Please ensure Javascript is enabled for purposes of website accessibility

Will Netflix Ever Consider Live TV?

By Stephen Lovely – Sep 26, 2018 at 12:00AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Netflix's streaming video on demand model is as "traditional" as the streaming space gets, but Netflix is increasingly alone in its apathy toward live streaming.

When Netflix (NFLX 2.50%) started streaming TV shows and movies in 2007, the idea was revolutionary. No other company was offering what Netflix was. Netflix's innovative idea and impressive success led to a slew of competitors and imitators, of course, and Netflix's subscription video on demand (SVOD) model became the norm, at least for a time.

But as the streaming space has grown, business models have diversified, often breaking from Netflix's traditional SVOD model. Amazon's SVOD service is built into a larger ecosystem that also includes third-party subscriptions and live broadcasting. Some companies, like AT&T's HBO, offer both direct subscriptions and subscriptions through subscription hubs like Amazon; HBO also, of course, offers live content. Hulu, long one of Netflix's imitators, has now joined a growing number of companies offering "skinny bundle" services -- live TV services with slimmed-down channel counts and, of course, slimmed-down price tags.

Fewer and fewer companies are operating strictly in the way that Netflix does. And many of the services that compete most directly with Netflix have one important thing in common: they offer some amount of live TV.

The Growing Importance of Live Streaming

The relationship between streaming and live TV has always been a complex one. In some ways, it almost seems counter-intuitive for streaming services to go live: after all, wasn't live cable what SVOD services were supposed to kill off? Netflix's on-demand model was more complete and convenient than, say, tuning into a movie broadcast on AMC or TNT. But live TV is undeniably important, even in the streaming era.

live TV - Will Netflix ever consider it?

Image source: Getty Images

That's clearly true of sports, which have long been considered "DVR-proof" thanks to fans' insistence on watching games and matches live. But the appeal of live TV isn't exclusive to sports: the success of skinny bundles and the arrival of Philo, a skinny bundle that intentionally eschews sports, news, and local channels to keep its prices low, show that there's a market for services that can show users something is "on now."

In a way, even Netflix itself acknowledges this impulse to watch what's "on": many of their app-related innovations have been designed to shorten decision-making times, and features that auto-play previews and next episodes seem akin to creating a "what's on" effect.

But Netflix does not offer any sort of streaming that could truly be called "live." Its competitors do. HBO existed as a live channel before it went on-demand, and it still has live feeds available through cable and skinny bundle services; other premium channels are in the same boat. Amazon has made efforts to get into live streaming: the company has secured streaming rights to some NFL games, for instance.

Hulu has gone the furthest: Netflix's old SVOD competitor debuted an entire live TV multichannel service, a streaming skinny bundle called Hulu with Live TV. Hulu with Live TV includes Hulu's SVOD service, too: subscribers get Netflix-like SVOD and live TV all in one, albeit for a price that's notably higher than Netflix's (Hulu with Live TV costs $39.99 per month, more than the $8.99 and up that Netflix costs, at least for now). Other skinny bundle services come with on-demand libraries, making them a form of Netflix competitor, too.

Netflix's Model: Increasingly Unique

Netflix is so synonymous with streaming that its business model seems natural even as that model becomes increasingly unusual for the streaming space.  But Netflix's SVOD dominance is important, because SVOD is all that Netflix has -- and Netflix doesn't have a God-given right to be the top streaming service forever. Its recent Q2 stumble in subscriber growth shows that it can be humbled in ways large and small.

Amazon originals are on Netflix's heels, and HBO's content library, while slimmer, has a lot of hits and not much filler. Netflix is still dominant in the streaming space, of course, but the value added by its competitors' live TV features creates a real imperative for Netflix to maintain its lead on the SVOD side — or, of course, entertain the idea of adding live features itself.

Netflix has shown no indication that it would ever host live TV -- in fact, CEO Reed Hastings has said that the company will not do so. Netflix doesn't want to "follow" the competition, according to Reed. But is that wise? It may be better to innovate than emulate,  but to do neither leaves Netflix without something its competitors offer.

Will Netflix Ever Close the Live TV Gap?

Truly, live TV may be a bit too far from Netflix's core competency. But what about a model like the one used by free streaming service Pluto TV, which sets up a psuedo-live TV experience by simply creating its own "channels" out of its its licensed content? Since the content is not "live" in the sense that, say, Saturday Night Live is, it would hardly represent an insurmountable technological challenge for Netflix to add this as a feature or option. It would, however, represent a big shift in strategy, and Netflix has been the most reluctant of the streaming services to consider such ideas.

Netflix seems unlikely to check out the live TV scene anytime soon. That's not surprising, but -- looked at in a certain light -- it might be just a little bit concerning. As Netflix's massive competitive advantage slowly erodes, streaming services with the means and desire to do live content may find a chink in Netflix's armor. In the competition between Netflix, Amazon, HBO, and the rest of the streaming giants, keep an eye on live TV.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Stephen Lovely owns shares of Amazon, AT&T, and Netflix. The Motley Fool owns shares of and recommends Amazon and Netflix. The Motley Fool has a disclosure policy.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.