Streaming service looks set for shakeups in ownership, pricing, competition
All eyes are on Netflix as it continues to surprise the market — for better or worse — with new deals and developments.
With 2013 just beginning, here are 10 ways the Los Gatos, Calif.-based streaming service could shake up the business in the months ahead:
New owner: The 10% stake Carl Icahn took in Netflix last fall all but guarantees that a shakeup is coming; the corporate raider’s track record speaks for itself. Icahn has openly welcome the possibility of a buyer coming in, which could mean CEO Reed Hastings’ days are numbered at the controls of the company he founded.
Original series: When the adaptation of the BBC drama “House of Cards” hits Netflix on Feb. 1, it will mark the first of a slate of big-budget originals on the service. Even with big names like Kevin Spacey attached to star and David Fincher as executive producer, “Cards” marks an expensive risk, but one that in success could reposition Netflix to consumers in the mold of rival HBO.
Competition: Netflix hasn’t had the subscription VOD space to itself in quite some time but it’s only in the last few months that Amazon Instant Video Prime has stepped up its game and started licensing exclusive content to differentiate itself. Hulu Plus also can’t be counted out, has gone one step further than Prime and tried to match Netflix on the original series front, though Amazon has projects in development, too. And what could be the biggest competitive threat yet is still to come in 2013: Redbox Instant by Verizon.
Pay-TV deals: Netflix stunned the marketplace in December by landing its first output deal in the pay-TV window with a major studio, luring Disney titles beginning in 2016. That dealt a blow to pay-TV service Starz, which now needs to hold onto its Sony Pictures deal more than ever. But even if Netflix can’t pry Sony away from Starz, chief content officer Ted Sarandos has talked of an even taller order: bidding away Warner Bros. from its corporate sibling HBO.
Network neutrality: As active as Netflix has been in Hollywood as of late, it’s Washington D.C. where even more significant action is taking place. Hastings has been a vocal critic of keeping ISPs from being able to discriminate against the content streaming through their broadband pipe. If the FCC can’t be counted on to protect Netflix’s interests, its dominant share of bandwidth could be a thing of the past.
Facebook friends: Netflix scored a victory on Capitol Hill last month by successfully lobbying to ease restrictions put in place by the Video Privacy Protection Act. That should pave the way for a long-awaited integration with Netflix that would enable social sharing of movies, which could bring a whole new dynamic to its customer base of film fans.
Cable carriage: Hastings stunned the TV industry early last year by speculating that Netflix could end up being offered by the same pay-TV distributors that considered it a mortal threat. Whether that was just a trial balloon or a reflection of actual negotiations still isn’t clear, but should that potential actually be fulfilled, it would mark quite a shift for the Netflix business model.
Cannibalization: What could be giving those same pay-TV providers pause about doing such a deal with Netflix is the dilutive effect it could have on the TV channels with which it vies for eyeballs. A mid-year ratings drain at Nickelodeon raised the prospect that the Viacom-owned cabler may have licensed so much library content to Netflix that it was pulling kids away from the channel. While analyst disagreed on whether audience data supported that conclusion, there’s still a consensus out there that some poor TV network could be the first to learn about over-licensing the hard way.
International growth: Netflix got aggressive outside North America in 2012, and there’s every indication it will add to its growing roster of overseas territories in the coming year. But that’s not without risk considering the massive cost of landing a new set of content deals for every region. In addition, there’s competition everywhere Netflix turns, from Lovefilm in the United Kingdom to DirecTV in Latin America and most recently, HBO in the Nordic countries.
Price hike: If there’s one aspect of the Netflix business deemed inviolate, it is its one-size-fits-all approach to pricing, which is currently $8 per month for streaming. The company learned the hard way in 2011 when it got a little too creative on the DVD side of its business never to mess with that simplicity again, but with $5 billion in content costs on its ledger through the next five years, can Hastings really never say never to another price adjustment?