In two years or three, when HBO, Showtime, and Starz finally decide that they want my money, I'll be hooked on shows from other providers. I won't go the extra mile to sign up for their puny little service that offers me a few series and a few movies, when Netflix and Hulu are offering me hundreds of shows and movies for less than 10 bucks a month.
I just bought a new point and shoot camera for about two hundred bucks. It can shoot 1080p video. The same revolution that happened in music is about to happen in movies and TV, and for the same reasons...it'll go faster, though, because of YouTube and the more advanced Internet culture.
But the music revolution - low-cost converters and mics, powerful laptops and inexpensive software - lets me record a good-quality pop track in my living room, minus live drums. Can you do set construction, lighting and shooting cheaply in yours? Or does the movie revolution require way more CGI than the music revolution required reverbs?
A good music recording studio costs more than many movie sets...and yet, people manage to make records that sell hundreds of thousands of copies with a few thousand bucks worth of gear. I've worked on records and movies and in television. I have complete confidence that great films and great television shows will be made by independent artists in the coming years.
Some early proof:
http://www.watchtheguild.com - Shot with Canon DSLR cameras, mostly in bedrooms.
http://www.drhorrible.com - Cost $200k to make, and included seriously high end talent, like NPH and Captain Mal. Netflix and Hulu could easily fund shows like this. Or, an independent production company could start turning out series along these lines. It takes far fewer viewers to pay back $200k than it takes to pay back a million an episode...and every eyeball that is watching Dr. Horrible is not watching Weeds or whatever content Starz has exclusive rights to.
Or, just browse WikiPedia: http://en.wikipedia.org/wiki/List_of_Web_television_series
A huge amount of money is not required to make something fun to watch, and the number of people who realize it will only increase with time.
I'm surprised someone on HN could be so short-sighted as to think that just because the old way of doing things can never be replicated on a tiny budget, it doesn't mean entertainment will not be produced in new ways on much smaller budgets. Doesn't matter how it's produced, or if it is up to the standards of high end movies. All that matters is that some people (even small numbers for any given film) tune into the new media rather than the old, and I'm certain some people will. I don't know anyone under the age of 30 that hasn't watched both the Guild and Dr. Horrible. That's what the future looks like, at least one aspect of it.
I think that Netflix (and Hulu) show that part of the appeal of online content consumption is that the content and the curation/presentation don't have to be intrinsically tied. Having to pay for a Starz account to watch Starz content through the Starz Player is about the most '90s thing they could do.
Having their content on Netflix or Hulu makes media companies feel like second class citizens because -- from their current worldview -- they are. They're no longer the tastemakers, the editors, the curators. They're now just the guys with the content, and in their eyes the content guys are the red on the balance sheet, they're the means to an end.
If advertising is the mousetrap, the content is the cheese, and its a big goddamn blow to traditional media outlets to discover that on the internet, they're cheesemakers or they're nothing, because there are waaay better mousetraps out there.
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* Stratifying your content curation by creative entity feels counter to what people seem to be expressing they like.
I think people like Netflix because it has a disparate collection of content which it recommends, filters, and curates, and lets users choose and collect within that content. You don't need to go to Netflix' "BBC" section to watch Doctor Who -- it's just there, filtered by Netflix' employees and algorithms to sit next to other like-minded content. Content made elsewhere, curated with care, and paid for.
Kodak thought the smart move was to ride drugstores etc. as long as they could, while profiting wildly. The stores needed film as a product lead, bringing customers into the stores multiple times to get at the film content and picking up additional purchases along the way just 'cuz they were in there. When Kodak started thinking about transitioning to digital photography, the stores threatened to sever their relationships with Kodak because the 3-visit "buy the film, drop off the film, pick up the prints" model was working so well. Kodak confused who was the customer, and focused on the stores instead of the camera users. When customers went digital en masse, Kodak was in the dust having focused on old distribution models too long.
Same here.
Starz thinks the smart move is to ride cable as long as they can, while profiting wildly. Due to pressures from cable companies, they have to back away from their internet model; viewers coming "in" to watch Starz content on cable will hang around and pay for other content as well. When margins on cable become too tight, they'll find the hard way that Netflix et al have moved on to other content owners and there's no more room in the game. Viewers will move en masse to internet distribution sources, find there is more than enough non-Starz content to keep them occupied for a long time, and will lose interest in those "old" movies. With the "internet-linked set-top box" market heating up, only those who buy in to that model will get the distribution; Starz is walking out right at the short-lived prime entry window.