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|Subject: Netflix to Hollywood: Video Streaming "New Opportunity" Not Threat Sat Jan 02, 2010 8:28 pm
Chief Content Officer Ted Sarandos, a former video-store clerk, is trying to convince movie studios that offering online video streaming won’t “destroy the ecosystem,” that in fact it’s “creating a new opportunity” to reach consumers.
Netflix has always had a penchant for seeing the future and adapting its business model accordingly, and unlike Blockbuster Video, once the behemoth of the video rental industry, it has flourished over the years (profits are up 22% since last year alone).
So when it approaches content providers with an idea for how to improve distribution and reach even more consumers you’d think they’d be eager listen to what it has to say.
Netflix Inc. Chief Content Officer Ted Sarandos, amazingly a former video-store clerk, has been trying to convince movie studios that digital distribution is the wave of the future as consumers migrate to the anytime, anywhere ease of the Web.
However, Hollywood is leery of any suggestions that alter its traditional window deployment time frames. Movies ordinarily go from theaters to stores (purchase or rental), to cable and satellite pay-per-view, to premium cable channels like HBO, then basic cable and broadcast, with the studios collecting money at every step along the way.
"We have to fight against their fear that we'll destroy the ecosystem," said Sarandos. "We're not destroying anything. We're creating a new opportunity."
And he’s right. File-sharing and P2P have ALWAYS been about providing what copyright holders refuse to. Piracy is merely filling gap they won’t. It’s what forced the music industry to first offer digital music, then to eventually remove DRM protections as well.
All the while it was only decreasing profits that forced its hand and Hollywood, flush with cash from a another record year (profits are up at least a mind numbing 9% over last year), still has no reason to give consumers what they want.
It sees the Internet and digital distribution not as an opportunity, but rather as a threat to the tried and true way its been conducting business.
Sony CEO Michael Lyton even admitted last May that he’s a “guy who doesn't see anything good having come from the Internet.”
Talk about wearing your heart on your sleeve.
Some are simply afraid of digital distribution after seeing what has happened to newspapers and record labels after their content became available online.
“Everybody views it as a terminal career decision if you get it wrong," said Frank Biondi, former President and CEO of Viacom (‘87-’96) and Chairman and CEO of Universal Studios (‘96-’98).
But, what they fail to realize is that their content is ALREADY available online and that they’ll only hurt themselves more in the future if they refuse to adapt.
Just imagine if record labels embraced Napster back in 1999 and created their own iTunes. Instead they’ve been forced to give a cut to Apple and are told what they can and cannot charge for their own product.
If there’s a lesson Hollywood’s trying to learn from online distribution I’d recommend it be that. The whole point of a business model is to satisfy consumer demand. Ignoring what they’ll want in the future won’t make that demand go away, and they’ll simply turn to P2P and other alternatives to satisfy what it refuses it to.
Moreover, Netflix prides itself on giving consumers what they want which is what any good business should do. Too bad Hollywood doesn’t feel the same.