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The Deal: Netflix CEO's Bet on Content Depends on Who Controls It

Tickers in this article: DISCA NFLX

NEW YORK (TheDeal) -- What was Netflix Inc. founder and leader Reed Hastings really trying to accomplish last week when he unloosed his vision for the video-streaming company?

a) Lull the cable portion of the pay-television firmament into a false sense of security.

b) Intimidate competitors and would-be interlopers into thinking Netflix already has the resources, scale and techniques to crush those intruding on its business model of "commercial-free unlimited-viewing subscription TV."

c) Bring even more transparency to a company that already celebrates having simplicity "at our core."

d) All of the above.

Answer: d) All of the above.


To arrive at this conclusion, it helps to contrast Hastings' "Long Term View," which is linked to Netflix's investor-relations site, with another white paper released last week, "Content Kings: The Changing Landscape of TV Consumption." This second paper, published by investment banking boutique Digital Capital Advisors, was prepared for a clientele described as "innovative media companies for whom digital is core to their DNA as well as those who would like it to be."

Its analysis, presumably agenda-free aside from a desire to win clients, differs markedly from Hastings' over the role of TV Everywhere -- the authentication system that allows cable customers, via passwords, to use any so-called 4-screen device (smartphone, tablet, PC/laptop or TV) for viewing the same networks covered by their cable subscriptions.

According to Hastings, "TV Everywhere will provide a smooth economic transition for existing networks." It'll be so smooth, he continues, "The same consumer who today finds it worthwhile to pay for a linear TV package will likely pay for a 'linear plus apps' package."

But that's not the way DCA sees it. "Seemingly unlimited amounts of new content now accessible online," the media bank contends, "has made the historic role of cable operators ... well, historic." Harsh words indeed, made harsher by the three to five "sustainable years" DCA gives the TV ecosystem as we know it. "Their DNA is simply incompatible with the evolving digital landscape of today," it says of a transition soon to be accelerated by the adoption of Smart IPTVs, "so it is just a matter of time before they are turned on their head."