

Time Warner Views Netflix as a Fading Star - donohoe
http://www.nytimes.com/2010/12/13/business/media/13bewkes.html?_r=1&src=twr

======
rdtsc
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...

~~~
dasil003
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.

~~~
sielskr
"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.

~~~
dasil003
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.

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jey
_“It’s a little bit like, is the Albanian army going to take over the world?”
said Jeffrey L. Bewkes, the chief executive of Time Warner, in an interview
last week. “I don’t think so.”_

Someone please throw a dozen copies of The Innovator's Dilemma[1] at this guy.
Maybe the TW board will wake up and fire him before he runs their company into
the ground.

1\. <http://en.wikipedia.org/wiki/Disruptive_technology>

~~~
Thuraash
I don't think you're giving Bewkes due credit. It seems like the point wasn't
lost on him at all; the industry seems to have realized that the wave is going
by, and they got caught flat-footed. See:

" _Time Warner’s HBO is in the process of introducing a new online service,
HBO GO, which will be available to authenticated HBO subscribers. Mr. Bewkes
has also led an industry initiative he has called TV Everywhere, whose idea is
to offer cable network programming online for anyone who is a verified cable
subscriber._ "

They're trying to take advantage of the economies and at least some of the
capabilities of the digital distribution platform without losing a huge chunk
of profits (subscribers). It makes sense to try and diminish their digital-
distribution competition (including Netflix) for business reasons. Netflix
jumped the gun on them by hopping on the digital platform first, and at very
subsidized prices, so the conglomerates have to play catch-up. Don't forget,
though, that this kitty got claws: big media can still price Netflix out of
the game, or at least out of this ridiculous growth phase, since they do
own/create the content that Netflix thrives on, and can raise prices.

~~~
jey
Nah, that seems like a classic textbook late response of a company caught
empty-handed by a disruption. The very pressures you cite to preserve their
existing business will ultimately kill them without some IBM-style creative
thinking.

Yes, it's theoretically possible that the TV industry is inefficient enough
that the oligopoly can keep out new entrants, but Netflix already has way too
much market share for that to work out in the cartel's favor.

~~~
earl
No, Netflix doesn't. If the studios don't sell netflix a streaming license,
then Netflix has no streaming business. I am aware of no law that requires the
studios to sell such a license; even if there is, I doubt that it requires the
studios to sell such a license on more generous terms than it sells license to
cable companies, who pay lots more than netflix.

~~~
Thuraash
I agree. Moreover, even if they choose to continue to do business with
Netflix, any businessperson would see the potential for raising prices, and
Netflix may make a big bruhaha now, but in the end, they'll pay it because
they'll still make money.

Netflix' ridiculous profits and growth rate represents a demand unanticipated
by the content providers that serve it. The only reason they didn't capitalize
on this potential and raise prices is because of the length of the contract.
As soon as it lapses, expect Netflix' profit margins to get a whole lot
skinnier, and their growth to slow down. This looks like a classic case of a
binding contract slowing down delaying the market response to unanticipated
innovation. It's not the conglomerates shutting Netflix down with extreme
malice and prejudice; it's the market adjusting and redistributing the
newfound pie.

------
chime
> Time Warner’s HBO is in the process of introducing a new online service, HBO
> GO, which will be available to authenticated HBO subscribers. Mr. Bewkes has
> also led an industry initiative he has called TV Everywhere, whose idea is
> to offer cable network programming online for anyone who is a verified cable
> subscriber.

And that's what you're doing wrong Mr. Bewkes. As I don't have cable anymore,
I'll never be able to access HBO GO or TV Everywhere. I will not re-signup for
cable at $75/month now that I have Netflix for $8/month, even if you add tons
of tertiary services to your cable offerings. With these tactics, the most you
can do is slow down customer defection to Netflix. And even then, you will
never get back a single customer you already lost to Netflix. They get their
users better than you get your viewers.

Get your content on Netflix and/or make your content available to any
Roku/XBox/Wii/PS3/iPad/iPhone/PC/Mac like Netflix for a fair price and I'll
sign up. I am no fan of DRM but I will use Silverlight if I must.

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p_nathan
Cable is on its way out. Maybe not today, maybe not next year, maybe not in
five years. But it is surpassed and supplanted by the Internet.

Movies, news and TV shows will continue, and online pricing will, in the
course of time, adjust to reflect a profit margin that doesn't involve
existing cable TV.

That doesn't mean Netflix is going to rule - it's much more reasonable in my
opinion to assume a cabal of motion picture industry will form and cut out the
middle-men.

My 0.02c.

~~~
cobralibre
_That doesn't mean Netflix is going to rule - it's much more reasonable in my
opinion to assume a cabal of motion picture industry will form and cut out the
middle-men._

And it's a pity that you're almost certainly right, since Netflix actually
does what it does well.

------
erreon
Blockbuster didn't think they were gonna be a challenge either.

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chc
Several times in this article, they make it sound like Netflix is competing
with cable. But in reality, Netflix only streams TV shows that are already out
on DVD. iTunes is the service competing with cable, both on the PC and Apple
TV.

~~~
brucehart
Netflix isn't competing with cable in terms of getting eyeballs for the same
content, but it is competing with cable in terms of time spent on
entertainment. I know several people who have canceled their cable
subscription because they found they had plenty of things to watch with a
$10/month Netflix subscription and no longer found a $50-100/month cable
subscription to be a good value.

~~~
adamc
I'm such a person. If you can live without sports (or only the sports
available locally via over-the-air) and you don't need to see the
latest/greatest shows, cable TV isn't a great value proposition. I don't mind
waiting a year or two to watch something; there are plenty of alternatives in
the meantime.

That's the essential problem that the industry has to deal with: there is way
more content than most of us have time for.

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protomyth
It isn't so far fetched. Time Warner is a producer of content and has a large
library. It doesn't seem unreasonable for content producers to cut out the
middle man and have a streaming service of their own. Disney in particular
could very well build a Netflix clone of their content. Aggregated services
like Netflix allow for more content and smaller library owner participation,
but one wonders at what size of library could $5 a month be justified? How
about $10?

~~~
ericd
The thing is that 1 service with 5x content >> 5 services with x content each.
Being able to find everything in one place is a very large benefit from a
consumer perspective.

~~~
protomyth
The thing is they don't all have same size libraries. If Disney took all
content off Netflix and created its own service, then it probably could do it
itself. Time Warner might be close to that size. Other need to be part of an
aggregation.

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iwwr
Killing Netflix is not going to push customers back in the fold of cable TV.
It will push them toward piracy.

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taylorwc
I think the right word for TWC's view is 'delusional.'

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acangiano
Speaking of fading stars:
<http://grab.by/grabs/47f61f006c2121a23c90dd80cb633255.png>

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mayukh
I had the same thought as some have expressed here, Time Warner taking a shot
at Netflix,,really? Time Warner ??

But the article makes some valid points. When Netflix started it wasn't viewed
as a direct threat to the content owners. Nflix served as the physical
distribution arm (and a very very efficient one at that) for media houses. But
now with streaming the game is changing.

Each of the players can now setup their own web based distribution base, why
would they need Netflix anymore?

Plus there's more competition now. When Netflix launched it was the only one
that did what it did (true bb tried, but they were poorly run). With streaming
in addition to each Media conglomerates own websites there's also Hulu and
lets not forget big dog Google (Youtube and Google TV).

In short content owners have options now, that didn't before. I trust Netflix
will come out of this strong, they're a great company with some really smart
people, but its not going to be easy

------
aracena
"Who in the hell wants to hear actors talk?" Harry Warner

~~~
OpieCunningham
Yeah, that guys company sure didn't last very long.

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invertedlambda
I would have paid attention to this article but I'm too busy streaming "Robin
Hood: Men in Tights".

------
gphil
On a related note, Netflix will be joining the S&P 500 next year when they re-
index.

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j2d2j2d2
I do too, unfortunately. I got bored of their streamable selection a little
while back.

If they updated it or got more of the main library in there, I'd be all about
it again though.

------
Cushman
Netflix responds, "Who?"

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bennesvig
Maybe fade slightly, but cable companies are ready to supernova.

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aresant
Netflix's greatest coup to date has been integration with so many hardware
manufacturers - the bulk of net-connected TVs & consoles have Netflix on there
as a gimmie.

But Amazon is catching up - found them on my most recent Sony TV purchase,
they're on ROKU (originally a Netflix device), etc.

With that option I find myself using Netflix less and less because the
streaming content just ain't that great and Amazon's streaming on-demand
service, while more expensive today, gives better content.

The recent rumor of Amazon considering bundling a FREE streaming service with
Amazon Prime is very compelling and, unlike Blockbuster & the studios, they
can compete in online commerce and have the pockets to play with the studios.

ref -
[http://technolog.msnbc.msn.com/_news/2010/12/07/5605985-amaz...](http://technolog.msnbc.msn.com/_news/2010/12/07/5605985-amazon-
primed-for-subscription-streaming-video)

