Comment by rdtsc | Hacker News Reader

Comment by rdtsc | Hacker News Reader

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Am I the only one who actually thinks they are scared and worried if they find the need to downplay Netflix and condescendingly compare it to the Albanian army taking over the world?

If it isn't a threat, why bother even talking about it...

Do the corporate PR types and CxOs really think they are being smart and sly when they all of the sudden, out of the blue start telling everyone "we are doing very well, we are not afraid of anyone, everything is fine" and not arouse suspicion?

Last time this kind of excessive chest pounding and excessive boasting happened in a company I worked for, a week later we read from CNN financial news that we have been sold to some no-name equity holding company... and it wasn't because we were great, it was because things were going South.

Now what I am interested in, does the management actually brainwash themselves to believe their own lies or do they know things are bad and just try to lie and talk their way out of the problem with pure "leadership" and "decisive" chest pounding...

I tend to think the smartest among them realize that the world is changing and big budget entertainment will increasingly have to compete with more and more free and low-cost entertainment options on the internet, but what are they supposed to do about that? The only rational thing is to extract as much value from their content as they can while they can. Freezing out NetFlix may well help profits in the short-term, which is the best they can hope for with the way the market is going. Eventually they will have to take less for streaming deals, but we are still a ways from that point.

"big budget entertainment will increasingly have to compete with more and more free and low-cost entertainment options on the internet"

By "free and low-cost entertainment options" do you mean pirated content? I do not see non-pirated content competing effectively with big-budget movies and television the way that non-pirated textual content (blogs, sites like HN) competes effectively with newspapers and magazines.

I wasn't specifically talking about pirated content, although piracy will continue to hurt them as well. As for non-pirated content, I agree, it doesn't compete effectively, but attention is a finite resource, and it's being stretched very thin. It's a far cry from the days when people had to go to the movies just to get in an air-conditioned building during the summer.

Here's my take: There is no threat to the studios.

1 - Netflix thinks streaming is the future.

2 - dvds are covered by first sale; streams are not

3 - ergo, netflix needs a license to stream, which they didn't need for dvds

4 - they got this by a clever backdoor agreement with Starz for a paltry $25MM. This agreement ends soon.

5 - the studios are now aware of this and want a lot more money, maybe so much to make it uneconomical for netflix

6 - this is a huge and growing piece of netflix' income, yet still a small piece of the studios'. Therefore, the studios most likely have all the cards in a negotiation.

7 - the closest comps are "hundreds of millions" that cable companies pay the studios, so expect the studios to expect that type of money from netflix

8 - to the extend that cable companies are worried netflix streaming cannibalizes their offerings, they are of course communicating this to the studios

9 - the studios are well aware which parties pay them hundreds of millions of dollars a year, and which parties don't

10 - I hope netflix pulls this out.

Why doesn't Netflix or someone make their own studio? The main thing holding media back at this point is the existing studios and distributors wanting a ridiculously high cut of everything. Personally, rather than trying to find a way to play nice with those guys, I'd rather cut them out entirely.

Exactly my thought when I read this. Starting a movie studio wouldn't necessarily be any more difficult than it was to build a nationwide distribution network. Seems to me Netflix could start financing the shows on cable and network TV, and then partner with Google and others to build out urban wi-fi networks, city by city to go after the cable providers. Netflix wouldn't even have to win this fight, but applying pressure across the entire value chain of content creation through content delivery would keep any one entity from putting Netflix in headlock.

Because studios are very capital-intensive. You've got to front hundreds of millions of dollars for a year or two before the movie hits theaters. Not to mention that it's like VC - you've got to invest in 5 movies because 2 of them will flop, 2 will be modest successes, and 1 of them will hit it big and nobody knows which ahead of time. So you're talking about getting your hands on like a billion dollars in startup cash for a studio.

1, because it's expensive (take a look at MGM situation over the past decade)

2, having access to 1 studio, especially a no-name studio is extremely non-valuable to Netflix. When is the last time you saw a movie because it was released by Sony Pictures, or Lionsgate, vs. seeing it because the content itself was interesting to you? I'd hazard you've never done any such thing, because effectively zero people consume content based upon who owner is vs. what the content is/who the creator is.

Netflix needs at least 2 of the major studios providing them content, preferably 3 or 4 of the 5 majors, in order to provide access to a wide range of material.

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