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Comment by serve_yay | Hacker News Reader

It doesn't seem like a lot of people actually use Amazon's video thing, though. But besides that, I think Netflix has a real problem in that they are a thin layer of tech (OK maybe not so thin) over a huge amount of intellectual property. Not only do they not own that IP, the companies they license from can just keep increasing their rates as Netflix makes more money. They were really cleaning up for a while after their deal with Starz a few years back, but Starz wised up and demanded more money when the contract was up for renewal. I don't see how they get around this.

On the other hand, people do seem to just watch whatever is on Netflix. So, maybe they can get away with licensing a less-expensive mix of content plus of course their in-house stuff.

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> Not only do they not own that IP, the companies they license from can just keep increasing their rates as Netflix makes more money.

HBO ran into the same problem (with a different delivery platform) once they ran into competition as a premium cable movie channel, and they responded much the same way Netflix is -- transitioning to increasingly prioritize first-party content. OTOH, when HBO didn't, there wasn't anyone doing basically the same thing on a different tech platform around -- which makes HBO Go being made available independently of cable a big threat to Netflix.

> On the other hand, people do seem to just watch whatever is on Netflix. So, maybe they can get away with licensing a less-expensive mix of content plus of course their in-house stuff.

Netflix being one of many "internet channels" with a limited library of mixed first- and third-party content is clearly where things are heading, the question is how they grow a subscriber base with more and more entrance to that space, some of which, like HBO, have a lot more experience in pretty much every aspect of that kind of operation except the internet delivery end.

> the question is how they grow a subscriber base with more and more entrance to that space, some of which, like HBO, have a lot more experience in pretty much every aspect of that kind of operation except the internet delivery end.

Sounds like HBO and Netflix could be good merger partners?

This is much more complicated than "content companies can raise prices at will".

Netflix makes ~$5.6 billion per year.

A big chunk of that goes to content licensing so they spend several billion dollars a year on content.

That revenue is pure profit for content companies.

If you're a CEO of content company and e.g. Netflix is willing $100 million a year for, say, license all seasons of "Friends", you can't simply say "I want $110 million" and expect Netflix to pay it.

If you're not willing to license for $100 million/year, then you're loosing $100 million/year of pure profit and shareholders like profit.

The more money Netflix has to spend, the more they can shop around so content companies don't have as strong of a negotiation position as many seem to believe.

And Netflix is being very smart by investing aggressively in their own content, which they'll own forever, which is an always growing asset.

> It doesn't seem like a lot of people actually use Amazon's video thing, though.

Amazon sent me snail mail a few months ago to remind me I got Amazon Instant Video with my prime membership and that I should use it some time, so I'm thinking you're probably right.

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