Will Netflix Replace the Big TV Networks?

Family watching a Netflix show in living room

Source: Netflix.com

The vast reach of Netflix, everybody’s favorite streaming service, makes it pretty likely that you use it, at least occasionally, to watch a movie, catch up on a favorite TV show, or get hooked on the latest original series that the Internet can’t stop buzzing about. But as we look ahead to the technology we’re most excited to see in the new year, we can’t help but ask: is Netflix eventually going to become the primary, or perhaps the only, place that you go to watch TV?

Farhad Manjoo reports for The New York Times that the titans in charge of global media conglomerates — Disney, Comcast, Twenty-First Century Fox, or Time Warner — probably aren’t worried enough about Netflix, with its 70 million subscribers or the expansion that instantly made the service accessible to more than 540 million household with broadband Internet access worldwide. “What if Netflix is the Amazon of the entertainment industry,” Manjoo poses the question to such media titans, “the embodiment of a slow, expensive, high-risk effort to consume the entirety of your business?”

Netflix’s plan to take on the traditional TV industry sounds “slightly nutty” — just as crazy as Amazon’s strategy to overtake traditional retailers once sounded. Manjoo notes that Netflix’s plan is a high-risk proposition, one that sees it spending billions of dollars to license and create the content that you want to watch, all while “fighting determined media incumbents across the globe, and it owns none of the pipes leading into people’s homes.” There are plenty of reasons why the plan shouldn’t work, Manjoo reports, but so far it is working.

Manjoo explains that, “like Amazon before it, Netflix’s business is so daring that it seems like it shouldn’t work — and yet the company keeps surprising everyone.” He adds, “A capacity for surprise is the first and most obvious similarity between Netflix and Amazon. There are lots of others,” such as how investors have allowed Netflix to spend huge sums of money on content in the same way that investors allowed Amazon to invest billions into its network of warehouses. Netflix will produce 600 hours of original programming in 2016, double what it created in 2015 and on par with most major TV networks.

Like Amazon, Netflix is also compiling a huge amount of data which will just fuel its growth. Netflix is collecting data on the kind of content that you, its customers, want, and it’s using that data to create more content to appeal to more users around the world. And finally, as Manjoo puts it, “Netflix, like Amazon, is a flywheel that keeps spinning faster.” As it gains more subscribers, who bring more data and more money to fund content, that content will help it bring in more customers. The expectation is that while Netflix is barely profitable now, it will eventually begin earning sizable profits — a line of logic that’s been applied to commentary on Amazon’s operations, as well.

So is Netflix going to become the place where you do most, if not all, of your TV watching? Can the rise of Netflix and a rival service from Amazon displace the traditional TV network as they fight for the central spot in your living room? As Matthew Ingram reports for Fortune, not everyone thinks so. For instance, NBCUniversal executive Alan Wurtzel, who heads up research and media development for the network, says that traditional TV is doing just fine — even though more users are quitting cable and subscriber numbers for major networks are down.

That’s because Wurtzel has seen some data from Symphony Advanced Media, a company that’s figured out a way to reverse-engineer some of the data that Netflix doesn’t share about how its shows are performing using audio recognition technology. The app listens to what people are watching and recognizes shows based on their audio profiles. Wurtzel says that this data reveals that while some Netflix shows get viewer numbers comparable to those of traditional TV shows, viewers stop after binge-watching a show for a couple of weeks and then go back to “watching TV the way that God intended.”

The argument that there isn’t enough content on Netflix to keep users watching after they’ve finished the latest season of an original series doesn’t seem to ring true, particularly because Netflix plans to make 10 movies, 30 children’s shows, 12 documentaries, and 10 stand-up comedy specials this year. Particularly for younger users, watching TV increasingly means firing up Netflix (or Amazon, or Hulu, or HBO Now, or YouTube, or other sources of online video) on whatever device is at hand.

If traditional TV networks don’t shake off their delusions about how Netflix has changed the way we watch TV — sitting down to watch a show whenever we want to instead of planning our evening around catching a show at the time the network decides to air it — then they’re just asking to be left behind as Netflix and streaming services like it slowly license or create all the content you could possibly want to watch.

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