Throughout 2011, I called the play-by-play of Netflix’s collapse. At times, it appeared as if I knew CEO Reed Hastings’ company better than he did.
Change happens fast in new media, though. Heading into 2013, I am moderately bullish on Netflix .
Even though he refuses to admit a shift in strategy, Hastings tweaked Netflix’s focus.
The days of way-too-expensive, large-scale, and seemingly random content buys are gone. Leave that to Amazon.com for now. Netflix realized that to provide value to viewers and content owners it needed to carve out a relatively sustainable niche.
I’m living proof that it’s effective. FX will gain a viewer it would not have had without Netflix. After I finish “Louie” reruns on Netflix, I’ll catch the new season on cable. AMC Networks freely admits that Netflix helped drive ratings for the most recent new season of “Mad Men.”
Work in Kids TV, documentaries, an attempt to succeed at original programming, and an average, but serviceable slate of movies and popular television shows and, finally, Netflix has a future.
If Canada mattered more globally (by the way, it should and I wish it did), I might contend that the spear BCE(formerly Bell Canada) just tossed could kill Netflix. Here’s what’s happening (with help from The Canadian Press via Yahoo! Finance Canada, and how it will impact Netflix’s business, if at all:
BCE will use its recent purchase of Astral Media to fuel a cross-platform Netflix competitor. The service will focus on Canadian movies, as well as Bell Media-owned news, sports, and entertainment content.
BCE made the informal announcement as a way to combat criticism from the public, on anti-competitive grounds, over the Astral acquisition.
BCE bills the service as a “Made in Canada” competitor to global brands, such as Netflix, Amazon, and Apple. From a public interest standpoint, the company claims the service will provide the necessary scale for increased investment in Canadian content.
I don’t have a problem with what BCE and Rogers Communications pull off in Canada. It’s reactionary to think it will be a disservice to Canadians. To the contrary, it will increase quality and help level the playing field as Canada looks to up its status in the world.
A Netflix competitor provides the perfect example. There’s little chance that anybody other than BCE or Rogers Communications could pull this off. Without a countermove, Netflix, an American company with primarily American content, would grow unchallenged in Canada.
Movies and television shows are great, but everything else BCE includes on its service will determine the extent to which it hurts Netflix. If BCE can do a broad entertainment, news, and (especially) sports offering, it could force Netflix to pull out of Canada.
That would be one of those stories that hits the stock temporarily, but probably does very little, if anything, to Netflix’s long-term viability.
It goes back to the theme I have been pounding home for several weeks on TheStreet: The Canadian government lets Rogers and Bell dominate the country’s media and telecommunications landscape in unprecedented fashion.
That’s what saves Netflix — and likely will for the foreseeable future — in the U.S. No one company owns all of the most valuable content. And the old guard refuses to come together to put the killer nail in Netflix’s coffin.
Hulu could have crushed Netflix. However, programmers have not worked together as enough of a unified force. Instead, we have fragmented TV Everywhere offerings. A one-stop shop for first-run movies and television as well as news, sports, and other entertainment would render Netflix useless.
As BCE develops its offering, it could expose one of Netflix’s core weaknesses. No matter how bullish I get, I will have the same thought in the back of my mind. Netflix has very little leverage over the Old Guard content owners.
At day’s end, they — and tight U.S. antitrust regulators — allow Netflix to exist. While BCE cannot kill Netflix outside of Canada, the American media establishment, with a more hands-off attitude from government, could make it happen overnight.
—By TheStreet.com Contributor Rocco Pendola
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At the time of publication, Rocco Pendola held no positions in any of the stocks mentioned in this article.