Expect a Netflix Acquisition Soon
So I’ve been trying to figure out why my favorite company of all time has been making such idiotic moves.
Yes, Netflix. Or Qwikster…or whatever the hell.
There’s no need to go over the details in detail. Netflix is splitting up its DVD & Streaming services. The internet exploded when it happened. Mass cancellations (or claims of cancellations), angry tweets, and investors and consumers alike have thrown up their hands.
People aren’t looking at the big picture & the big picture isn’t some idealistic “We HATE DVD’s and want our DVD service to die so bad that we’re going to split it off into a separate company with the worst brand name since Blippy in order to do so.”
Instead, the big picture is that the “service of the future” called Netflix Streaming is in big trouble. Not that it isn’t 100% the preferred delivery method of most Netflix users. It is.
The problem is that they can’t get any damn content.
I’m happy with their content. I have more classics, indies, and foreign films to keep me busy for a few years at this point. But the vast majority of their customers are far more interested in new releases. With the recent news that Starz, Netflix’s biggest source of new content, is peacing out in February 2012, Streaming looked to be in big trouble.
Here’s the simple math.
Netflix charges $8 per month for unlimited streaming. This gives them very little money to bring to the negotiating table with studios who scoff at Netflix’s offers. They could care less if they inconvenience consumers as long as the only way for consumers to get that content is through more lucrative channels like DVD/Blu-Ray or VOD/On-Demand rentals. They make way more money that way.
Starz was the only one playing Netflix’s game. Not HBO. Not Sony. Not Disney. No one. Now Starz spurned them and Netflix is looking at a future with no big movies in their Instant Watch catalogs.
That’s not a good sign for their future. They can split off Instant (like they are) & charge more for a premium subscription that will provide them with more money to make deals for newer content and give consumers the newer content they want.
But that strategy has no vision. What happens when they have to re-negotiate and studios say they want even more? What are they going to do? Keep raising the price until customers say “Screw you guys, I’m going home.”
Fact is, they need some way to future-proof their Streaming price rates. They see Streaming as the future. They can give up on it and latch onto DVD service through Qwikster, but another studio/cable-owned VOD service will eventually make Streaming work and then Qwikster will be fucked.
So let’s look at the facts one more time:
- Netflix has always seen streaming as the future…and it is, whether that future is through Netflix or another provider.
- If you thought Streaming was doomed and you had to ride your DVD service, would you want to do it with a brand name like Qwikster?
- Studios are asking tons of money for streaming rights & Netflix can’t handle it
- Netflix decided to split their DVD & Instant businesses into two totally different companies, in turn angering & inconveniencing customers.
Does that sound like a plan for growth? Nope.
So what now? Acquisition.
It’s my belief that Netflix has a potential acquirer and…
- That acquirer said “We’ll buy you, but we don’t want the burden of your mail-in business.”
- That acquirer will be a big media company with far more resources and leverage in studio negotiations.
- That acquirer is the only way to future-proof streaming rates
If this doesn’t happen, then Netflix & Reed Hastings are just stupid.