Netflix spooks Hollywood more than ever
LOS ANGELES—Hollywood film executives want you to know that they are not at war with Netflix or the Internet. — Some of them told me over the past week that they have every intention to continue to distribute films and TV shows over the Web and at attractive prices to boot.
Context & Ripple Effects
This follows last month's reporting on what Hollywood execs privately say about Netflix — where the anxiety was off the record — and it captures the gap between that private worry and the public line: executives insist they are not at war with Netflix or the Internet, and say they intend to keep distributing films and TV over the Web at attractive prices.
The significance is the posture, not any single deal. By early 2011 the studios' own stated commitment to web distribution means their fear isn't of the Internet itself — it's of one company, Netflix, becoming the dominant window through which consumers reach that content.
First-order effects
- Studios face a pricing-and-leverage problem on every streaming rights negotiation: the more Netflix consolidates subscriber demand, the weaker each studio's hand when its output licenses come up for renewal.
- Netflix gains negotiating cover from Hollywood's public denial of conflict — no studio wants to look anti-consumer by attacking the cheapest way to watch, which lets Netflix keep acquiring content without provoking a coordinated boycott.
Second-order effects
- Expect studios to respond structurally rather than rhetorically — tightening release windows, holding back newer titles from subscription libraries, or building their own digital storefronts — because the alternative is letting a single distributor set the wholesale price for premium content.
- Cable and satellite distributors, whose bundles depend on exclusive first-run access, become collateral stakeholders: if studios favor Netflix's flat-price model, pay-TV operators lose differentiation and will pressure suppliers to preserve the traditional window hierarchy.
Third-order effects
- If the pattern holds, the industry moves from selling content to many intermediaries toward vertically integrated players who own both library and pipe — forcing every major studio to decide whether it is a supplier to Netflix or a competitor to it.
- The dispute foreshadows regulatory attention to concentration in digital distribution: a single gatekeeper for streaming catalogues raises the same questions regulators have historically applied to theatrical exhibition and cable carriage.
The trend: Streaming is shifting power from content owners to whoever owns the customer relationship, pushing studios toward vertical integration as a defensive response to Netflix's consolidation.