Media Companies Playing ‘Nice, Nice’ with Netflix

Money and eyeballs attract content creators, don’t they? Netflix’ increasing subscriber numbers — now more than any pay-TV service — and its growing spend on acquiring content has media creators changing their public statements about Netflix from skepticism to something more positive.

A report in The Wall Street Journal listed the more positive recent statements about Netflix from CEOs of Time Warner, CBS and News Corp.

Time Warner CEO Jeff Bewkes, who once likened Netflix to the inconsequential Albanian army, said Netflix is “a welcome addition” to the video market. After signing a deal recently with Netflix, CBS CEO Les Moonves said, “Gee, it’s great to be in business with them [Netflix] and they are terrific.” He called it a new flavor of subscription TV. Chase Carey, COO of News Corp, owner of Fox TV and Twentieth Century Fox, said, “Netflix has actually provided some truly incremental value for libraries.”

The changed attitude has several causes, best summarized as money and a large and growing base of paying subscribers. The media companies didn’t invent Netflix, but they should have: Netflix is no Napster when it comes to paying for content.
Netflix has shown it can continue to add subscribers in the US and now in Canada. It added 3.3 million in the US in the most recent quarter and has 23.6 million subscribers in the US and Canada. The media companies would be short-sighted and perhaps short-changed to overlook a company that has more paying subscribers than any pay-TV service.

Netflix is willing to produce original content for its subscribers. A recent deal to produce an American version of “House of Cards” is the beginning of a direct threat to pay-TV channels such as Time Warner’s HBO and Showtime.

Netflix is willing to pay for third-party content, big time. Wedbush analyst Michael Pachter estimates Netflix spent $180 million in 2010 for content and will spend $500 million in 2011 and $1.98 billion in 2012. He bases the estimates on Netflix deals with Epix and Disney.

Recent Netflix deals include:

– A four-year deal with Warner Bros.. to pay $200,000 per episode for all 100 episodes of “Nip/Tuck”

– A Lionsgate deal worth $75 million to $100 million for the streaming rights to the series “Mad Men”

– An estimated $100 to $125 million expansion of an existing deal with News Corps’s Twentieth Century Fox for episodes of “Glee,” “Sons of Anarchy,” “Ally McBeal” and “The Wonder Years” in addition to the already-available “24” and “X-Files”

– A $10 to $15 million dollar deal with Viacom’s Paramount Pictures for Canada that includes 350 movie titles and the right to show the studio’s new releases in Canada before any other television channels there

– A deal with CBS, the only major US broadcaster not on Hulu, that includes “Star Trek,” “Frasier,” “Twin Peaks” and other series

– A deal estimated to be worth $1 billion with Epix for streaming rights, excluding some releases that were previously promised to HBO

– A deal with Disney to stream shows from ABC and the Disney Channel and ABC Family pay-TV channels including the popular “High School Musical”

There’s also the estimated $100 million deal it made for “House of Cards,” its first effort to produce content for itself.

As we have pointed out before, subscribers may not be cancelling their TV service, but when they are watching Netflix, they are not watching the pay-TV companies’ channels. And, the more content Netflix gets, the less likely it is that young consumers are going to sign up for pay-TV, a trend that Nielsen reported last week.

Money and eyeballs attract, don’t they?

About the Author

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