Netflix CEO Reed Hastings is seeing intense competition from cable companies, Amazon and a bevy of other video players including Google's YouTube. Cue the Neflix killer headlines right? Not so fast.
Speaking at the AllThingsD D9 conference, Hastings talked content costs---and negotiations with HBO and a stalemate because Netflix's check isn't big enough---and competition. The competition for Netflix is the largest field ever.
However, Netflix's Hastings has earned a pass. Amazon didn't kill Netflix. Apple didn't either. Blockbuster certainly didn't. Hastings said at D9 (photo right via AllThingsD) that the biggest competition is courting consumer's eyeballs and time.
Here's a look at the competitive field and my take on Netflix's place. TV Everywhere and Comcast. Hastings said that "our main competition is going to be from TV Everywhere." Indeed, Comcast has a healthy respect for Netflix. Hastings also pointed out that Netflix has to get to the next level on interface to fend off Comcast's Xfinity app.
My take: When every video provider has the same content, the interface wins the day. Netflix has an edge, but Comcast is learning quickly. By the way, Hastings watches Comcast too. Netflix isn't looking to replace cable companies.
HBO. Hastings described Netflix as an Internet video channel. And when you toss in original content it's quite possible that Netflix will look a lot more like HBO.
My take: Netflix is competing with HBO for consumer dollars and undercutting the pay channel on price. It's no wonder that HBO-Netflix negotiations are tricky. Hastings noted that a $200 million price tag to renew a deal with Starz wouldn't be surprising. As content costs go up, Netflix could get squeezed. If Starz would cost $200 million, a deal with HBO could be much higher.
Morgan Stanley recently went cautious on Netflix shares. In a research note, Morgan Stanley analyst Scott Devitt said:
We believe the HBO Go app launch is important because HBO is the only premium TV company with a comparably formidable content portfolio to Netflix.
Apple. Kara Swisher kept going down this thread where Apple could buy Netflix. Hastings shot that down.
My take: Apple is a nice distribution channel for Netflix why would you sell out and then nuke most of those partnerships?
Hulu, Vudu and the gang: Hastings didn't consider Hulu competition. Netflix competes for "time and hours" with everybody.
My take: If you follow the channel analogy, Hulu, Vidu and Netflix could make one huge roll-up for YouTube at some point.
Amazon: An audience member at D9 asked about selection on Netflix's streaming service and why Amazon would sometimes have movies Hastings & Co. didn't. Hastings replied that the content costs for unlimited streaming would be expensive. My take: Amazon is the most likely acquirer of Netflix, but Hastings would have to stumble first. There's no evidence of that anytime soon.
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