How the movie studios caused Netflix’s problems | Hacker News Reader

How the movie studios caused Netflix’s problems

blogs.reuters.com

33 pointsjfruh25 comments

I still think Netflix is one of those transitional businesses not unlike Red Box. It will probably survive to be the place for indies and second tier studios, but I believe that Disney, WB, or Fox have the amount of content needed to create their own On-Demand internet service.

At which point they'll be bitten by a low-grade network effect; the value of a streaming service to me goes up as its content goes up. I'm much less likely to use the Disney streaming service, the WB streaming service, and the Fox streaming service (and the HBO and Showtime and Discovery and...), than I am to join one that has them all... and the studios are smoking crack if they think I'm going to subscribe to all of them, or even just manage user accounts for all of them. This needs to be easier than what we have now, not harder, and we're sure not going to pay more for less (in absolute dollar terms, anyhow).

Not to mention each of the studio streaming services will suck compared to the one created by a company living and dying on the streaming itself.

Oh, and I haven't even mentioned DRM. The studios have demonstrated a certain inability to judge the DRM tradeoffs when left to their own devices. Maybe the studios could get away with running their own download-of-not-DRMed-files, but if they've also got to create their own DRM and make it work on all the rapidly-multiplying number of streaming devices out there, it'll be even worse. TVs that can receive ABC but not CBS... hooray for the 21st century!

They may try... I don't deny they may try. But it won't go well.

I agree that "a TV that gets ABC but not CBS" sounds ludicrous. But look at it another way. Isn't one of the longtime geek rallying cries about cable "I just want to pay for the channels I want, not the whole bundle?"

Plus, with the gradual move to an on-demand model for entertainment, it strikes me that "channels" as we know them (where something specific is on at any given time and you don't control that) will become meaningless. Why shouldn't we be buying content direct from the creators (or from the company that funded its creation, more accurately) rather than worry about what "channel" it's on? It seems weird to think about paying Disney directly for Disney content but that's only because we're used to paying for channels. Maybe in the future we'll have choices to buy either unlimited streaming or individual shows from the companies that make them -- and your monthly bill, taking inflation into account, will probably be roughly what you'd pay for cable today. (What, you didn't think things would get cheaper, did you?)

Why shouldn't we be buying content direct from the creators (or from the company that funded its creation, more accurately) rather than worry about what "channel" it's on? It seems weird to think about paying Disney directly for Disney content but that's only because we're used to paying for channels.

I prefer buying hand blenders from Amazon, instead of from Braun, because when it comes to the online shopping experience, price, delivery and customer service, Braun will not come near Amazon's quality in a hundred years.

As content creation is further accelerated, aggregators will have a more and more important role. The internet is creating more specialisation in commerce overall, not reducing it.

"I prefer buying hand blenders from Amazon, instead of from Braun, because when it comes to the online shopping experience, price, delivery and customer service, Braun will not come near Amazon's quality in a hundred years."

That is exactly what I was trying to get at, only your explanation actually successfully conveys the idea. Thanks.

The only problem with this is that paying for channels isn't quite analogous to paying for streaming access. Felix Salmon points to the obvious difference in reasonable pricing models: a stream aggregator could charge a flat fee but pay variable fees to its content providers.

In this case, you're simply paying up front for the service, guaranteeing the revenue of the aggregator, who then buys your content a la carte.

I just want to buy channels from a few primary vendors, not individually evaluate pricing, delivery, terms and conditions from multiple vendors. There's a cost for carrying more vendors - look at complex manufacturing operations that tend to try and reduce supplier counts to manage. On a personal basis, the more individual billing accounts I have to juggle, the less time I have to do things I actually care about.

The vendors should care about transaction models, because if I'm evaluating the price of each item individually be it per show or per channel, I'm likely to spend less on content overall vs a ongoing account.

Your points about DRM, network effects and studios building crappy streaming services are spot on, but there's one thing that overrides all those: Content-owners hold hostage practically every important work since the 1930's. They can simply refuse to renew their deals with Netflix. The only place you'll be able to get their content is from approved services.

I think the studios will continue to raise their licensing prices for Netflix, until eventually Netflix has margins close to zero. It won't be fun for consumers, since the negotiations will cause movies on Netflix to disappear and reappear randomly.

618c5b50e71cee32de7515ab70d371e8c5c9e00a

Just curious, what's with the hash? Are you concerned your message might get tampered with?

It's a prediction, and not a very interesting one at that. Still, I don't want to reveal it until the discussion has fizzled out. I promise I'll sate your curiosity in 24 hours.

Ugh, I can't believe it. My laptop battery died and with it, my recent bash_history (which was not saved to disk). I don't remember the exact text, so I might as well spoil my prediction now since it can't be confirmed.

I predicted that some nitpicker would reply to my comment and name a few important works that are in the public domain or CC-licensed. Like I said, not a very interesting prediction.

This hasn't happened yet, so my prediction was wrong. In this case, making the prediction public changes how people act, so I didn't want to say it outright. On the other hand, saying "I knew you were gonna do that" isn't very believable. A hash of the prediction is a good solution to this problem. The only information it conveys is that a prediction has been made.

Sorry for the losing the exact text. I love being able to prove I predicted something.

I like the idea you have there. I wish there was a service that would keep track of predictions by politicians, pundits, and other notable figures. Maybe then people would realize that a lot of people on TV(radio) are only randomly saying something reasonable.

That would actually be a very interesting addition to message board. Add a note to your last posted message that reveals itself after a set time and allows people to vote on the truth of the predication.

nice idea - sorry about the loss

HBO is owned by Time Warner (WB) and Disney / Fox have multiple content venues to roll into a big On-Demand channel. They have then content in their library and know how to create new shows. Look at Netflix and see how much of the content is owned by a major company.

I am not saying Netflix will go away, but I believe they will stick around being the front for content of indies and tier two studios without the content libraries of the bigger players.

> Not to mention each of the studio streaming services will suck compared to the one created by a company living and dying on the streaming itself.

I think it will come to a point that Disney, Fox, and WB are living or dying on streaming.

> DRM

I don't think they will do much different than Netflix. It will be an app thing on every device. They already have expertise from other ventures (e.g. Hulu).

Sports might be an interesting part of the equation. ESPN (Disney) / Fox Sports might end up as the sports channel for sports without the huge following to support their own service. Each does have original content, so they would be bonuses for their parent company's respective streaming offering.

You're assuming they want to. Look at hulu for example: its parent companies are trying to give it away. It's a bit like trying to say that studios have the resources they need to start their own theaters or that TV networks have the resources to start their own cable companies. I realize those aren't perfect analogies, but the point is the same.

Content companies want to focus on content. Technology companies want to focus on technology. And despite attempts from both sides to do away with the other, that's the way I suspect it will remain for a long time.

Nobody in the entire universe cares which studio (save for Pixar/Disney) is responsible for the content they want to watch. Movie studio brands are worthless, and movie streaming services are largely fungible, save for catalog. As soon as a customer goes to watch a movie and it's not available, the service has lost their loyalty. This is why so many of the services (iTunes, Amazon) try to create an ecosystem that increases switching costs.

A streaming service needs to have as much content as Blockbuster stores did in their heyday; however, the DVD business that the studios are desperately trying to nurse along; and the deeply terrible deals cut with airline on-demand, HBO, and others dictate that streaming will be a second-class citizen right up until there's some kind of dramatic change -- studios going tits-up, that kind of thing.

On a related note: I have an idea/vision for a next generation movie theatre, but I decided to put it on the backburner for a while, perhaps forever, due in part to all the legal & bureaucratic obstacles related to the MPAA and studio/theatre system. But there are so many obvious ways to make theatres better than what we have today.

I dunno, I kind of like movie theaters as they are. You'd really have to wow me to sell me on "next-generation movie theaters"

When movie/game night is at my place I'm going to say, "Welcome to my next-generation movie theater."

How about being able to get a group of people together to watch a new movie of your choosing on demand, in relatively small private rooms, on equipment far better than you could afford?

How will you address the large jump in showing costs brought about by "small private rooms"? I don't want to pay $500 for a movie ticket.

Via digital projection on smaller screens, with movies stored on a very large high-speed NAS. If, and it's an insanely huge if that I have no intention of actually trying to address, Hollywood studios would be open to a licensing model that preserves their per-ticket revenue, it should earn them the same amount of money, and save theaters the expense of showing a movie to an empty auditorium with a power-hungry high-brightness bulb. Hence, ticket prices should be roughly the same.

You could further appeal to discerning consumers and directors by building in an automated calibration system that adjusts for changes in the projector bulb and matches specifications before every showing.

Note: I'm not the top-level poster.

Can anyone back up his claim that Netflix is paying the studios based on subscribers? This seems really unlikely. Surely they are tracking watches and paying a fee based on that. I am pretty sure this is how streaming music services work.

AFAIK streaming music works that way because congress has passed a law specifying what streaming music royalties are supposed to be. There is no such law sounds movies

I don't think that's true in this case. It looks like Netflix negotiated a very low, flat license fee, with the condition that not too many people were going to have access to the videos. Once the number went above a certain point, a new kind of contract had to be drawn up to track the number of viewers and pay more.

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