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Why the Studios Need Netflix

Netflix (NASDAQ: NFLX  ) critics like to point out that the company doesn't actually make anything. The movies and TV shows that are the streaming video maven's lifeblood all comes from third-party sources. Yes, even the so-called "Netflix original shows." Orange Is the New Black comes from Lions Gate (NYSE: LGF  ) , French media veteran Gaumont films makes Hemlock Grove, and so on.

The idea is simple: If Netflix doesn't actually make anything in-house, like Time Warner's (NYSE: TWX  ) HBO does, then the studios will eventually drive up prices and squeeze Netflix out of business. It's an HBO and Walt Disney (NYSE: DIS  ) world, and Netflix just lives in it until the studios decide otherwise.

But it ain't that easy to build a world-class distribution network, even if you're a powerhouse in the predigital movie world.

In this video, Fool analyst Anders Bylund presents a quote from DreamWorks Animation (NASDAQ: DWA  )  CEO Jeffrey Katzenberg, which explains the real balance of power in less than 10 seconds.

What makes Netflix so special?
It's one thing to corner a market that nobody cares about, and a totally different thing to dominate a staple of modern culture. Americans reportedly spend nearly 34 hours a week watching television! With television viewing taking up almost as much time as the average work week, the potential for profits in the space is enormous. The Motley Fool's top experts have created a new free report titled "Will Netflix Own the Future of Television?" The report not only outlines where the future of television is heading, but offers top ideas for how to profit. To get your free report, just click here!

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9/28/2016 4:02 PM
DIS $92.20 Up +0.48 +0.52%
Walt Disney CAPS Rating: *****
DWA $40.97 Down +0.00 +0.00%
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LGF $20.65 Up +0.23 +1.13%
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NFLX $97.48 Up +0.41 +0.42%
Netflix CAPS Rating: ***
TWX $78.56 Up +0.68 +0.87%
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