As the competition in the online streaming space (Amazon, Hulu, etc.) gains steam, Netflix is looking to differentiate itself through exclusive content, according to a Wall Street report. A signal: a new deal with Disney giving it sole rights to a slew of films in a pay-TV window.
As Netflix tries to build a moat around its content, a potential long-term implication is the service becoming “somewhat more likely to eventually gain carriage from a traditional cable or satellite distributor,” according to Barclays analyst Anthony DiClemente.
The emerging Netflix strategy would have it relying more on a less-extensive portfolio, but one with “scarcity value,” DiClemente writes in a report. A notable example has been a deal with AMC, giving it exclusive rights to prior seasons of “Walking Dead” and “Mad Men.”
The approach could pose somewhat of a challenge to large content providers (Disney, News Corp., etc.), which have relished the opportunity to sign nonexclusive deals with Netflix, allowing them to also collect subscription video-on-demand (SVOD) dollars from Amazon and others.
SVOD options have brought cash windfalls and a chance to monetize library content. Programmers could now charge Netflix more for exclusivity, making up for any lost revenues from double- or triple-dipping.
DiClemente suggests in negotiations between Netflix and digital SVOD providers, programmers will continue to “maintain leverage” as they offer up more recent content Netflix could want. Plus, Amazon has money to spend; it has not shown the same emphasis on exclusivity, while new entrants, such as the Verizon/Redbox venture, could play a role in raising bidding prices.
(The Barclays analyst notes that while the largest programming distributors have warmed to Netflix and Amazon, one holdout has been Scripps Networks, which has sought to gain TV Everywhere revenues from distributors. (It has been suggested that digital distribution might offer “cannibalistic threats” to its linear programming in the ratings area.)
The overarching conclusion from DiClemente is that content providers have enough to satisfy the multiple digital distributors by artfully dividing content, which as consumer demand increases, “will ultimately translate into more digital dollars, not less.”