Commentary

Netflix Is 10 Years Old -- And TV Networks Are Playing Catch Up

It’s time for TV networks to do some Monday morning quarterbacking about digital media. But think back 10 years ago, when Hulu started up this week.

It was also in 2008 that Netflix was ramping up its streaming service alongside its DVD mail-rental service -- a streaming platform that would grow to 118 million global subscribers worldwide and 55 million in the U.S.

All this came with major bumps in the road for that SVOD service, including the infamous and widely panned move in July 2011 when Netflix announced it would separate its existing subscription plans -- one covering the streaming and the other DVD rental services.

Netflix righted itself and plowed ahead. Ten years hence, Netflix has grown into a major lightning rod for what has gone mostly wrong with traditional TV media. And it continues to rack up big gains.

For example -- even after its big stock gains in recent years -- Netflix’s stock this year is up 67% so far. Disney is down 2.2%.  

Many look to Walt Disney as perhaps the only studio that can take on the big subscription video service because of its wide-ranging entertainment businesses. Is it too late? No. But it is complicated.

Consumers are not dropping their traditional pay TV services is mass numbers to take on new digital services. There is still around 90 million traditional pay TV subscribers. Cable, satellite and telco customers are keeping what they have, as well as signing up for Netflix, Amazon or Hulu.

In addition, media consumers -- totaling around 4.6 million -- have bought into virtual multichannel video program distributors like Sling TV, DirecTV Now, YouTube TV and Hulu with Live TV.

Now 4.6 million is just a fraction of the 90 million+ that subscribe to regular pay TV. But add in some 55 million in the U.S. that now have a Netflix subscription. Consumers want comfort before any big change -- a possible hint about where things are going.

TV networks had the right intention 10 years ago. Big TV network-based media companies did think about the future with Hulu -- which launched on March 12, 2008.

Currently, we do know that Hulu equity partners -- Walt Disney, NBCUniversal, Fox and Time Warner --  continue to incurred annual million-dollar losses in the SVOD service as Hulu looks to keep pace with Netflix.

In 2008, the thinking was that Hulu would be TV networks’ digital media insurance -- a hedge against the looming stagnant national TV advertising revenue pie or other non-advertising revenue declines.

Ten years from now, what will traditional TV executives be saying about past decisions? Maybe it is just a policy where the claims are yet to come.

1 comment about "Netflix Is 10 Years Old -- And TV Networks Are Playing Catch Up".
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  1. Ed Papazian from Media Dynamics Inc, March 13, 2018 at 9:22 a.m.

    There is truth in what you are saying, Wayne, but this time around, it seems that the TV "Establishment", including CBS, which is usually the most cautious,is at last moving aggressively into the digital/OTT/SVOD arenas. The same thing happened when basic cable suddenly appeared as a competitor for viewer and ad dollars in the early 1980s. Then, too, the broadcast TV networks were slow to act and were generally disparaging of cable's very low average minute ratings. ABC jumped in and, got lucky with ESPN while various combos of TV networks and magazine publishers bought into numerous---later-to-be most profitable--- cable channels. CBS played its usual waiting game after losing $30 million in one year on an ill-fated documentary channel and is still a distant hindrunner in the cable arena compared to ABC ( Disney) and NBCU. This cost CBS many millions of dollars in pure profit and, maybe, it has learned from this lesson. Its current posture regarding alternative platforms suggests that this is so.

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