Thursday, December 06, 2012

Netflix, Disney and You; the Starz Realign

The LA Times (and everyone else) reports that Netflix has entered into a deal with Disney (including Pixar, LucasFilm and Marvel) to take over exclusive streaming distribution of its new films and its historic libraries. The current holder of those rights is the premium cable network Starz. Starz, for it its part, puts a brave face on the matter by saying that:
"Our decision not to extend the agreement for Disney output past that time allows us the opportunity to implement our plan to dramatically ramp up our investment in exclusive, premium-quality original series which will best meet the needs of our distributors and subscribers."
If you listen closely you can hear the faint workings of the gears as the stars realign into strikingly different patterns.

Right now you see a movie content-distribution system defined by Big Movie Houses, several Big Distribution-to-theatre networks that secure advertising on Major Media, roughly simultaneous late release to DVD and Big Premium Cable Networks. The Big Dog syndrome is deep in the DNA of the business—something that is the root complaint of indie developer.

Somewhere off in the future is that misty land where chokeholds on access to movie houses, advertising contracts, and the major cable networks no longer keeps "the talent" from controlling the creation and distribution of movies. Nirvana for creators. But it is also the promised land for fans who want access to products that aren't tied to a system where the broadest possible appeal is emphasized by those who control the big screens and where those who control the little screens of TV want the largest audience for advertising.

Starz losing out to Netflix pulls out a critical lynchpin that kept the current system running even after defections and new technologies have riddled the neat story about movie production that has been told since the 1920's and 30's. There will be NO premium cable channel involved in Disney's distribution framework after 2016. Disney has declared that is sees no important downside in skipping cable moving directly streaming; that, in fact, it considers streaming and premium cable to roughly be reaching equivalent audiences. That's huge.

Even more important is the dynamic this move sets in motion. Starz response is to double down on its move toward producing its own material—something Netflix and all the other premium channels have been driving toward already. (HBO has been stunningly successful with it; HBO movies and series have put it far out in front of other premium channels.) The big three channels of yesteryear have long since dissolved into the welter of channels that we see on cable. As "streaming houses" become substitutes for those channels we can expect the further expansion of indie production houses and ad hoc combinations of players who stay together for only a few productions. They can make money by selling into the vastly expanded, ever more specialized audiences built by speciality channels who will find their type of material widely streamed.

With the collapse of premium channel exclusivity streaming video is set to become a radically reorganized, chaotic, wide-open field where smaller and more specialized audiences can be "feed" profitably. The new pattern will surely be flatter and wildly more diverse.

And So?
The patient reader will likely think this "interesting" but wonder what it's doing on a "Lafayette profiber" blog. The answer is pretty simple and may be obvious: LUS Fiber and other small providers are selling a superior network and hometown control. Network superiority is a nice bragging point but having to play the same game as the big guys to get the movie content puts them at a dramatic disadvantage. It's never good to have to play a game that is defined and controlled by your opposition. The coming disintegration of the Big Cable chokehold on quality video distribution is nothing but good for the small network competitors. They will have superior networks for downloading streaming. Aggressively cacheing content on network can assure the highest quality, least compressed work is always available on their network at no access disadvantage to users. The demise of cable as we know it is visible just over this Netflix horizon.

It's a death to be devoutly wished for. Especially if you want to see local control of your communications networks succeed.