I don't know about you, but the next time I hear or read that "Netflix is killing pay TV," I'm going to scream. Anyone who takes a step back will realize that Netflix is pay TV. Netflix is a competitor to HBO, Showtime and Starz. They all offer different (but similar) collections of feature films, episodic programming and original content.
Content-wise, it is only a difference in quantity, quality and price. They all allow programming to be watched on large screens and mobile devices, although some services are better at one than the other.
Obviously, Netflix started with small screens and is moving to the large screen via devices like Roku, Blu-ray players and smart TVs, while HBO and its kindred started on the bigger TV screens and are moving toward small screens via TV everywhere apps like HBO GO. As each side gets better at its non-native strength, we can expect everyone to be pretty good at everything.
The real difference between Netflix and the more traditional pay channels is delivery. The difference isn't in the devices to which it gets delivered. It isn't even the technologies used to deliver the content, as the traditional providers are often delivered via IP on IPTV services like Verizon.
No, the real difference is whether delivery is part of the deal. Is the content licensing and the delivery of the service packaged together for a single price? Or are they separate?
When customers sign up for HBO (or Showtime or Starz) via their cable, satellite or IPTV provider, the delivery of that channel to the TV is included in the price. The programmer is responsible for the first part of the delivery process, and the service provider provides last part. If the picture doesn't look good or isn't getting to the TV, the customer calls the provider, and the provider fixes the problem.
With Netflix, obviously, this is much more complicated. The service gets delivered via a third party (the internet provider) and isn't guaranteed as a piece of the licensing of the content.
Whether one model is better than the other remains to be seen. The important fact is that the separation of the content licensing from the delivery of the content is a new trend. It used to be that one always came with the other because it had to be that way.
Licensing a cable channel was pointless without the ability for it to be delivered to the customer's premises. However, now we have the Internet, an open-access network that can be used for just about anything. This means that there is an opportunity to create new services that can be programmed without taking responsibility for the delivery.
Of course, it isn't just Netflix. Aereo relies on this model, and so does iTunes, Hulu Plus and all of the rumored new services like Intel's video service and Amazon's set-top box. It changes the model, but only if the (separately purchased) delivery system performs well enough. Remember this, the number of Netflix streaming providers who only have access to dial-up is darn close to zero.
So, will we see more options for program licensing without delivery included? Will the traditional programming retailers (cable, satellite and telco-video providers) begin to offer program licensing without delivery? We have to assume the answer to both of these questions is yes.
