Stock analysts Trefis have written a provocative piece for Forbes questioning Netflix’s long-term strategy. Although Netflix has consistently argued that it does not intend to compete against the pay-TV companies, Trefis say the company has made it clear they’re going to produce original programming. Trefis also say there’s a chance that Netflix’s focus on connected TV has the potential to create conflict with the pay TV companies, which could make it more costly for Netflix to acquire content.
Putting some of the slightly odd statements Trefis make, such as ‘TV is not portable’, their conclusion about the long-term impact of disrupting prime time viewing is at least worthy of consideration, assuming of course that Netflix’s own content is of a sufficient quality to draw people away during prime time hours:
We feel that at some point, this conflict will emerge more prominently, and the issue might percolate down to how media companies manage their content. If advertising gets affected as a result of the effect on prime-time viewing, media companies are going to increase their content licensing prices to recoup those lost revenues. Such a situation would imply higher costs for Netflix and make it difficult for the company to continue acquiring lucrative content.
Food for thought, but perhaps we should also be considering how much content companies are going to be dependent on services like Netflix. With other online companies like Yahoo and Google also producing their own content, are we perhaps heading towards a situation where there will be a glut of supply in the market as the market enters the phase of disruption and consolidation?