With OTT, Nets Have Netflix In Their Sights

So, Reed Hastings likes to talk some trash.

Asked whether Netflix would ever offer an evening newscast at a New York Times conference this week, the CEO of the SVOD service said that the news format was “dying” and not something worth investing in.

NAB spokesman Dennis Wharton, who has 40 years of experience trashing Michigan football, was ready when the New York Post contacted him: “Apparently, Netflix executives are either binge-viewing too much science fiction or making claims out of a House of Cards.”

Wharton also pointed out, correctly, that local and national newscasts are doing just fine, holding their own against the blizzard of digital news options.

Talk of Netflix getting into news was started by the company itself. During a third-quarter earnings call last month, when the subject of non-entertainment programming came up, Hastings asked his content chief Ted Sarandos who was also on the call, how likely it is that Netflix would compete with Vice in the next two years. “Probably high,” Sarandos answered.

I don’t know why Hastings felt he had to diss the evening news, the cornerstone of the Big Three network news operations. But if I were he, I wouldn’t even be thinking news right now.

I would focus on what has allowed Netflix to become one of the few digital companies that has been able to break into the big-time television business — amassing the best movies and off-network TV services it can get and layering on top-quality scripted series of its own.

Why?

Because the Big Media companies — the ones that own the major broadcast and cable networks with most of the movies and TV shows people want to watch — are accelerating their OTT efforts, increasing the competitive heat.

Disney, NBCU and 21st Century Fox are doubling down on Hulu. Even though the service is currently operating at a loss, Disney COO Thomas Staggs told analysts on the company’s 3Q earnings call this week, the partners intend to “step up their investment in both acquiring and producing original programming…. We believe it’s going to create value over time.”

And not to be outdone, CBS this week said that it would attempt to kick CBS All Access into warp drive by unspooling an all-new Star Trek series on it — after a promotional sneak peak (episode one) on the CBS TV network. “Star Trek is an unstoppable franchise and its auspices are tremendous and bona fide,” Moonves crowed on his earning call this week.

Just as important, Moonves said it was considering a commercial-free version of CBS All Access for $10 a month  that would put it in head-to-head competition with commercial-free Netflix, whose “standard” HD service sells for $10.  (CBS All Access, with commercials, goes for $6 a month.)

Moonves spent a lot of time on the call talking up CBS All Access and its companion Showtime OTT service. If you listen to the call or simply read the transcript, you get the sense that the “direct-to-consumer” services — no middle man! — are moving closer to the center of CBS’s corporate strategy.

CBS was still not ready to talk about how many subscriptions it is selling, but Moonves said it had its biggest month adding subs in September. CBS COO Joseph Ianniello added that All Access and Showtime OTT should be contributors to operating income next year. Perhaps then we will see some numbers.

Incidentally, Moonves conceded that he has yet to make a deal with the NFL that would allow CBS All Access to include games on the schedules of the CBS O&Os and affiliates that are part of the service, but he said talks are on-going with the league.

At the same time Big Media are ramping up OTT efforts, they are pondering how far they should go in enabling Netflix and Amazon by licensing their best programming to them. It’s easy money, the thinking goes, but they may be creating a monster that may eventually devour their network businesses.

Peter Kafka had a nice piece in re/code on Monday about Big Media’s Netflix anxiety. He quotes Time Warner CEO Jeff Bewkes as saying you don’t want to “[undercut] yourself by having somebody else pay a fraction of the cost and create a better inventory on the various shows you yourself invented.”

On his earnings call this week, Disney CEO Robert Iger called Netflix an “extremely aggressive” buyer of Disney programming and seemed happy for the business. But, he added, the market is “dynamic” and Disney may eventually decide to change course. “[I]t is possible that off-network programs will end up either being bundled with our multichannel services or as part of apps that the company brings out to sell directly to customers.”

Moonves, too, betrayed some ambivalence about filling the Netflix maw. “[O]nce again, as we say, Netflix is our friend and they’re also our competitor.”

So, look, I wouldn’t discourage anyone from doing TV news. The more, the better, right? Each news organization not only puts a check on government and business, but on other news organizations.

But Reed Hastings should probably worry more about his programming suppliers coming to see Netflix as a competitor rather than a friend.

And he should quit trashing enterprises he knows nothing about.

Harry A. Jessell is editor of TVNewsCheck. He can be contacted at 973-701-1067 or [email protected]. You can read earlier columns here.