Netflix has become a problem for media companies, and many have begun admitting it. That said, it is not clear yet who will solve the Netflix problem
Sacrificing short-term profits for overall industry gain
Big content owners such as Walt Disney, Time Warner, 21st Century Fox, CBS, Viacom, Discovery Communications and AMC Networks generate huge revenue from licensing content to Netflix and other streaming services such as Amazon.com’s Prime Instant Video.
At this year's inaugural London Quality Growth Investor conference, Denis Callioni, analyst and portfolio manager at European investment group Comgest, highlighted one of the top ideas of the Comgest Europe Growth Fund. According to the speaker, the team managing this fund focus on finding companies that have stainable growth trajectories with a proven track record Read More
On the other hand, traditional TV ratings are getting hurt because of those shows being available on the streaming platforms. The “right thing” to do for the media companies at this moment is to pull content from Netflix, but which media company will be the first to forgo short-term profits for the good of the industry is an important question that needs an answer, says a report from Wall Street Journal.
Recently, Time Warner gave indications that it could be the first to make this sacrifice. The company lowered its 2016 outlook after which its stock took a hit. Furthermore, for better positioning in the future, the company is making aggressive investments in content, technology and consumer experience, the report says.
Time Warner could take a stand against Netflix
Time Warner is even thinking of taking a stake in Hulu, the Wall Street Journal claimed last week. That way, it will acquire a portion of stakes that the owners of the streaming service — Fox, Disney and Comcast’s NBCUniversal — are holding. Such a move “could bolster Hulu’s ability to serve as a Big-Media-owned counterweight to Netflix,” says the WSJ report.
The Time Warner CEO recently said that his company is evaluating whether or not to hold on to the rights to shows for a longer period before they sell them to Netflix and others or to entirely forgo licensing.
Disney also echoed somewhat similar sentiments, when the company’s chief Bob Iger said the company was flexible enough to retract and cut back if it ever felt that a licensing deal would impact its businesses in a negative manner in the long-term. This marks a big change from the attitude towards Netflix, when in in the second-quarter, Iger called Netflix ‘more friend than a foe.’
Since Disney’s three-year deal with Netflix will begin next year, it is unlikely to stand up against the streaming firm at this point. That makes Time Warner appears the prime candidate to become a “Netflix killer” for now.