I think the current situation can resolve in one of two ways. I don't see Netflix, which is a tech company, being able to compete with the movie studios on the production side.
Either Netflix gives in to the movie studios' demands and enters licensing/pricing agreements on the studios' terms, or the movie studios will use a separate provider of streaming services and cut Netflix out entirely. The studios have been fighting web technology tooth and claw (usually in stupid ways), but the underlying motivation is that they want control of the price model. There is no technological reason why they won't be able to achieve this, even if their products will in the end be distributed through the web.
There are already startups working on portable and efficient streaming software which is specialized for licensing to content _producers_. If one of these companies can create a unified brand and payment portal while giving control to each individual studio, Netflix will be a second-class citizen in the media distribution world. I guess Netflix could take this role on its own, but it would go against its vested interests (ironically, exactly the same situation Blockbuster was in before it got crushed by Netflix).
There are probably some antitrust issues that will come into the light if this scenario plays out, which might mitigate things a bit. But to me this seems like a very large threat to Netflix's success. I am going to say the unpopular thing here: Netflix's best option for long-term survival is to allow each studio to set its own pricing/licensing terms.
I don't see Netflix, which is a tech company, being able to compete with the movie studios on the production side.
Could you extrapolate as to why? I don't know anything about the industry, but it seems like the only reason the movie studios control production is because they own distribution. With Netflix controlling a massive distribution channel and having access to large amounts of capital, it seems that they could easily compete with the movie studios on production (and probably win because they're not encumbered by old business models and can offer better deals to top talent).
My point is that movies are the movie studios' core business. It's what they've specialized in for decades. The article specifically mentions HBO as a key competitor, and HBO is known for incredibly high-quality shows. I have a very hard time believing that Netflix will be able to make anything remotely as good and popular as Hollywood's movies and shows, unless Hollywood collectively does something very stupid to piss off its existing actors, writers and producers.
Netflix are great at distribution, but they need to have something to distribute. There is no use in distributing a product that no one wants. The movie studios' key product isn't distribution, it's the movies themselves. Things are different in the music industry, where many of the labels are simply an intermediary between the musicians and the customers. But the product and distribution are much more connected in the movie industry.
I don't think it's an insurmountable challenge. It seems like over the past decade, a number of cable channels have started producing more HBO-like content with decent success. FX with Nip/Tuck, Justified, etc., AMC with Mad Men, Breaking Bad and The Walking Dead, and even Starz with Boss.
Either Netflix gives in to the movie studios' demands and enters licensing/pricing agreements on the studios' terms, or the movie studios will use a separate provider of streaming services and cut Netflix out entirely. The studios have been fighting web technology tooth and claw (usually in stupid ways), but the underlying motivation is that they want control of the price model. There is no technological reason why they won't be able to achieve this, even if their products will in the end be distributed through the web.
There are already startups working on portable and efficient streaming software which is specialized for licensing to content _producers_. If one of these companies can create a unified brand and payment portal while giving control to each individual studio, Netflix will be a second-class citizen in the media distribution world. I guess Netflix could take this role on its own, but it would go against its vested interests (ironically, exactly the same situation Blockbuster was in before it got crushed by Netflix).
There are probably some antitrust issues that will come into the light if this scenario plays out, which might mitigate things a bit. But to me this seems like a very large threat to Netflix's success. I am going to say the unpopular thing here: Netflix's best option for long-term survival is to allow each studio to set its own pricing/licensing terms.