Disney’s decision to pull all its content from Netflix isn’t too much of a surprise to anyone paying attention.
The growing power of content producers has been growing since the beginning of broadband internet – when the immense investment in providing distribution to millions of end users collapsed in an instant. Traditional owners, such as large media distributors (Free To Air Channels, Cable TV purveyors) have always relied on content producers to create their content – even “branded” shows, exclusive to that channel, are usually produced by a third party, either directly funded by the parent (Think MasterChef on TEN) or leased for a limited amount of time (The Handmaids Tale on SBS).
As Netflix approached, a new breed of distributor rose, plopping CDNs in data centres, making deals with ISPs, linking into the domestic backbones of the internet. It, like Hulu, Stan, Amazon, YouTube and others, began to replicate what the local distributors used to do with terrestrial TV licenses and millions of kilometres of coaxial fibre cable. They went to the very same producers and asked for their content – in many cases, the “streaming rights”, a loophole that most traditional media owners quickly despised and fought against, especially as they began uploading their own ad supported content to the internet.
The difference this time was that there were no longer borders, local audiences or billions in infrastructure investments. Netflix didn’t just show its content in the US, it broadcast it to every single country with broadband internet. At first, this wasn’t too much of a problem – local distributors of traditional networks still had millions of eyes and subscribers, with plenty of ad dollars to spend on content. There was still a healthy market for auctioning new TV pilots and producers could still profit multiple times over in every country that won the rights.
But over time, more and more people began to stop relying on traditional media to see their content. They got sick of ads and preferred to pay a fixed monthly cost to get all they could eat. As ad revenue dropped, so did the free to air appetite for spending big on content. Individual channels, such as Showtime and HBO, realised that customers were willing to pay them directly for their content. Content producers, such as Disney, noticed that too. The writing on the wall was there, clear and simple, people were enjoying paying a lot less for more quality and less quantity.
Netflix and its brethren also saw the writing – they knew paying established companies like Sony, Universal and Disney for temporary licenses to content was not a good long-term strategy. They needed to commission, both internally and externally, exclusive content that couldn’t be seen anywhere else. So they stopped spending big on established franchises and started building their own. Before long, what was once simple – one big fee for everything on Cable or no fees for the rest on FTA – became a heavy landscape of individual exclusives with a host of paid providers.
Disney’s decision to build its own streaming service is a logical expansion of their current setup – they have popular cable channels, own the rights to a vast array of extremely lucrative licenses (Star Wars, Marvel, Pixar, etc) as well as one of the strongest back catalogues of almost any producer. But this breakaway into a first party focused strategy is not especially great for consumers, and runs the risk of fracturing the landscape so badly that entertainment becomes just as much or even more expensive than Cable is now.
If Disney is first, offering up premium Star Wars and Marvel content exclusively for $15 a month, what is stopping Sony, Universal, Fremantle Media as well as every other Cable network big enough to produce its own content from splitting off into a $15-$20/month service? The risk is that Netflix and Stan become producers of nothing but Originals, forcing themselves to take giant risks on “everyone” content without being able to provide an affordable array of “other” shows from other producers. To watch Game Of Thrones (HBO), Breaking Bad (Sony), a new Star Wars or Marvel TV series or film (Disney), Mythbusters (Discovery) , The Expanse (SyFy) could run you up a bill approaching $80. Back catalogues of shows would not just be silo-ed with one provider (Foxtel) but across five or seven providers.
I’m sure many people might assume that this scenario would be unsustainable. But it’s not, because right now you need access to roughly four services already – House of Cards is only on Netflix, The Grand Tour is Amazon’s, Westworld is with HBO/Foxtel, and Better Call Saul is locked up over there on Stan. Right now, the content mix is reasonably healthy and you can get away with simply one of two of these, depending on what you like to watch. But many people baulking at Foxtel Now’s cost would be faced with the same situation in three to five years’ time.
For years, we begged content producers for the rights to access their best content at the lowest price. For a short period of time, they did – everyone went to Netflix because it was cheaper than setting up their own service. But as Netflix got rich, they started gazumping rights and reaching across borders, content producers realised that their assets could be exploited by buying now widely available content delivery software and an account with a worldwide CDN provider.
So enjoy watching Brooklyn Nine Nine (Universal TV), Star Wars: The Force Awakens (Disney), Star Trek Discovery (CBS TV), Rick and Morty (Warner Bros) on Netflix while you can – it might cost you a lot more sooner than you think.