Netflix has announced a new agreement with Disney ABC Television Group to allow it to stream hundreds more episodes of shows from the Disney and ABC Family cable channels as well as the ABC network, now including series like Ugly Betty and Scrubs. Episodes will be available to Netflix subscribers from 15 days after first broadcast. The distribution deal will put pressure on Hulu Plus, the subscription service in which Disney ABC is a stakeholder, together with NBC Universal and News Corporation. Is Netflix destined to unpick the lock cable television has had on premium programming?
Ted Sarandos of Netflix said: “Adding to our existing Disney-ABC lineup with great network and cable shows, and opening up ABC Family for the first time, are important steps in creating a wide and diverse selection of content Netflix members of all ages can watch.”
Netflix, which started out renting discs by mail, is increasingly focussed on streaming online, adding an all you can watch streaming-only subscription service for $7.99 a month, after a successful launch in Canada. The company is now accelerating plans for international expansion in 2011.
Netflix has nearly 17 million members in the United States and Canada, compared to just over 11 million a year previously. They now watch more material from Netflix online than on discs delivered by mail. “We are now primarily a streaming video company delivering a wide selection of TV shows and films over the internet,” said Reed Hastings, the co-founder and chief executive of Netflix.
The company spent $1.2 billion on streaming rights this year. The company expects revenues this year to be over $2 billion.
It is a sign of the times that with a market capitalisation of over $10 billion, more than that of any single movie studio, Netflix will replace the New York Times in the S&P500 index of top traded companies.
It was therefore something of a surprise that Carry McCarthy, the chief financial officer of Netflix since 1999, should choose this time to leave the company. He will be succeeded by David Wells, who previously headed financial planning and analysis at the company.
The rise of Netflix is seen as unsustainable by some and a threat to traditional pay-television packages by others. Having started out with movies, the expansion into episodic programmes increasingly encroaches on the television business.
While the networks have been putting their programming online, Netflix has been rolling out its services to over 200 different types of network-connected devices and displays, from games consoles to televisions.
The question now is whether Netflix has become an unstoppable force in the market and the minds of consumers, or whether media owners will want significantly more money when it comes to renegotiating distribution deals.
Jeff Bewkes, the chairman and chief executive of Time Warner said at a UBS Global Media and Communications conference in New York that it did not make sense for studios to spend big money producing high-quality television shows and for networks to pay high prices for them, only to have them show up on an online service which pays only a fraction of the cost. However, he did suggest that premium channels like HBO could be offered outside existing pay-television bundles, via either traditional or new distributors.
Les Moonves, the chief executive of CBS, has been more reserved about digital distribution than some. He said that some see Netflix as the anti-Christ, while others embrace it as the second coming. “We’re somewhere in the middle,” he said. “Caution is not a bad thing here.”