In a very enlightening interview with Business Insider this week, Netflix
Why can't we be friends?
Among the salient points that Hastings made to Henry Blodget and Dan Frommer, he claimed that "everyone, essentially" among Netflix's base subscribes to a TV service, dimissing the notion that folks are trading in their chunky cable deals for a Netflix streaming plan and a high-def antenna to grab local channels for free.
Hastings also pointed out that while the country's pay-television industry did suffer net defections through the first three quarters of 2010, it did bounce back during the fourth quarter. In this same three months, Netflix tacked on 3.1 million net subs.
Pay television doesn't have to fail for Netflix to succeed. Comcast
In addition, Hastings asserted that 30% of his subscribers pay for Time Warner's
If you didn't know any better, you'd think that Business Insider were interviewing a cable giant apologist, defending old school media in the face of a dot-com onslaught. But Hastings hasn't gone mad here. If anything, he's a genius.
Come with me if you want to live
Hastings is talking up the competition because he still needs them alive and well. His stock may have tripled over the past year -- hitting a fresh all-time high this morning -- but Netflix still needs content. Right now, studios have more to lose if traditional pay television goes belly-up than they stand to gain by licensing their streams through Netflix.
In short, I think Hastings is playing possum, making non-threatening statements to soothe the fears of Big Media. According to Hastings, Netflix has no interest in the live sports, news, or reality shows that anchor couch potatoes to their cable or satellite providers.
When addressing the Liberty Starz
Hastings is even giving his dot-com competition some mad props and major leeway. He nixes talk of tiered streaming plans or pay-per-view deals. He doesn't want to take on iTunes and Amazon.com
Why should Netflix stray from its bread and butter, when it's working so well? Revenue, earnings, and subscribers climbed 29%, 39%, and 63%, respectively last year -- accelerating during the final quarter.
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By sticking to what it does best, Netflix may lull the media giants into thinking it's staying out of their way -- but it's actually sowing the seeds of their eventual downfall.
Hastings is publicly pitching Netflix as a convenient add-on to conventional pay television. When someone is paying $80 or more a month for cable or satellite television, what's an extra $7.99 for Netflix streaming -- or a couple of bucks more for DVD rentals as well?
Unfortunately, I think viewers will adopt a different attitude. Premium movie channels will take the first hit, as HBO's lackluster recent performance seems to bear out. Next, the day that cable companies have long fought tooth and nail will finally arrive: customizable pay-per-channel plans.
Since most viewers don't watch half of the glut of programming they currently pay for, who wouldn't jump at a chance to augment free local channels with a dozen or so cherry-picked cable favorites -- and a dramatically lower bill? Cable and satellite companies don't want to lose those dollars, given their costly infrastructure and expensive subsidized receivers, but soon they may have no choice. I think cable customers' cord-cutting last year represented the first signs of a customer uprising against TV providers' increasingly outdated model.
No wonder Reed Hastings doesn't mind paying cable and satellite a few compliments. As TV increasingly trips itself up, Netflix simply has to sit back, quietly provide consumers with a more desirable option, and wait for its giant rivals to implode.
What nuggets did you take away from Hastings' interview? Share your thoughts in the comment box below.