Videoage International March 2018

10 March 2018 Netflix Solutions Sunday magazine ran a story about Netflix that basically replicated what VideoAge wrote in its January 2014 Issue, noting that Netflix has cash flow problems, that it generates little profit, and that, in order to survive, it constantly has to generate new subscribers by entering multiple international markets. On a technical level, VideoAge considers Netflix a streaming service because it is carried over the Internet using encoded audio and video signals in a container such as MP4. But there is a bit of confusion when generalizing about streaming TV services. For some U.S. studios, in terms of TV rights, streaming means “replicating a linear live event authenticated through an MVPD,” and it cannot be downloaded. As for Netflix, it’s considered SVoD rights. To better illustrate this, take a look at HBO Now (SVoD) and HBO Go (streaming). HBO Now is a paid streaming service that offers instant and unlimited access to HBO programs and movies. Unlike HBO Go, HBO Now does not require a cable or satellite TV subscription. HBO Now is only for the U.S. HBO Go is an authenticated SVoD service because it’s only available with a cable subscription or through a cable operator. Today, in order to compete with Neflix and other similar content delivery channels, all U.S. networks and/or studios are developing their own streaming services: CBS has All Access; Sony Pictures has Crackle; Disney/ABC has Disney Movies Anywhere; Warner Bros. has FilmStruck; NBCUniversal International has hayu (available in the U.K., Ireland, Australia, Nordics); and Fox has Fox Now, just to mention a few. However, consumers will not — and can’t possibly — subscribe to all of them. (Based on cursory research, consumers can now access over 30 streaming TV services.) There are too many. It would be too costly. And it would be too time consuming to log on to all of those regularly. Netflix, on the other hand, is like an aggregator of many channels (AMC, Starz, USA, etc.), so with one subscription consumers can get original programming, library material, and content from all the studios and broadcast/cable channels. In effect, Netflix is duplicating the cable-TV model, but instead of a linear model, it uses an on-demand model, with one drawback: it has only one revenue stream. streaming services for free financed by advertising, and offer advertising free on FreeNet. Some TV channels’ catch-up television services already include programs, which have not been previously broadcast on their channels. In effect, the “television service” may thus be a combination of live events and on-demand programs under the same brand. There are different streaming services, like Sling TV, which aggregate linear cable channels like AMC, TBS, CNN, etc., and other services that, like Netflix, offer services from different content suppliers, and services focused on one particular company, like Crackle and CBS All Access. The competition will be between two service aggregators: the traditional MVPD (like Comcast and Time Warner Cable) and the streaming aggregator that will not need traditional cable lines, but a broadband connection. Further subtle differences between the catch-up service of a television channel and a subscription on-demand service may also become irrelevant: from the users’ point of view, they provide a relatively similar service. On the other hand, the networks and studios already use three revenue streams: advertising (for their linear channels), retrans fees (from cable carriage), and subscriptions (for their streaming services). The beauty of this model is that, in the short run, theydon’t have togiveupanyof their services. However, they will have to create a new one: a Netflix-like streaming aggregator. Naturally, this aggregator has to have the streaming channels on an exclusive basis, so as not to recreate the maze of services that prompted the creation of the aggregator in the first place. Thus, a suggestion to the networks is to use the cable business model for their digital services too: Create an aggregator (called, for example, FreeNet) that can offer a series of streaming channels for one subscription price with each channel getting a retrans fee. In order to keep the two-tier digital revenue stream, the networks could offer their own (Continued from Cover) In effect, Netflix is duplicating the cable-TV model, but instead of a linear model, it uses an on-demand model, with one drawback: it has only one revenue stream.