Netflix's Hastings, Diller: Beware of Profit-Seeking

Netflix CEO Reed Hastings recently donned his Carnac the Magnificent hat, predicting apps will gradually replace networks, and traditional TV channels “that fail to develop first-class apps will lose viewing and revenue.”

Of course, Hastings’ thoughts were issued shortly before he gave an extensive interview to the New York Times, acknowledging how badly he misread the marketplace when he made the near-disastrous decision to spit Netflix’s business and launch Qwikster, before quickly retreating and apologizing.

This observation isn’t intended to pick on Netflix, although frankly, the company’s ubiquity in media circles should be beginning to get on even its nerves. Rather, it’s to make a point about prognostication, and how one should always take attempts to forecast what’s going to happen in the great media unknown with a sizable grain of salt – especially if the would-be seer has a sizable dog in the fight.

Netflix is hardly the first to discuss traditional TV’s demise, and the virtual certainty the model will continue to evolve and move toward more immediate choice, as opposed to set schedules. We’ve already witnessed great strides in that direction.

The big question, however, involves pinpointing when – a bar that has shifted a dozen times despite past “OK, it’s really happening this time” pronouncements, like those people who keep predicting the end of the world.

Notably, about 20 years ago the “End of TV as we know it” warnings were being delivered by the heads of the Big Three broadcast networks themselves.

Of course, like Hastings and Barry Diller — who did some of his own crystal-ball-gazing at the Milken Global Conference, even as he remains embroiled in a dispute with the networks over Aereo — they were hardly disinterested parties, but were in fact pushing a conscious agenda. In that case, broadcasters wanted to convince the federal government to eliminate the financial interest and syndication rules, or fin-syn for short, which among other things set restrictions on how much of their own programming they could own and produce.

Eventually, the FCC did scuttle fin-syn, despite protestations from independent producers, who insisted they would be driven out of business if the networks could supply and profit from controlling the lion’s share of their programming. And for many, particularly those who toiled in the then-thriving TV movie business, that’s exactly what happened.

Still, if nothing else the media world is unpredictable, which explains how Hemisphere Film Capital’s Jeff Sagansky – who was running the entertainment division at one of those networks, CBS, when the fin-syn rules were phased out – could recently deliver a speech calling this a “golden age” for independent suppliers, citing the explosion of opportunities and new financing models. Among the factors buttressing his argument: Netflix, as well as other Internet-based services, and their growing hunger for original product.

Even allowing for some hyperbole in Sagansky’s remarks, it’s hard to deny producers and creators now have a plethora of options that didn’t exist when the fin-syn rules went away. As for the networks, they’ve shifted from a “Woe is me” posture to insisting they’re better positioned for the digital future than pundits generally allow, pointing to the durability of their business even in the face of new competitors and time-bending technology.

Indeed, with the networks’ portion of the upfront market only a few weeks away, expect an onslaught of rosy predictions and gee-whiz statistics to buttress this argument, particularly from CBS, which has long been broadcasting’s most forceful cheerleader. And with the networks likely to amass another $9 billion or so in advance ad sales, they do have a fairly potent answer to the Chicken Littles out there, screaming about their inevitable extinction.

Change, at this point, is the only certainty in the media game. But when it gets down to the details, beware of false and self-serving prophets, especially if their forecasting – and the image of the future they present – is in any way tied to their bottom lines or impressing Wall Street analysts.

Oh, and if you agree with the wisdom of this point of view, be sure to email it to 50 of your closest friends. Not to be self-serving or anything.

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