Netflix Gains Exclusive Rights to Dreamworks Animation Titles

[Woochifer]

As the dust from Netflix's recently announced price increase begins to settle, another one of the scenarios that I previously discussed (http://forums.audioreview.com/showthread.php?t=36729)seems to be taking hold. In that previous thead, I indicted that due to content cost escalations and competitive pressures, the future of streaming might wind up situating itself similarly to the premium cable channel market, where HBO, Showtime, and Starz have each carved out exclusive access to the movies from specific studios.

So, in the opening volley, Netflix has now gained exclusive streaming rights to titles from Dreamworks Animation, whose titles include the Shrek, Ice Age, and Kung Fu Panda series. HBO currently holds those rights, but opted to forego the final two years of their current arrangement with Dreamworks Animation, which expires in 2013.

http://www.reuters.com/article/2011/07/25/idUS318772322020110725

The tech press is making this out to be Netflix suckerpunching HBO, as their favored new media darling gets ready to squeeze the obsolete cable channels into oblivion. I'm not so sure that this is what it's about. All that Netflix gains is the streaming rights, but does that mean that HBO no longer has broadcast righs to those titles? I actually doubt it, but that's how the tech press has been spinning the story.

Keep in mind that HBO just went live with their streaming service called HBO Go, which includes HBO's original programming, as well as all the movies that they're showing on the network this month (and from previous months). Would not surprise me that HBO's fine with letting the streaming rights for some of their movies lapse, since the majority of their audience logs onto HBO Go to watch HBO's original programs. If HBO retains the broadcast rights, then they only lose out on a small portion of their streaming audience, most of whom log on to watch programming that HBO already owns.

But, within the streaming market, this is a sign that exclusivity in these rights deals is available to Netflix or Amazon or Apple or anybody else, if they're willing to pay for it. What's to stop Amazon from negotiating with another studio for exclusive rights? The rights fee dispute that Netflix is having over Sony Pictures titles represents a perfect opportunity for Amazon, for example, to negotiate an exclusive rights deal, and lock Netflix out. If the dominoes begin falling at that point, you'll wind up with the streaming market looking a lot like the premium cable channel market.

Netflix's deal with Dreamworks Animation might represent the first step towards that outcome.

[Sir Terrence the Terrible]

I knew it would not be easy for streaming to overtake the physical disc. For renting, it probably has. However, there is no one stop shop that allows streaming for all DVD titles out there, and that means fractured market. Fractured market means much slower growth, as one has to stream from multiple sources(which means multiple payments) to get all there is to get. Without a one stop shop, streaming is going to have a tough time going forward. Combine that with bandwidth caps, and one has to raise the yellow flag on future growth.

I predict the cost of streaming is going to go waaaaaay up, no matter who is delivering the streams.

[SlumpBuster]

This about sums it up.

http://www.slate.com/id/2298871/?from=rss

I frequent used record stores buying out of print LPs and cassettes. I foresee a future where my kids are frequenting very similar looking stores full of CDs and DVDs. Its all about access.

[Woochifer]

I knew it would not be easy for streaming to overtake the physical disc. For renting, it probably has. However, there is no one stop shop that allows streaming for all DVD titles out there, and that means fractured market. Fractured market means much slower growth, as one has to stream from multiple sources(which means multiple payments) to get all there is to get. Without a one stop shop, streaming is going to have a tough time going forward. Combine that with bandwidth caps, and one has to raise the yellow flag on future growth.

I predict the cost of streaming is going to go waaaaaay up, no matter who is delivering the streams.

I think your interpretation is spot on. If you're correct and the studios invite balkanization among streaming providers to dilute market power away from any single provider, then exclusivity deals with streaming providers is how that would be accomplished.

At the rate that their content costs have already escalated, there's no way that Netflix can afford exclusivity with more than a small number of studios. This leaves the door open for competing studios to ink their own deals with the likes of Amazon, Hulu Plus, DishOnline, and others. It all adds up to fragmentation. The only way that you get a one-stop shop would be through higher prices, something Netflix has thus far only imposed on the DVD-by-mail subscribers.

Netflix is walking a tightrope right now, trying to gain an insurmountable lead with streaming subscriptions while also trying to raise revenue and stop mass defections from their DVD-by-mail subscribers. One problem Netflix has right now is that while their streaming library is the biggest in the business, those 20,000 streaming titles still pale in comparison with the 100,000 DVD titles that they carry. Alienating their DVD subscribers (which make up 80% of current subscriptions) might not be a smart move with all these other competitors making their own moves.

It's quite amusing that a lot of the tech bloggers, y'know the usual suspects that are wrong just about every time when it comes to home entertainment topics, have spun this story into an obituary for HBO -- basically claiming that Netflix's deal with Dreamworks Animation is the beginning of the end for HBO. Yet, none of these clowns asked themselves if the content deal with Dreamworks Animation was so important to HBO, why did they choose to relinquish the two-year option they had on those titles?

Like I said, if HBO retains the broadcast rights and only loses the streaming rights, then it has minimal impact, except that it helps HBO's bottomline by removing the streaming fees. HBO Go streams their home-grown series, as well as a selection of movies (some of which though are not available on Netflix), but the movies are far less consequential to the success of HBO Go than the HBO-original programs.

[Woochifer]

This about sums it up.

http://www.slate.com/id/2298871/?from=rss

I frequent used record stores buying out of print LPs and cassettes. I foresee a future where my kids are frequenting very similar looking stores full of CDs and DVDs. Its all about access.

The author makes some decent points until he arrives at the conclusion that because the landscape is too expensive and complicated for him, he recommends illegal downloading. His points just sound like another entitled techie who thinks that all content should be available to him wherever and whenever he wants. Yeah, that's all well and good, but even with illegal downloading, he's not there yet.

And I think the achilles heel of his article (and many others) is claiming that the decline of the music industry is doomed to repeat itself with the movie industry. First off, techies consistently fail to notice that audio and video content are consumed very differently.

Audio has trended towards portability for decades -- the emergence of the MP3 player is just an extension of existing trends. Downloading music files takes a matter of minutes, and it doesn't brush up against residential and mobile data caps.

Video on the other hand is increasingly consumed on larger and higher resolution TVs. Yes, streaming video usage is going up and video on the go is increasing. But, the average viewing time for all networked video remains less than 20 minutes/day, while TV viewing time continues to increase and is now closing in on 5 1/2 hours a day. Cable/pay TV penetration rates remain over 80%, which is about the same as cell phones.

The author of the article presumes that it's only "fortysomethings" that can't figure out Bit Torrent, and that illegal downloading is simply the norm for people in their 20s and 30s. That's a baseless presumption, and one that techies make all the time. I've not seen any actual viewing studies that confirm this trend.

Netflix has come closest to producing a killer app because their streaming service comes with most purchased set top boxes and Blu-ray players. It's a lot easier to use than Bit Torrent, doesn't require connecting a PC or DLNA server, and it gives you instant gratification (something that Bit Torrent lacks).

The illegal options have their own pitfalls, and that's something that the article seems to brush aside. And of course, there's always the risk that the producers of the program/movie that you're downloading takes more exception to having their product downloaded for "free." On a P2P network, the IP address is there for all to see, and that's how 20,000 people got rounded up when the producers of The Hurt Locker decided to collect from people who illegally downloaded that particular movie. It's risk that goes along with the reward.

[SlumpBuster]

The author makes some decent points until he arrives at the conclusion that because the landscape is too expensive and complicated for him, he recommends illegal downloading. His points just sound like another entitled techie who thinks that all content should be available to him wherever and whenever he wants. Yeah, that's all well and good, but even with illegal downloading, he's not there yet.

You're missing the point. He never recommends illegal downloading. His point is that the industry should be trying to come up with a unified model that makes it as easy for the legit user to access content as it is for the illegal user. I have never downloaded an illegal movie and never will. Pirates are not going to pay for it and never will. They should stop treating me like a pirate and focus on moving the product.


And I think the achilles heel of his article (and many others) is claiming that the decline of the music industry is doomed to repeat itself with the movie industry. First off, techies consistently fail to notice that audio and video content are consumed very differently.

He specifically observes that he just wants to watch on his couch.


Audio has trended towards portability for decades -- the emergence of the MP3 player is just an extension of existing trends. Downloading music files takes a matter of minutes, and it doesn't brush up against residential and mobile data caps.

Video on the other hand is increasingly consumed on larger and higher resolution TVs. Yes, streaming video usage is going up and video on the go is increasing. But, the average viewing time for all networked video remains less than 20 minutes/day, while TV viewing time continues to increase and is now closing in on 5 1/2 hours a day. Cable/pay TV penetration rates remain over 80%, which is about the same as cell phones.

The author of the article presumes that it's only "fortysomethings" that can't figure out Bit Torrent, and that illegal downloading is simply the norm for people in their 20s and 30s. That's a baseless presumption, and one that techies make all the time. I've not seen any actual viewing studies that confirm this trend.

Netflix has come closest to producing a killer app because their streaming service comes with most purchased set top boxes and Blu-ray players. It's a lot easier to use than Bit Torrent, doesn't require connecting a PC or DLNA server, and it gives you instant gratification (something that Bit Torrent lacks).

The illegal options have their own pitfalls, and that's something that the article seems to brush aside. And of course, there's always the risk that the producers of the program/movie that you're downloading takes more exception to having their product downloaded for "free." On a P2P network, the IP address is there for all to see, and that's how 20,000 people got rounded up when the producers of The Hurt Locker decided to collect from people who illegally downloaded that particular movie. It's risk that goes along with the reward.

Again, his observation is "The easiest and most convenient way to see the movies or TV shows you want is to get them illegally." His point is that it should be reversed so that the easiest way to get what you want is to get it legally. It is the industry that needs to develop the model to accomplish that.

That was my point about LPs and Cassettes. Its all about access to the music you want the way you want it. Why shouldn't the techies be entitled to have it all in one place whenever and wherever? If that is what they want then sell it to them. If you're not selling anything, don't blame the customer. Find a better way to sell it. And you're right about Netflix. And that is why Hollywood should not be resisting Netflix the way the Beatles resisted iTunes.

[pixelthis]

I knew it would not be easy for streaming to overtake the physical disc. For renting, it probably has. However, there is no one stop shop that allows streaming for all DVD titles out there, and that means fractured market. Fractured market means much slower growth, as one has to stream from multiple sources(which means multiple payments) to get all there is to get. Without a one stop shop, streaming is going to have a tough time going forward. Combine that with bandwidth caps, and one has to raise the yellow flag on future growth.

I predict the cost of streaming is going to go waaaaaay up, no matter who is delivering the streams.

Streaming is what killed video stores, cable's ondemand service
is paticulary popular, as is the UVERSE on demand.
MAYBE not estoteric titles, but everything people want, some
day and date with DVD(not that you can rent DVD anywhere but redbox and netflix anymore).:1:

[Woochifer]

You're missing the point. He never recommends illegal downloading. His point is that the industry should be trying to come up with a unified model that makes it as easy for the legit user to access content as it is for the illegal user. I have never downloaded an illegal movie and never will. Pirates are not going to pay for it and never will. They should stop treating me like a pirate and focus on moving the product.

Maybe recommend wasn't the right word. But, I still disagree with his point that illegal downloads represent the easiest or most convenient option for most people, simply because P2P downloads require a PC.

Since most TVs are not attached to PCs, this requires the extra step of offloading the file or otherwise configuring a networked set-top box to play the media file. And IMO, the big drawback with illegal downloads is the lag time. Average broadband speeds in the US is somewhere around 3 Mbps, which necessitates somewhere around a 1 hour wait to download a DVD-quality movie file.


Again, his observation is "The easiest and most convenient way to see the movies or TV shows you want is to get them illegally." His point is that it should be reversed so that the easiest way to get what you want is to get it legally. It is the industry that needs to develop the model to accomplish that.

Unfortunately, the direction of the industry is looking more like a fragmented array of providers for different content. At the rate that content costs have escalated, it will soon be infeasible for any single provider to profitably support content from every major studio. Netflix is obviously preparing for this by producing their own content (they've already funded some indie films and begun developing their own TV series). But, no way can they keep going in this direction without fee hikes for subscribers.


That was my point about LPs and Cassettes. Its all about access to the music you want the way you want it. Why shouldn't the techies be entitled to have it all in one place whenever and wherever? If that is what they want then sell it to them. If you're not selling anything, don't blame the customer. Find a better way to sell it. And you're right about Netflix. And that is why Hollywood should not be resisting Netflix the way the Beatles resisted iTunes.

The attitude of entitlement that I often see is that they want it wherever and whenever without paying anything for it. For example, Apple announced their iTunes Match service as part of iCloud, which provides online storage for music files. Yet, the refrain that I read over and over from a lot of techies was that no way they're going to pay anybody for anything having to do with "their" music, even if that service also essentially legalizes their entire music collection and upgrades all of their files to 256k AAC for less than the cost of two CDs.

I don't think that Hollywood is resisting Netflix, so much as they want to play Netflix against all of its streaming competitors to maximize revenue. They will wholeheartedly embrace streaming when someone shows them a revenue model that can replace what they get right now with theatrical and home video releases. We're not at that point yet, that's why Netflix and all the other streaming services are encumbered.

[Smokey]

Alienating their DVD subscribers (which make up 80% of current subscriptions) might not be a smart move with all these other competitors making their own moves.

The percentage of DVD subscribers seem rather high. According to latest report out of 25 million total subscribers, only 15 million subscribed to DVDs (60%) :)

http://www.blogcdn.com/www.engadget.com/media/2011/07/netflixsubscriberstats.jpg

http://www.engadget.com/2011/07/25/netflix-rises-to-25-million-subscribers-in-q2-thinks-dvd-busine/

[Woochifer]

The percentage of DVD subscribers seem rather high. According to latest report out of 25 million total subscribers, only 15 million subscribed to DVDs (60%) :)


That 80% number came from the LA Times article that I cited in the previous thread. Obviously, that's now old info.