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Netflix and Amazon don’t want to change TV. Maybe they want to replace it.

Reed Hastings, co-founder and CEO of Netflix.
Michael Newberg | CNBC
Reed Hastings, co-founder and CEO of Netflix.

Shonda Rhimes's departure from ABC to produce new shows for Netflix could not have come at a better time to intensify the fears that have been roiling the TV industry for the past several years and that have reached a fever pitch this summer.

Said fears involve the rise of tech industry-backed streaming services to such a high level of status and power that they effectively price everybody else out of the TV-making market. If you subscribe to these fears, the best-case scenario is that "everybody else," a.k.a. the more traditional broadcast and cable networks, becomes a sort of farm system for "the majors": Netflix, Amazon, and a handful of other players.

The worst-case scenario is that everybody else goes out of business, unable to compete with Netflix's spending spree, and once Netflix dominates the market, it cuts back on its total number of projects — similar to how the company reduced Blockbuster to ash just in time to shift its focus away from its DVD-by-mail service.

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I should caution upfront that this fear is at least somewhat misguided and probably unlikely to come to pass exactly as industry pessimists worry it might. But it's easy to look at Rhimes's move to Netflix, or The Walking Dead's Robert Kirkman's move to Amazon(he'd previously produced projects for AMC and Cinemax), and wonder if at least some of those fears about "everybody else" aren't already coming to pass.

And yet one big open question remains: Is any of this hypergrowth sustainable?

Netflix is built atop a mountain of debt. The debt itself isn't unusual — but the size of it has a lot of people worried.

A recent Los Angeles Times report quantified a specific point that comes up in just about any conversation surrounding the future of the film and TV industries: Netflix is built atop a whole bunch of debt. The report estimated that Netflix's debt is around $20 billion, a stunning total for any one entertainment company.

But it's not uncommon for studios to run a deficit while producing any given project, whether it's a TV show or a film.

For most of television history, the conventional wisdom was that a studio would lose money on a TV show until it was sold into syndication — usually at the end of season four — and the studio could start to recoup its investment. The network that aired the TV show made money off it by selling ad revenue, but it was not necessarily obligated to share that ad revenue with the studio that actually made the show, because the rerun market was considered so lucrative (as long as the show lasted long enough to enter it). Now studios can make their money back more quickly, via selling of international rights, streaming rights, and other forms of ancillary revenue, but running up a debt on early seasons of a TV show is still common.

Movies, meanwhile, are produced and sold before they ever make any money at the box office, which means that even a moderately successful film can lose money if it's not budgeted properly. And studios are frequently accused of creative accounting, in which they allege that they just barely broke even on hits, in order to avoid further payouts to members of the creative team who may be entitled to a portion of post-release profits.

So there are plenty of ways to lose money in Hollywood — especially when you're building a new studio or entertainment brand. But it still takes a total boondoggle to completely lose your shirt, especially in television, where a single Friends can keep raking in cash for decades after it leaves the air.

The larger point is that Netflix running up a debt isn't all that odd; indeed, if it were the sole issue here, nobody would bat an eye. Instead, the factor that's spurred so much discussion and consternation is the size of Netflix's debt, and the fact that the company has only recently seemed to show an interest in reining in its spending, by canceling a handful of underperforming shows (only to turn right around and sign blockbuster deals with Shonda Rhimes, among others).

Netflix, like many companies in the tech industry, is funded by venture capital, which allows it to continue spending money in an effort to someday become a stable, profitable corporate monolith. But such an outcome is by no means a guarantee. Placate venture capitalists, and they'll extend what might seem like an infinite line of credit. After all, Amazon famously didn't turn a profit for most of its first two decades, and it continues to expand the lines of business it enters.

The concern is that if Netflix and Amazon aren't necessarily bound by the need to erase or lower their debt, but more conventional TV networks are, then Netflix and Amazon aren't really building TV networks. Instead, they're building alternate distribution channels that might eventually forgo the existing entertainment industry entirely, in favor of operating within the tech industry. If you look at it this way, as many in show business do, you can see the makings of a battle that isn't between, say, Netflix and HBO, but between two massive industries. And it's easy to see why those who work in TV and film fear that such a conflict could be detrimental to their continued existence.

Concern over Netflix and other streaming services is exacerbated by the mystery surrounding them

Viewed through this lens, the frequent, industry-wide calls for Netflix to release its viewership data are thrown into sharper relief. If Netflix is building an entire alternate entertainment industry based largely on its own perceived awesomeness, viewership numbers might puncture that idea. (If the company's viewership numbers were extremely high, releasing them might only serve to further inflate the Netflix bubble — but one can assume that if its viewership numbers were extremely high, Netflix would at least be teasing them in more concrete detail.)

It's also not hard to see the big three streaming services — Netflix, Hulu, and Amazon — as trying to find a way to retrofit themselves into old-fashioned TV networks with alternate distribution models.

Netflix in particular has always centered its original programming on shows it thinks its subscribers will like, based on what they're already watching. Sometimes, that allows the company to find undiscovered, exciting new talent (as with Stranger Things' Duffer brothers), but it mostly results in lots of deals like the Rhimes pact, in which an established talent arrives to offer Netflix a frisson of legitimacy.

It would be one thing if the various streaming services had better track records than conventional TV networks, but all three are comparable to essentially any major network. Netflix might be the home of Stranger Things and Orange Is the New Black, for example — but it's also home to the quickly canceled Girlboss and Gypsy.

The summer has been especially dismal for the streaming services, with majorly hyped releases (like Gypsyor Amazon's The Last Tycoon) sinking and even long-running shows facing uncertain futures. (Hulu's Casual, for instance, is one of the company's signature shows, but it has yet to be renewed for a fourth season.) Both Netflix and Amazon's film slates have similarly struggled, with the former's failing to garner the same kind of hype as its television offerings, even with critically acclaimed films like Okja.

None of this is to suggest that Netflix, Hulu, or Amazon is doing anything wrong. But it does help illustrate why many in the entertainment industry feel as if they're engaged in asymmetrical warfare against an opponent that isn't bound by the same rules. The media consolidation that has pushed more and more networks and studios into the hands of a few corporations still pales in comparison with a service like Amazon, which is specifically builtto offer a consolidated, all-in-one experience. And regulating such all-in-one experiences to break them up into smaller pieces is something the government has shown little taste for since the 1970s.

There are some crocodile tears in play here — in many cases, we're talking about very rich people complaining about other, richer people — but the existential threat that tech industry-backed options pose to more traditional entertainment companies is real. Netflix and Amazon have already reached such a large size and scale that they'll only really become stable if they evolve into massive, globe-spanning mega-corporations that have essentially driven all rivals out of business. And all of those rivals are currently playing catch-up.

A streaming service in every pot!

If one side of the sustainability fear is that Netflix and its ilk can't keep running up massive amounts of debt forever, the flip side is that the entertainment industry trying to beat Netflix at its own game may end up being a self-defeating proposition.

You could argue that failing to grasp the importance of streaming — and thus selling off catalog titles to outside streaming services in the early days of streaming video becoming a mainstream entertainment option — is the film and TV industry's version of the music industry failing to notice the rise of Napster. I'm not sure that argument perfectly tracks, but the way so many studios and networks are hurrying to launch their own streaming services (or are promising to do so, as Disney has) suggests they at least take the idea seriously.

There's no way that consumers will simply keep shelling out for every new streaming service that comes along. That very situation — a growing number of cable channels to subscribe to — led to the sorts of massive cable bundles whose growing bloat and expense led to the rise of cord cutting in the first place. (This is part of why I half-suspect your local cable company may yet win the streaming revolution.)

Yet if studios balkanize their content on self-owned streaming services, it's hard not to picture something like the cable bundle being the result. Another option might be that streaming subscriptions collapse and the whole industry shifts to a model where everything you want to watch is purchased or rented à la carte. Such a setup would probably be reasonable for many consumers. However, it would also drastically limit the number of projects with financial backing, as well as more artistically adventurous projects that are harder to imagine turning a profit at first blush.

Talk to executives throughout the entertainment industry, or at their streaming competitors, and they'll readily admit to thinking about all of the above. But there's no optimal way out of the massive game of chicken they're all playing with each other.

And that's before Apple gets involved in streaming TV and film, or before Google pours more money into original programming on YouTube (a streaming platform that the generation after millennials, who are just beginning to act as entertainment consumers, is very comfortable with using).

At a certain point, if it looks like a bubble and feels like a bubble, then it's probably a bubble. And bubbles can't inflate forever.