Does Netflix/Disney deal signal the transformation of network TV?
Sitting at home last night with my cable on the fritz -- thank you Bright House Networks! -- I decided to use my freed up TV-watching time as only a geeky television critic would: catching up on old Glee episodes through Apple TV.
Which made me think of Netflix's newly-announced deal to stream an expanded array of Disney/ABC TV content to its subscribers, sometimes featuring episodes just over two weeks after they aired on broadcast television. That means, if you can wait a couple of weeks, you can keep up with Grey's Anatomy or the Desperate Housewives on your schedule -- perhaps when your access to traditional TV is, um, curtailed.
This is troubling news for TV networks, which don't earn nearly as much from such content deals as they do from the advertisements on conventional broadcasts or later DVD sales. If they allow a segment of their audience to see episodes two weeks later, will they bother watching the first-run episodes? Or buying/renting the DVD later?
Let's welcome the TV industry to the same conundrum that devastated the music industry and sent newspapers reeling; the Internet's drive to distribute media content, on demand, in ways that content makers have trouble earning revenue from.
Most of the glitzy new media technology coming your way this Christmas -- Internet-enabled TVs, Google TV, the Roku, Apple TV and the iPad -- get their value from a single proposition: Giving access to movies, games and/or TV shows, on demand.
TV networks have been fighting the trend even as the experiment with it, teaming up to create a slick online portal for streaming shows, Hulu.com, then barring Google TV from access to the site and many of their proprietary sites. But just ask anybody who works in music or newspapers; this is a deluge that is nearly impossible to hold back. And when it breaks, huge segments of the audience will flock to the most convenient way they can consume television -- which is also the places where TV networks earn the least.
And even while the networks have focused on Google TV and iTunes, Netflix has stepped up as a surprise player, paying a reported $150-million to $200-million for the Disney/ABC deal. Netflix's video streaming service now appears on Google TV, Apple TV, Xbox 360, Nintendo Wii the Roku and a host of other devices, which allow the streams to be display on TVs, computer screens or portable devices such a the iPhone.
As this trend spreads, the nation's TV system may be redefined. Can local broadcast affiliates keep retransmitting network product when huge chunks of viewers can see shows online or via on demand cable? Can TV networks keep making big-ticket series -- spending upwards of $2.5-million an episode -- if revenue for each show falls? And what happens to communities if local TV stations -- still the biggest source for local news, according to national polls -- find viewership dropping due to online viewing of network content?
These are huge freight trains headed toward the core of the network TV business. And so far, it hard to see that anyone involved has a real plan for handling them in the long term.