Since your last earnings call, some of your big video partners, particularly Time Warner and Fox, have gotten even more explicit about their intent to cut back what they sell to subscription video services. They clearly seem to be talking about you. What’s your response?
We’re going to continue to invest in original content, because that’s something we can influence and control, and consumers love it. So think of that as our big, long-term future. And to the degree that we can continue to license content from them, it’s great for us and great for them. But it’s clearly a decision they have to make.
When did you anticipate you’d see them taking this stance?
I would say very early on, when we were very successful with “Breaking Bad.” Because we knew that while we were adding a lot of value to “Breaking Bad,” AMC had created it. And that in principle, if AMC had a way to monetize the catalog of prior seasons, that would be great for AMC. And they didn’t, so this was the best alternative.
In the long term, the producer/developer was going to be the distributor. We’ve understood that for a long time.
Ben Thompson nails it in his Daily Update (paywall):
I think that Hastings is selling himself a bit short (given his track record, almost certainly on purpose): the larger Netflix’s user base becomes, the more leverage Netflix will have with content creators. In the case of undifferentiated content, Netflix will simply be too attractive when it comes to spreading out fixed costs; more importantly, in the case of differentiated content that drives subscriptions Netflix will have the biggest pocketbook — they are already spending twice as much as HBO — and given that attention is a zero-sum game, the difference could very well continue to increase.
This is why the German (and French and Italian etc.) TV landscape is in trouble in the near future: They rely on licensing fictional US content. But this content, even if its creators try to resist, will be in significant amounts be lured into international/global big money deals with Netflix; or with Amazon Prime Instant Video with the same results for local TV.