chunk of consumer demand for Netflix service.

    This really will should be a wake up call for Netflix customers.

  2. Mike says:

    It’s pretty obvious that Netflix has been going into the tv show streaming business for a while (they claim that’s what most of their customers are streaming and they are already getting into original programming). I think the wake-up call was the price increase, and most of the people who decided to keep streaming decided to do so because of the tv content, not the movie content. Frankly, the movie content mostly sucked, anyway.

    Speaking personally, it’s a good deal for my house because we can get the big four content over the air on our DVR, and use Netflix to replace cable content (when we’re just looking for something to have on). If there’s something we have to have, iTunes works. Cable cut.

  3. Paul MD (Stella's Boy) says:

    I like the streaming movie content. It’s not perfect, but I’ve used it to watch a lot of movies in the last couple months. A nice mix of foreign, ’80s horror, classics, and more. I’ve also watched some TV, but right now I used it mostly to watch movies, and I’ve found plenty to watch. This deal is pretty lame though. Not interested in any of those CW shows.

  4. sanj says:

    with that sort of money netflix could have bought several movie theatres .

    there should be a dp/30 Netflix every 4 months – things keep changing for them ..

  5. storymark says:

    Im the customer Mike was talking about. I use the streaming for TV 90% of the time. I still use their DVD service for films.

  6. Roy Batty says:

    The only way this is a good deal for Netflix is if the blood it puts in the water leads to studios starting a feeding frenzy of trying for even bigger deals while Netflix is signing big checks. This deal would make re-signing Starz worth like $1.5B a year.

    Otherwise, it’s a very shitty deal that damages their brand even more. “Come to Netflix! We have all the crappy movies and terrible CW shows you can not watch!!”

  7. LexG says:

    Or maybe everyone could just watch movies on HBO like a normal human being or set a VCR.

  8. Paul MD (Stella's Boy) says:

    Setting a VCR is hard and cable is too expensive.

  9. Joe Leydon says:

    OK, I don’t want to sound like a smart ass, or a complete ignoramus, but when people start talking about cutting their cable, I wonder: Does this mean you don’t watch news? Sports? Anything besides movies and reruns of TV episodes?

  10. Paul MD (Stella's Boy) says:

    We have a box and rabbit ears so that we can watch local channels. I watch sports. NFL on Fox, CBS, and NBC. College football on NBC, ABC, and CBS. MLB on Fox. I also had a subscription to MLB through Apple TV. I watch a little local news, but not much. I never watched cable news. Not a fan of the cable news networks. So, yes, not just movies and reruns of TV episodes.

  11. storymark says:

    I read the news online, myself. Dont watch sports at all. About the only thing I watch on cable anymore is the Daily Show. I really only have it because it was bundled with my internet service.

  12. LexG says:

    But how do you watch like Bill Maher, or O’Reilly, or Olbermann, or Sons of Anarchy, or Sunny, or Entourage, or iCarly, or Justified, or just zone out in front of the Bourne or Bond movies caught in progress on a whim?

    That’s why I’m always mooning over cable and the bygone days of Early HBO… I miss that ‘unaware’ vibe where you could just zone out and watch FLETCH sixteen times in a month or THE INCREDIBLE SHRINKING WOMAN or NIGHTHAWKS, no expectations, no pressure, just it’s on in the background and you happen upon it and stick with it thru to the end. It’s sort of why every minor movie of the ’80s is somehow a remake-worthy “classic” today– us latchkey kids watching the same 30 movies over and over and OVER.

    Today, THE KIDS don’t have that. They STREAM everything or watch something ONCE via Netflix and mail it back… that repetition is gone, that sense of discovery, that sense of being stuck with NIGHT SHIFT 25 times a month instead of being able to DEMAND Kurosawa movies on a whim.

    I can’t adjust to it.

  13. David Poland says:

    I believe that if I went to basic & local channels only on my satellite, the bill would be cut to between a half and a third.

    If I could stream HBO Go to my TV, paying for it separately, I might well consider dumping Showtime, Encore, aports (MLB already separated… NFL Sunday Ticket still a sticking point for me), and whatever extras, keeping Netflix and Hulu-Plus for now… and save hundreds of $s every year.

    I’m not going to rabbit ears.

  14. The Big Perm says:

    News on tv is shit anyway. Just read it online or if I’m in a car and I don’t want to listen to the music I’ve heard a million times, there’s always CSPAN or news there. I don’t have any kind of cable…I did but now I just have internet where you can see any new show the day after it airs anyway, and I have Netflix. The only time I miss tv is for Halloween, I always liked seeing stupid Travel Channel specials about ghosts or Halloween parks.

  15. Paul MD (Stella's Boy) says:

    I use iTunes to watch new TV shows.

    I would love to be able to stream HBO Go to my TV. That would be awesome. And the rabbit ears would great for watching sports on local channels. Perfect picture.

    Lex, I get what you’re saying, and relate to it. I fondly remember watching all sorts of stuff on HBO as a young lad. We were trying to make a few cuts, and the monthly bill has been cut more than half.

  16. LexG says:

    I could stand to make the pay channel cut myself… Other than regular HBO and an occasional thing on Showtime, I almost never, ever even remember I HAVE 25 different pay services other than when I’m hard up at 2am and ogle Bikini Frankenstein on Cinemax for the 20th time. I don’t know why I’m paying a buck fifty a bunch for the privilege of HBO LATINO EAST and STARZ BLACK or SHOWTIME EXTREME.

  17. JKill says:

    When I was growing up, we had the movie channels, and the big thing for me on the weekends was staying up as late as I could and watching whatever I could find. It was totally random, with my picks being just what I had read about or what looked cool, and the night would consist of either a triple feature or just bits and pieces that I would fall asleep through. This led to me seeing everything from MEET THE FEELBES to COMING HOME, and I had very formative experiences like catching the first forty five minutes of Altman’s THE LONG GOODBYE and having my mind blown and being furious with myself for being unable to stay awake. It’s great having everything now at the tip of our fingertips, but I miss that sense of excitement and discovery from the pre-streaming, pre-DVD days.

  18. Paul MD (Stella's Boy) says:

    That’s what we determined Lex. We looked at our bill and thought about how many channels we were really watching regularly. It was HBO and a few others, and not much else. Not nearly enough to justify that bill.

  19. palmtree says:

    I get news from the internet and the Daily Show, which I stream via the internet. So yeah, the internet.

    Sports don’t interest me much.

    By my tastes are not mainstream by any stretch. I’d be perfectly happy with cable if I could get TCM, Classic Arts Showcase, and the free on-demand stuff. Everything else is just noise.

  20. Joe Leydon says:

    To each his own, I suppose. Of course, I suppose it helps in my case that I can deduct my cable bill as a legit business expense. But, then again, can’t a lot of you here do that, too?

  21. sanj says:

    whats all this tv content worth internationally ..

    over in the UK ..they got bskyb tv … they run new shows and reruns right after each other …they don’t care which US network its from ..

    the biggest problem i have with tv is infomercials …they take up way too much time at all hours it seems .
    theres even a 24 hour infomercial channel….

    DP you should put the dp/30′s on the infomercial channel… rerun them 4 times a day. you’ll get famous that way…just like Cindy Crawford and her makeup line.

  22. hcat says:

    If you have a Roku box they have a newscaster service that gives you almost everything from the cable networks. If you can wait for a few hours you can catch Maddow or Morning Joe (or whatever you might want to watch) commercial free.

    As for the deal, it is absolutly terrible deal and they massively overpaid for.

  23. Hendhogan says:

    I think they made the deal because A) they are expecting a crapload of new subscribers through their deal with Facebook B) The CW thinks most of their viewership comes from the online experience. If you’ve watched anything on their home site, they have up to five commercials per break (granted there’s a lot of promos for other shows, but is there really a difference between promo and commercial in annoyance level?)

  24. Roy Batty says:

    Normal human beings don’t come on sites like this, for one.

    For two, Time Warner doesn’t offer either HBO Go or HD On Demand (ironic considering who used to own them, no?).

    3, some of us can re-watch FLETCH for the 20th time AND Kurosawa (and for some of his, for the 5th or 6th time. I can watch SEVEN SAMURAI every fucking year). Streaming helps with those challenging films that you have to be in just the right mood to watch. It’s hard to have a “ah, fuck it, let’s finally check out SERAPHINE” moment on a whim at Laser Blazer.

    4, VHS looks like dog puke.

    5, if you think “the kids” are watching Kurosawa, boy do you need to share those drugs with the rest of us.

  25. Joe Leydon says:

    Well, of course, if you actually own a DVD (or Blu Ray) copy of Seven Samurai, you can watch it anytime you want.

  26. LexG says:

    Nobody DOES though. The fun of cable is it just SHOWS UP. The DVD era taught us that nobody ever really needs to OWN that many movies… Other than 8 or 10 comfort-watch perennials, most of the 800 or so DVDs I stupidly, STUPIDLY bought stayed in the shrink-wrap or got watched ONCE, ever. Like if you’re in a beer stupor dicking around on the computer and STRIPES comes on the Superstation, you might leave it on and it’s pleasant background noise.

    But you’re never, ever going to go “Hey tonight I want to watch STRIPES!” and bust out the DVD and set it in the tray and jack up the sound and sit there dilligently studying it like you’re taking fucking notes.

  27. The Big Perm says:

    Joe, I could PROBABLY deduct cable…but who watches all that shit anyway? Anything decent on is either a movie on TNT (I may have the original uncut anyway) or some tv show which I don’t have time to watch. When I moved and didn’t have cable for six months, I realized what do I care. If I do watch a tv show, I’d rather watch it on DVD or Netflix anyway, because if I watch it week by week I can never remember what happened on the last episode anyway.

    All I need is my HD box so I can get broadcast, and watch my Thursday night stories. Luckily for me, Deadliest Catch and Monsterquest are on Netflix.

  28. jesse says:

    Lex, that’s not a bad point. I’m far from an obsessive DVD collector but I do tend to get (usually used or on sale or as gifts, occasionally for review) my eight to ten favorite movies of a given year, plus assorted comfort-food movies. And while I like having them available, and my wife and I often watch something we’ve seen a bunch of times piecemeal as we’re falling asleep at night over the course of a week, I don’t actually USE them as often as I’d like to think. I’m sure I have plenty of DVDs that I’ve never actually watched (on DVD) straight through, that I just assumed I wanted because I taped the movie off of HBO when I was 12 and watched it a dozen times. Or at least, stuff that I watched again to review, or watched when I got it, and then never again, even if it’s a movie I kind of LOVE. It also dampens my enthusiasm for the midnight-movie/rep-programming scene in NYC because it seems silly to pay ten or twelve bucks to see something I have on DVD.

    I do like having DVDs to loan to people and say YOU HAVE TO SEE THIS. Which does work once in awhile. And I like having a selection of movies if I AM home sick from work, or just want to put something on while folding laundry, or whatever. But could most of those needs be filled by six Star Wars movies and a couple of comedies? Yes, they probably could. And stumbling across movies on cable is fun. Having HBO as a kid is why I’ve seen Wayne’s World, Batman Returns, and A League of Their Own at least a dozen times each (ah, summer 1993; I didn’t have many friends yet).

  29. Joe Leydon says:

    Again: Different strokes for different folks. I have hundreds of DVDs for the same reason any academic has hundreds of references books: To be able to consult them immediately when the need arises. Does that mean I have dozens upon dozens of DVDs still shrink-wrapped and unwatched? Of course. But if and when the need arises — and, mind you, I never know when that’ll happen — I’m ready. Just last week, I was asked to do a Q&A a few weeks hence with a notable. Just out of curiosity, I checked to see how many of this person’s movies were available for instant access on Netflix, Amazon, etc. Know what I found out? Not enough.

  30. Jason says:

    Initially, cable was great because it bundled content (multiple channels) together for one affordable price. The issue today is that the cost of cable has risen greatly (probably greater than inflation) though the ammount of content provided has not risen.

    Additionally, there are now so many content options out there. The issue is, it is not affordable to have multiple selections. Perhaps it’s affordable to have Netflix, or HBO, or NFL ticket, but to have all, that is expensive for most people. On top of cable, it is ridiculous. I think what all these companies are finding is that once the newness wares off, people realize that they’re paying hundreds a month for all this content and they start to cut back. Because the cost to available content issue is poor. Sure they will keep one or 2, but those will be individual decisions based on amount of content and/or choice of content.

    With streaming or online services, you pay for delivery (internet) and content. They should make delivery next to nothing and then people will have more money for content. Also, companies should get together to bundle content similar to cable. Otherwise, their service will be just niche. Which is fine for a lot of people and some companies. But as the deals with Netflix keep being announced demonstrate, they do not want to be niche, they want millions of suscribers. That’s not going to happen without a better cost to available content ratio.

  31. Jason says:

    I should clarify in my second paragraph that people pay hundreds a month for ACCESS to content. If they were actually getting “all this content” then there is no issue.

  32. Jenna says:

    ALL I want is to pay to stream movies online. I don’t like paying 7 dollars a flick on my tv and I have no interest in this middle- ages scheme of waiting for them to arrive by mail. I just want online streaming of actually good movies- I would pay $20 a month for that! Netflix is such bull. Now that I’ve finished watching breaking bad, all that’s left is some horrible documentaries and childrens movies.. BYE, NETFLIX!

  33. Paul MD (Stella's Boy) says:

    “all that’s left is some horrible documentaries and childrens movies”

    All due respect, that is nowhere close to being true. Anyone who thinks that isn’t even trying.

  34. Bennett says:

    Unless they are going to go streaming on their own right(like Sony and Disney) why do companies not jump into streaming with their old television libraries…Especially for there older content. For example, even though I know HBO To Go is out there, why doesn’t HBO sign a short term deal with netflix to show their older shows(Sopranos, Wire, Sex and the City, Entourage, Six Feet Under,etc.) It is like printing money. I am sure there DVD sales have dwindled.I willing to bet that those shows would get more attention than CW’s programing.

    Another thing regarding netflix I wonder about is how it helps current television shows. For example, I ordered Showtime because I got hooked to Californication from streaming season one. I started watching Sons of Anarchy because of Netflix.

    Also, on a side note, I have a small cable company that services my house. To keep my high speed internet, I have to keep my cable line “hot”. Which was explained to me as having to pay for the digital level. So it is basically all or nothing. I would love to just use my Roku box and rabbit ears, but I cannot do that without high speed internet. Any thoughts?

  35. Mike says:

    One of the nice things about the DVD problem Lex talks about (buying an entire library) is that I just encoded them all and put them on a 3TB harddrive. Now I can stream anything I own, including 20-30 TV series on demand to my Apple TV. That helps take care of some of the “looking for something to watch” feeling that cable used to take care of. Why watch Shawshank or A Few Good Men on TNT, when I can just stream them without moving from my couch? And I’d rather watch Deadwood again than many things on primetime.

    I’m a big believer in cutting the cord, but it is tough for sports. Fortunately, I can get a lot in better HD over the air than I could on cable, and the NFL games I miss, I just stream with NFL Game Rewind the next day. Sometimes it means plugging my ears and avoiding some web sites for a day, but as I have a 1-year-old at home, it’s hard to watch four hours of anyting when it’s actually on without pissing off the wife.

  36. hcat says:

    There might be a strategy behind this that it is a loss leader to open the door to Warner’s vast tv catalog. I am sure Friends, West Wing, and ER along with the HBO content it very high on Netflix’s wishlist.

    And for the streaming site Netflix needs to let you set up some of your own criteria. Most of the stuff that comes up automatically is content that I would never watch. I need to be able to tell them only to show me the variety of theatrical movies and leave all the dtv action, horror, and american pie rip-offs, the WWE, and the stand up comedian content out of my sight.

  37. Triple Option says:

    @Paul MD (Stella’s Boy): I think what Jenna was saying was that she’s exhausted her library selections she’s wanting to see. Just a couple more things in her queue and then Buh-bye! Or that’s me just projecting. I’m down to two more disc in my queue and then Netflix will have to cut back on a couple of rolls of toilet paper or paper clips in the office to make up for the loss of $7.99 a month from me. I’m sure I could go hunt for more but the key is me going out to look for stuff or sit and think of things as opposed to having a ready list I’m dying to see.

    I have a good chunk of movies to stream in my queue. With football and baseball post season, my time for movies has drastically been reduced from what I was watching over the summer. I wish I could cut back on my cable but for that stupid digital HD box you have to get some plus package that really offers very little.

    I forget what show I tried watching online last night. The network TV shows generally have like one or two commercials per break, this one was ridiculous. I had to shut it off. Even if some were only 10 seconds or 15, they still went beyond the normal 2-3 mins in a normal broadcast. I wanted to stay watching just to see how long they’d go but I couldn’t take it anymore.

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