Netflix (NASDAQ:NFLX) has had a rough year. What’s worse is that the company’s series of catastrophic missteps don’t seem to be coming to an end any time soon. The streaming video service is moving away from its disruptive business model for one that resembles that of a traditional cable company.
The concept of Internet TV streaming is genius. Services like Netflix and Hulu — co-owned by NBC Universal (NASDAQ:CMCSA), Fox (NASDAQ:NWSA), and Disney (NYSE:DIS) — offer thousands of titles for less that $10 a month, while channels like CNN (NYSE:TWX), TNT (NYSE:TWX), Bloomberg, ABC, and NBC stream free programming onto mobile devices.
Meanwhile, cable and satellite packages can cost upwards of $65 a month, leading many consumers to question the cable TV model, with some cutting the cord in favor of streaming services.
But even though Netflix has always been a refuge for customers looking to avoid cable television, Netflix CEO Reed Hastings has stated that his company is not interested in taking on cable giants like Comcast (NASDAQ:CMCSA). The company is only interested in creating a different experience for watching TV, one that offers consumers movies and TV shows at affordable prices.
The challenges that Netflix faced while trying to add titles to its streaming library, including its failed negotiations with networks like Starz Play (NASDAQ:LSTZA) have forced Netflix to start acting more like a cable company. Netflix is taking a page from HBO’s (NYSE:TWX) playbook by branching into original programming.
Netflix is using its original programs to market its subscription service to new customers. Netflix is rumored to be reviving cult series like Arrested Development and Firefly, both of which were canceled well before their time, to draw in loyal fans.
Netflix is also reportedly talking with cable companies to make their streaming service into a cable offering. Netflix thinks it’s a win-win scenario that will help itself gain more subscribers and help cable companies prevent subscribers from cutting the cord. But it looks like many cable companies are not interested in a partnership and are instead launching their own subscription services, like Comcast’s Streampix service for Xfinity TV customers. Verizon (NYSE:VZ) is planning its own joint venture with rival Redbox (NASDAQ:CSTR).
But there is some logic behind Netflix’s business strategy. The company hopes the move will increase its subscription base and increase profit margins. Netflix is looking to attract the estimated 31 million subscribers who have canceled their Netflix accounts over the past three years with original content and a new library.
Still, it doesn’t make sense for Netflix to drift into a cable TV business model when cable TV business models aren’t even working for cable companies any more. Rather, the able companies are the ones trying to get in on the streaming game. Netflix simply can’t afford to take anymore risks. Please, Netflix, for your sake, get it right already.
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