After turning in an absolutely stellar Q4 and 2010 overall, Netflix’s star has never been brighter. But some of the attention that the company’s killer numbers are attracting comes from Hollywood studios, who are taking an increasingly critical look at Netflix’s success.
One standout bit of information revealed by Netflix yesterday was the fact that a third of its new subscribers have opted for its cheap, streaming-only plan. Hollywood, which never hesitates to proclaim the value of its content, believes that Netflix’s streaming service devalues said content by offering too much for too little. Sound familiar, Redbox fans?
Warner CEO Jeff Bewkes, whose rhetoric towards Netflix has evolved from dismissive to vaguely hostile in recent months, is a particularly outspoken critic of the streaming provider:
“…[Netflix] isn’t really paying anything close to what the value of the programming is . . . and they are essentially devaluing the product…”
Netflix’s problem is summarized thusly: as it continues to rapidly add subscribers, many of whom are users of its streaming service, the company will need to greatly increase its content offering to keep those subscribers happy. Hollywood, which licenses the content to Netflix, is growing ever more reluctant to “devalue” its product by allowing Netflix to stream it to millions of people at a low monthly rate.
There’s definitely some conflict shaping up here, and it will be interesting to watch as the studios wrestle with their decision on how to deal with Netflix. Comment away on how you think the relationship between Hollywood and Netflix will evolve in the coming months, Insiders.