Netflix Using TV Repeats To Strip Share Away From TV Networks, Murdoch Rumoured To Be Interested In Streaming Company
In the US where Netflix has over 40 million subscribers there is growing concern among TV executives that Netflix is becoming the ten pound gorilla that could very well crush certain TV network revenues.
According to US TV executives I spoke to last week in New York the chief architect of Netflix’s strategy to take on TV networks in markets where they operate is Reed Hastings the Companies CEO.
One senior TV executive said that one rumour sweeping New York TV circles was that Rupert Murdoch and his News Corporation were running a ruler over the Netflix operation after backing away from buying Time Warner.
In Australia recently Hastings minders refused to allow SmartHouse to put questions to the Netflix CEO about his Companies refusal to collect GST payments or pay tax in Australia or their strategy to take out free to air TV stations, during his recent visit to Australia.
Pulse Communications a division of Ogilvy + Mather also refused our requests for interviews.
This is the same PR Company who was dumped by LG Electronics last year with senior LG management telling ChannelNews that the reason for their dumping is that “they were hopeless”.
In the USA last week I was told by Time Warner management that Netflix is being accused of being behind a significant decline in TV ratings that showed up in tracking data in August and is still in decline today.
Ironically Netflix subscriber numbers grew over 12% during this period.
Netflix, streamed 10 billion hours of content in the first quarter of 2014.
According to re/Code this represents close to 6 percent of total TV viewing in the U.S.
US analyst Michael Nathanson claims that Netflix accounts for 43 percent of the ratings decline the networks are now experiencing.
The MoffettNathanson analyst figures reveal that the trend is set to continue and “Netflix as a percentage of traditional TV will steadily rise to the low-double-digit range over the next four years, representing the majority of the declines in traditional TV viewing.”
Nathanson claims that what makes this more painful for TV networks and the Hollywood studios they work with is that they’ve helped Netflix eat into their own business by selling them their repeats – a very high-margin business they were happy to have.
Now there are drumbeats that the studios will cut back on those sales a move that could seriously undermine the Netflix operation which has a high percentage of TV repeat programs.
During Netflix’s recent Q1 earnings call, the company said it hadn’t seen any signs that movie houses were set to restrict access to content.
re/Code said that’s one of the reasons Hastings has been accelerating his investments in original content – he doesn’t want to depend on the TV guys’ leftovers.
One observer of the issue wrote recently “Netflix uses TV’s old shows to build its own business, which eats into TV’s business. Then Netflix uses the money it makes from TV’s old shows to make new shows of its own – so it can eat into the TV business some more.
Virtuous cycle for Netflix. Vicious one for the TV guys”