This is Why Netflix and Hulu Will Eventually Kill Cable Television
According to Netflix CEO Reed Hastings, viewership exceeded 1 billion hours in June—the first time the company has ever surpassed the 1 billion mark. That’s a monthly average of about 38 hours per streaming subscriber. This is great news and a sense of relief for Hastings after his company suffered a setback last year when it raised fees on subscribers and attempted to split its DVD mail service into a separate entity (Quikster).
Netflix has successfully rebounded, and they’re attempting to lure DVD subscribers to their Internet streaming service in order to eventually phase out the DVD mail rental service. There’s no questioning that films on disc form are on their way out the door and Netflix wants to be at the forefront in this transition to online media.
Delivering Internet video is much faster and less expensive than discs. The only setback that folks (like myself) find is that the selection isn’t as extensive as what’s available on DVD. To compensate for this issue, Netflix has been spending millions of dollars to revamp their investment in online streaming so that they can add more compelling titles for their 26.5 million worldwide subscribers.
According to Richard Greenfield, an analyst for BTIG (a global equity trading firm), Netflix is the 15th most-watched “TV Network” in the U.S., a phenomenal achievement considering it’s affordable cost of $8 per month. Netflix is only 4 million viewers shy of the leading cable provider, Comcast, but it costs ten times less and has zero commercial interruptions.
Hastings has done his best to present his company as a supplemental viewing option to cable-TV subscriptions, but viewers are already starting to “cut the cord” on cable-TV and simply rely on cost effective alternatives such as Netflix and Hulu.
This may initially seem like a great thing for consumers and the economy—more purchasing power with a smaller cable bill—but it could very well be short-lived.
If Netflix begins to monopolize TV series and film viewing, it could start salvaging advertising, leading to a high spike in licensing fees as studios of these films and TV series try to make up for the revenue they lose from cable providers and advertising-supported broadcasters. A rise in licensing fees will inevitably become a rise in service fees.
That being said, mobile and handheld devices with Netflix are starting to spike with the advent of high-speed Internet and high-powered devices, so if Netflix subscribers can embrace streaming, cancellations will continue to decline and that may be a way to counteract the raise in licensing fees.
Netflix is leading the way into a new era of film and TV viewing and it’s all up in the air as to where all of this will go. One thing is for sure: DVDs are slowly fading away, just as VHS once did. Could cable-TV be on the demise as well? I’m not too sure about that, but Netflix isn’t helping the economy, even with a rise in viewers.
If anything, all this statistic is showing is that unemployed cable-TV analysts, journalists, and radio disc jockeys are all still feeling the recession and what's better than watching some "Critically-acclaimed Emotional Movies" to pass the time?