Script Being Written For The End Of TV

Michael Hedges October 26, 2015 Follow on Twitter

The secret to competitive advantage is knowing you’ve got it. And knowing it grants certain respect. Being the biggest doesn’t cut it, note how VW suffers from one really stupid mistake. Being clever is so over-rated and never be last year’s hero. It’s a TV show worth watching.

The Netflix subscription video on demand (SVoD) service arrived last week in Spain, Italy and Portugal, noted local media watchers and others. It is the latest stage in worldwide roll-out. Compared to the UK arrival there was less fawning nor the French cultural doom and gloom but no German shrug. CEO Reed Hastings and chief content officer Ted Sarandos, accompanied by stars from their best known shows, toured Madrid, Milan and Lisbon.

The most common question was about market potential. The answer in each country was the same: “"We hope to be in a third of all Spanish (Italian and Portuguese) households in seven years," said Mr. Hastings. "The first year we focus on happiness,” recorded impala.pt (October 21).

Financial and some subscriber details released the week earlier might have erased some happiness as the always important growth rate in the US “disappointed” investors. Worldwide subscriptions, according to the Q3 2015 data, rose to 69.11 million, up by 3.62 million in the summer quarter. Quarterly US subscriber growth, apparently all stock traders can see, slowed to barely above a million. International growth was the heavy weight. The share price was briefly punished, indicating little but grasp falling short of reality.

“At current growth rates in the number of non-American viewers will become the majority by 2017,” said Mr.Hastings. “The ultimate goal is having eighty percent of our audience beyond America's borders.” The Netflix service also rolled-out in Japan last week with Taiwan, Hong Kong, Singapore and South Korea to follow early next year.

Competitive advantage is clear. Netflix offers series and movies that attract notice from serious TV watchers, not to forget awards now and again. House of Cards and Orange Is The New Black are audience magnets worldwide. Recent productions, from Sense8 to Marco Polo, have also gained traction. And there are more coming - 30 next year - making Netflix a significant disruptive force as pay-TV operators charge subscribers far more.

Obstacles, according to the executives, are just details. “Piracy is a global problem affecting many countries,” said Mr. Sarandos, quoted by Cadena SER (October 23), “but with the arrival of Netflix, we’ve observed, piracy is reduced through better quality, lower prices and much more global availability. Netflix looks better on a computer.” Internet piracy in Spain is renowned. He also mentioned that competitors - they’re everywhere - have been forced to “lower prices, improve quality and provide more content.”

There is, of course, a big picture, which Mr. Hastings freely offers. “We do a good job,” he said to La Repubblica (October 23). “The truth is we answer (consumer demand). You can see what you want, when you want and it’s affordable. Traditional TV will be no more in ten or twenty years.”

“The business (for traditional TV) will change, eventually, to resemble ours,” he continued. Sports will be “pushed to the Web” by demand for HD and Ultra HD. “The cost for satellite transmission is too high. We will stay with films, TV series and documentaries.”

Speaking at the Netflix fete in Madrid, Sense8 actress Daryl Hannah offered that “in the future Netflix will be to streaming services what Kleenex is to tissues,” quoted by El Mundo (October 20). That’s a lot like what Apple is to smartphones. And the secret is being the coolest on the block.

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After a rough transition media business models are emerging. Challenges remain. There are Web models, mobile models, free models, pay models and a few newer models. It makes for exciting times. This ftm Knowledge file examines emerging business models and the speed-of-light changes. 137 pages PDF (January 2013)

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