Summary:
Netflix and Amazon have both entered into a deal with Walt Disney Co. that will allow them to offer streaming of ABC and Disney Channel shows. These deals show the increasing importance of being able to offer online streaming for media companies. These deals, however, are not only important to the service providers - content owners are seeing a decrease in revenues from other sources.
Amazon has shown itself to be a real competitor for Netflix, having added more than 11,000 titles this year. In addition to increasing their content, Netflix has the added pressure of expanding their market. They will be moving into U.K. and Ireland, and are expecting some loss in parts of 2012.
A market analyst that covers Netflix for Janney Capital Markets, says that content companies are profiting from the current market, since they can sell their content to numerous distributors.
See article for a brief comparison of the financial states of both companies.
Analysis:
While there are few true entrepreneurs in the service providers section of media, there are a few companies that are changing the traditional approach to media through innovation. Netflix is the most obvious of them. It popularized the idea of streaming both movies and TV shows online, instead of watching them through traditional providers. Hulu, though neither mentioned in the article nor a public company, is a competitor of Netflix, offering a very similar streaming service, though at the moment its content is significantly weaker. Perhaps if it decides to go public at some point, it will be able to get the necessary capital to negotiate the deals that other companies are making.
Amazon is a very well established company, but it is a fairly new to streaming. However, it has a very large customer base and makes it easy for its customers to start using its streaming service. This deal shows that it is dedicated to entering this market and can become serious competition for Netflix.
Also notable here is the type of television/movies that Netflix and Amazon now stream and distribute: children and family. ABC and Disney Channel are both known for providing family-friendly programming, which indicates to me that Netflix and Amazon are both thinking about how this generation's children factor into their business decisions. From my own personal experience, I've found that younger kids are unbelievably savvy with new technologies (such as the iPad) and that they are able to rent movies and watch TV through those technologies without the help of their parents. Opening up Disney and ABC to Netflix will allow those kids to download programming through their parents' accounts, thereby providing more demand for Netflix and Amazon's services.
ReplyDelete