Today's Netflix-Epix deal should be setting off alarms in the CEO suites of major cable operators around the country that TV Everywhere must get rolled out ASAP. The Epix deal underscores the extent of Netflix's financial resources and its ambition to gain a bigger chunk both of consumers' entertainment mindshare and their spending.
The first, a shift in mindshare, is already underway. With 15 million subscribers, an expanding streaming library, countless ways to view (e.g. iPad, Xbox, Roku, Blu-ray, etc, etc), a value-packed $9/mo entry tier and a customer-focused brand, Netflix has established a reputation for itself as the cutting edge video leader. In social settings these days, it is practically inevitable that someone will bring up how they're streaming Netflix content to the device of their choosing and how cool it is. Conversely, despite the cable industry's numerous positive digital TV efforts, it is still dogged by lagging customer service, often confusing pricing tiers and suboptimal user experiences.
With the mindshare battle tilting to Netflix's advantage, next up is the battle for the consumer's entertainment spending. On an apples-to-apples basis, Netflix cannot be considered a direct substitute for cable today (no live, first-run programming, no sports, etc.). But the Epix deal, when combined with previous deals with Starz, Warner Bros., Fox, Relativity Media keep moving Netflix closer to cable's traditional turf.
Despite precautions like the 90-day release delay for Epix titles, savvy consumers will begin realizing that there's no need to pay twice for virtually the same content. Anecdotes of so-called "cord-shaving," or dropping premium channels, are hitting my radar with some regularity these days. Of far larger concern to the cable industry is if consumers deem Netflix, when augmented by other free or inexpensive online video sources, as being sufficient, despite their limitations, to drop their cable service entirely.
The above scenarios are plausible and plainly visible to cable CEOs. The good news for cable is that their TV Everywhere solution, if executed well, could blunt much of Netflix's current appeal. Even Netflix's CEO Reed Hastings called TV Everywhere "frustratingly brilliant" when I interviewed him last May. But despite its strategic importance and its competitive value - not to mention a lot of initial hype - TV Everywhere is languishing among U.S. cable operators. Comcast hasn't offered a comprehensive update about their progress in months. Time Warner Cable is still running a tiny trial. Other big operators have yet to even say they're running trials. These days, telcos Verizon and AT&T seem to be making more progress with TV Everywhere, as are Canadian players Rogers, Bell Canada and Shaw.
TV Everywhere's sluggish rollout is helping create a mile-wide opening for Netflix, which it is masterfully exploiting. Netflix is methodically changing the perception of value in video subscriptions to emphasize flexible online viewing on multiple devices. Whether due to lack of strategic prioritization, ineffective execution or both, the cable industry is falling short in rolling out TV Everywhere.
While it is enticing to watch Comcast's CEO Brian Roberts is showing off an iPad prototype app, it would be far more significant, given Netflix's progress, to hear him talking about 10 million or more subscribers avidly using its TV Everywhere offering. If the present situation continues, Netflix is surely going to cause the cable industry major headaches down the road.
VideoNuze is the authoritative online source for original analysis and news aggregation focused on the burgeoning online video industry. Founded in 2007 by Will Richmond, a 20-year veteran of the broadband, cable TV, content and technology industries, VideoNuze is read by executive-level decision-makers who need to get beyond the standard headlines and achieve a deep understanding of online video’s disruptive impact.