Netflix sent the blogosphere into a tizzy earlier this week when it announced it was dividing itself in two: Netflix the streaming video business, and Qwikster, the disastrously named DVD by mail step child. A lot of articles were written trying to parse the news, but the general sentiment was confusion.
The truth is that the TV business is on the brink of a seismic shift, akin to what has already happened in music with the iTunes store and Spotify. But the entrenched interests, both the networks and the cable companies, are doing everything they can to make sure they keep control during this change.
So you get a situation like Netflix and Qwickster, which as Evolver.fm Elliot Van Buskirk explains, is all about the licensing silly:
Anyone who uses Netflix should understand the fundamental difference between Netflix the DVD service and Netflix the streaming service: The DVD section has a better selection, with newer releases. The reason for this: Movie studios have a striated approach to licensing. They sell the same movies over and over in different ways, at different prices, to theaters, DVD rental companies, on-demand cable, pay TV, basic cable, online streaming services, airlines, basic cable, and free TV.
The people who own movie copyrights already treat Netflix’s DVD and streaming businesses separately, and have done so for years. We weren’t in the room when these deals were struck, but given Netflix’s surprising decision, it seems clear that the movie studios were using one as a bargaining chip against the other. Basically: “We’ll give you X on DVD if you accept not having Y on a stream until Z date.”
From Netflix’s point of view, the decision to split its streaming and DVD-shipping businesses into separate companies, with no ties to each other appears to be about allowing them to negotiate rights and release windows independently. No longer will the movie studios be able to use leverage in one area against the other, and this is especially important in light of current and future competition against Netflix’s streaming business from the likes of Apple, Google, Amazon, Microsoft and others.
Betabeat has reported on a similar internal conflict between Hulu and its parent companies, who seemed intent on kneecapping Hulu just as it was in the midst of acquisition talks. Again the issue was that the company was in effect competing against itself. The parent companies want Hulu to succeed, but not so badly that they are willing to sacrifice the juicy revenue that comes from re-trans rights paid by the cable companies.
Things are poised to become even more complex as TV Anywhere, the alternative to Hulu, has announced plans to join forces with Google TV, which up till now had trouble securing partnerships with traditional television companies. Expect things to get worse before they get better, with a lot of fragmentation and ridiculous authentication needed in order to watch TV over the web. A world in which a single, Spotify like platform allows for one payment to access almost all mainstream content, seems increasingly far away.