Netflix, Disney and the Future of Streaming

Disney are pulling their content from Netflix. This development isn’t wholly surprising, Disney are the biggest entertainment company in the world after all, and rumours last year suggested they were looking to buy Netflix, although for whatever reason this never came to fruition. This move by the entertainment giant signposts a greater trend in the industry, as content creation companies and broadcasters seek out to take control of their own distribution through subscriptions.

Chances are you no longer watch TV linearly (watching TV at a time set by the channel), unless it’s event based viewing, like a sports match. You probably don’t rent movies either, and if you do you definitely won’t be going to a store to do it (RIP Blockbuster). Binge watching is now the norm, helped along by our expectation that we should have access to content when and where we want it. On demand programming has changed the landscape of media consumption and it’s Netflix you have to thank for that.

The US streaming company has shaped the way we consume media. It started life as a DVD rental company, but transitioned into an affordable streaming services offering TV and films it licensed from content producers. It wasn’t until 2013, when Netflix moved into original programming, that the service really started to take off. Successful high quality original programming like House of Cards, Orange is the New Black, and the Marvel Defenders series (which are actually made by ABC a Disney company), drew people to the service and cemented the Silicon Valley company as a go to destination to consume entertainment. This move to produce their own shows was done, in part, to preempt the shift we are seeing now. The more Netflix relied on others, the more it was in danger of becoming irrelevant. And Netflix isn’t resting on its laurels, taking out another $1.1 Billion loan, on top of the billions it has already borrowed, for more original content. That doesn’t mean Netflix can solely rely on their own shows, their library of licensed TV and movies bolsters their offerings and gives the service better value for money. Taking away any of that content reduces the value proposition for the customer, especially Disney’s back catalogue which is highly valuable. There’s no doubt about it, Disney’s actions will effect Netflix going forward. As Netflix gains in popularity, it has become more and more influential, making the big studios nervous. It has a strong negotiating position, securing deals that suited Netflix more than the content producers. A similar trend happened with music. Piracy was devastating the record labels profits, so Apple stepped in with their iTunes store. Apple could dictating many of the terms for the deals it secured as the music industry was in a free fall. Users could download single songs rather than albums and the downloaded versions of albums were often cheaper than the physical counterparts. Since then profits have never recovered to the levels they were before the internet. The movie studios don’t want this their content.

But what happens if every studio decides to pull their content from Netflix or their competitor Amazon Prime? What happens if every publisher creates their own subscription service? If we take into account that a Netflix subscription costs £8.99 a month (£108 a year), and we presume that these new services will cost around the same, having just a few of these new services will bring your monthly spend in line with the price of traditional Satellite and Cable packages, especially when you add the price of internet access. And with the looming threat of Net Neutrality being abolished, allowing internet providers, who are often content creators themselves, to squeeze third party offering out of the market by charging customers more to access those services, it seems like we might have a worse system that we started with. Maybe we will see the rise of cable 2.0, the same service as we get through cable and satellite, but updated and delivered over the internet, or it could backfire, forcing people to piracy as consumers feel they’re spending too much for too little with segmented subscription services. Only time will tell.

Netflix’s popularity is fuelled by its great selection of movies and TV shows and the publics appetite for a better experience than they got from Pay TV. It seems Netflix has succeed at that, but the studios have been watching and they’re coming after Netflix’s business. They see streaming as the future of their revenue and business. Netflix will survive Disney pulling their catalogue from its service. Their original programming and content from other studios will ensure that, but as more and more studios create their own services, Netflix could be one of the first casualties. Let’s hope not, it would be a shame not to know what happens in Stranger Things.

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