By David Poland firstname.lastname@example.org
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!”