When I meet someone who doesn’t have Netflix, the first thing I do is punch them in the face. I then explain how they’re missing out on thousands of titles that can be mailed to them or streamed right off the internet. We live in a society where people want to watch shows and movies on their own time. Thus, in the past 5 years, we’ve seen a significant rise in Netflix and DVR (digital video recorder) users.
These two new platforms are sucking the profits away from the networks. When people DVR shows, they fast forward through the commercials. Advertisers are not happy about this and they’ve begun to demand lower CPMs (cost per one thousand exposures of an ad) from the networks because they think everyone is skipping their commercials. Also, rating points only reflect viewers that watched the show in its scheduled time slot. Lower ratings are another arguing point for advertisers trying to get lower CPMs.
The networks also have Netflix stealing their viewers too. I have my Netflix connected through my PlayStation 3 and with that, I can stream shows directly onto my TV. It’s simple, fast, convenient and commercial-free.
Netflix will have spent roughly $500 million on content by year’s end. Last month they inked a $1 billion deal with new premium cable channel EPIX (a joint-venture between Lionsgate, MGM, and Paramount). They will have exclusive rights to the EPIX library for the next five years. Netflix also closed a deal with Relativity Media this summer. The deal, which is said to be worth more than $100 million a year, will give Netflix sole back-end distribution rights for films produced under the Relativity banner.
Netflix single-handedly destroyed Blockbuster (they just filed for bankruptcy last week), will network television be next?
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