The Continuing Adventures Of Billionaire Kavanuagh
Oy.
Ryan Kavanaugh is at it again.
This time, he is taking his Relativity product to NetFlix instead of pay-TV.
Hmmmm….how exactly does this pay? How much is NetFlix playing in order to try to change their future from being a passive gateway to being a programmer? Can they really be paying $1 million a title… which is still – even with pay-TV deals getting smaller – significantly less than major studios are paid by the major pay-tv companies?
No one who Kavanaugh called to hype the deal (Deadline – TheWrap) seems to have an answer (or asked the question).
Essentially, this deal is based in failure. It is the failure of the studio world to keep the prices for their movies up as high as they were with pay-tv for years. And it is about failure for Kavanaugh, as he will only control and put on NetFlix movies for which he/Relativity hasn’t found studio distribution. I don’t foresee any studio doing a distribution deal with any movie – other than a straight service deal – that doesn’t have pay-tv rights attached.
it seems to me that the bar at non-major-studio pay-TV is now so low that NetFlix can reach to compete and Kavanaugh can rationalize this new idea. But this is also why the notion that this move will intimidate pay-tv companies is silly. The biggest of them are now more in the original content business than the movie business. That’s where the spending and the profits live. They still fill a lot of hours across multiple channels with movies, and indeed, use exclusive movies to sell their brands. But NetFlix isn’t anywhere near competing with HBO and Showtime in filling its “channel.”
NetFlix’s only window into studio pay-tv until now – which they use to drive much of their streaming success – is the Starz deal. Basically, Starz’ deals in recent years have included streaming, which they have partnered on with NetFlix. But… Disney is already pushing hard to get out… and they will surely be followed by Sony in two or three years when their deal is up for renegotiation. Without Starz delivering recent studio product (anything less than 4 years old or older) there will no major studios streaming newiish product through NetFlix at all. And remember, Starz paid virtually nothing for streaming rights, as there was no market for creating revenue with streaming even a year or two ago when the last deal (Sony) was done. Even if they can keep a studio under their banner, the price is on the rise.
But accentuating the positive, it seems like Kavanaugh is building IFC or Magnolia with more expensive films that he is paying for in full. Small distribution, VOD, streaming, DVD. The first question is whether more people will “tune in” and stream a Mark Wahlberg film on NetFlix than are tuning in to Magnolia previews on HDNet. The second question is whether there is a single person on the planet who will join NetFlix to watch Relativity Media titles as they roll out?
Hollywood’s favorite question about Kavanaugh is how many hundreds of millions more he can lose before he is no longer in business. This NetFlix deal, while smelling like future spirit, is really just a new way to lose money. The hope is that it is, indeed, a bridge to the future and Kavanaugh will make his money back and then some in The Future.
On some level, you have to love this guy’s bravado and NetFlix’s awareness of and unwillingness to just accept the fact that they are 3 – 5 years from being Blockbuster. On another level, you have to wonder how to get into this guy’s pocket because he throws around his massive funds like a drunken sailor on leave. Cha-ching!
What will this madman think of next?
And how long can he last?
Netflix is not looking for movie content. They are looking for TV. They are looking for shows like Party Down – shows that start small but slowly build through Word of Mouth. They’re looking for another Arrested Development or The Office. Shows that get people to keep coming out. Shows that they have to rent multiple discs if they go the post office method. My guess is there is more money in TV and that has always been the back bone of Netflix success.
Netflix is not looking for movie content. They are looking for TV. They are looking for shows like Party Down – shows that start small but slowly build through Word of Mouth. They’re looking for another Arrested Development or The Office. Shows that get people to keep coming out. Shows that they have to rent multiple discs if they go the post office method. My guess is there is more money in TV and that has always been the back bone of Netflix success.
It looks like studios don’t want to give up some pay-TV slots to service-deal movies; it may be why Relativity needs to make deal with NetFlix. (if Universal didn’t want to give pay-TV slots to DreamWorks movies, I don’t think that Universal wants to give pay-TV slots to the movies like “Catfish”, “My Soul To Take”)
I guess it would be a better news for the distributors which release indie movies and foreign movies. (indie movies and foreign movies tend to do better in NetFlix than many other video stores.)
Just set up a template so that every post automatically begins with “Oy.” from now on.
DP, I may be misreading this post but Starz re-upped with Disney a few months ago and the new deal still includes streaming rights with Netflix.
http://abcnews.go.com/Business/wireStory?id=10075594
Dave you may be underestimating the number of people who are supplementing cable with Netflix streaming is very high. It’s a great service. The cost right now is so good that if you couple it with hd over the air who needs to be sodomized by their cable company anymore.
Thanks to the digital transition, over-the-air TV reception can be hit-and-miss. Combine Netflix with expanded basic or a good satellite package — then you’ll be set.
Netflix’ continuing success has killed Hollywood Video and may mortally wound Blockbuster.