So Netflix has had a good first quarter, exceeding expectations and crossing the $1 Billion revenue threshold. Stock prices have been skyrocketing, going from sub 100 to over 200 in just the past 4-5 months. Their subscriber base continues to grow, and fears that people would use the free trial to stream exclusive content like House of Cards, then bolt from the service seem unfounded. However, we’re starting to see a fundamental shift in the way Netflix is doing business here. For the first time ever, I’m seeing statements like this:
As we continue to focus on exclusive and curated content, our willingness to pay for non-exclusive, bulk content deals declines.
I don’t like the sound of that, but then, the cost of non-exclusive content seems to keep rising at an absurd level, and well, you know, it’s not exclusive. The costs have risen to somewhere on the order of $2 billion per year on content licensing and original shows. So statements like this seem like a natural outgrowth of that cost:
As we’ve gained experience, we’ve realized that the 20th documentary about the financial crisis will mostly just take away viewing from the other 19 such docs, and instead of trying to have everything, we should strive to have the best in each category. As such, we are actively curating our service rather than carrying as many titles as we can.
We don’t and can’t compete on breadth with Comcast, Sky, Amazon, Apple, Microsoft, Sony, or Google. For us to be hugely successful we have to be a focused passion brand. Starbucks, not 7-Eleven. Southwest, not United. HBO, not Dish.
This all makes perfect sense from a business perspective, but as a consumer, this sucks. I don’t want to have to subscribe to 8 different services to watch 8 different shows that seem interesting to me. Netflix’s statements and priorities seem to be moving, for the first time, away from a goal of providing a streaming service with a wide, almost comprehensive selection of movies and television. Instead, we’re getting a more curated approach coupled with original content. That wouldn’t be the worst thing ever, but Netflix isn’t the only one playing this game. Amazon just released 14 pilot episodes for their own exclusive content. I’m guessing it’s only a matter of time before Hulu joins this roundalay (and for all I know, they’re already there – I’ve just hated every experience I’ve had with Hulu so much that I don’t really care to look into it). HBO is already doing its thing with HBO Go, which exlcusively streams their shows. How many other streaming services will I have to subscribe to if I want to watch TV (or movies) in the future? Like it or not, fragmentation is coming. And no one seems to be working on a comprehensive solution anymore (at least, not in a monthly subscription model – Amazon and iTunes have pretty good a la carte options). This is frustrating, and I feel like there’s a big market for this thing, but at the same time, content owners seem to be overcharging for their content. If Netflix’s crappy selection costs $2 billion a year, imagine what something even remotely comprehensive would cost (easily 5-10 times that amount, which is clearly not feasible).
Incidentally, Netflix’s third exclusive series, Hemlock Grove, premiered this past weekend. I tried to watch the first episode, but I fell asleep. What I remember was pretty shlockey and not particularly inspiring… but I have a soft spot for cheesy stuff like this, so I’ll give it another chance. Still, the response seems a bit mixed on this one. I did really end up enjoying House of Cards, but I’m not sure how much I’m going to stick with Hemlock Grove…