Netflix announced Q1 results yesterday, and they topped 1bn in quarterly revenues for the first time and reached 33m subscribers. No mean feat. But the numbers that really caught my eye are that Netflix will spend $350m this year delivering its service, and a further $2bn on content rights. Those are some punchy expenses and respresent a significant barrier to entry for anybody else looking to get into the TV streaming game.
I think that leaves the opportunities in TV squarely in the discovery space. Alongside their quarterly results Netflix published a paper on the future of television and one of their predictions is that we will soon see the end of linear TV. I buy into that for lots of reasons, not least the impact that Netflix had with House of Cards because the whole series was available to watch from day 1, but it begs the question of what experience will replace the ‘hit the couch, put your favourite channel on and sit back’ mode of engagement that is so prevalent with TV today. The obvious answer is a clever combination of playlists, social inspiration and algorithmic recommendations.
Netflix, Amazon, Google and Apple will try to own this layer as well, but there maybe space for a startup here, particularly given that consumers may want their discovery service to cover more than just one silo. In the long run it makes sense to me that these discovery services will link directly to the content owners, maybe handling billing and rights management. In that view of the world Netflix’s emerging content business will be much more important to them than their distribution business, which would be cut out of the equation.