It’s no secret that Netflix has built a dominant OTT business by replaying other companies’ content. As of this week, it’s also no secret that studios are strongly reconsidering their business relationship with the Silicon Valley juggernaut.
James Murdoch of Fox fired the first salvo in September, declaring that “the business rules around how we sell to [SVOD] providers is changing.” Not only is this reflected in more content going to Hulu, but in his belief that the revenue from the more closely-controlled Hulu is less cannibalizing than that coming from Netflix. Time Warner CEO, Jeff Bewkes, piled on, noting that it didn’t want to cut into its own future “by having somebody else pay a fraction of the cost and create a better inventory on the various shows you yourself invented” – a very clear indication that it is reconsidering the value of Netflix dollars. Not to be outdone, Discovery CEO, David Zaslav, described the act of licensing content that drives brand loyalty for the licensor rather than the source of the content as “just not rational”.
The fact that Netflix secured a lot of content at bargain basement prices when it started is not in question. Today, though, everyone sees them coming – which probably explains why they are (according to SNL Kagan) spending in the range of $6.5B on content alone this year. The tightening of the noose by the providers of the raw materials of Netflix’ business is already being felt: the company took an uncharacteristic beating after reporting Q3 results that disappointed the Street on subscriber growth.
Of course, simply withholding the good stuff from Netflix isn’t going to be enough to drive subscribers back to the studios. They now have to come up with their own, more appealing offerings – which is exactly what CBS announced this week. They will be launching a brand new Star Trek series, specifically designed to be consumed through the company’s OTT services: The Verge calls this investment “big, but necessary”. They’re probably right, too, not to mention prescient: before you knew it, there was Starz announcing that it would debut the first episode of its new drama series Flesh and Bone online via starz.com and EW.com.
As if that wasn’t enough, Starz announced that they are going ‘beyond the traditional cable bundle’ to reach out directly to consumers. It’s a move that is a surprise only insofar as the timing, as its primary competitors are already there with HBO Now and Showtime. The universe of experience syndicators is growing quickly, and we should expect to see a lot more activity here soon.
So all in all a huge week for content, especially high-end content designed to build brand loyalty; and one in which we see the industry reaching for heights that will absolutely demand a focus on quality of experience. For all the investments in content, audiences reward providers with their attention only when great content is married with great experience – and we expect to hear a lot more about that in the coming weeks and months.