Pay Channels Hinder Netflix

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Recently Netflix made a bold statement by acquiring rights to a television series called House of Cards. By buying rights to this show, Netflix avoids having to purchase streaming rights from a pay TV channel. This sent shock waves through the television entertainment industry because Netflix made a move that represents a potential threat to this business. Well the industry has responded and one by one, pay TV channels are limiting their relationship with Netflix to maintain their own viewership.

After the announcement about House of Cards, Showtime responded by renegotiating their contract with Netflix. The new contract, which goes into effect in a few months, prevents Netflix from offering their subscribers streaming access to shows that are now on air. Original programming like Californication and Dexter will no longer be available to Netflix subscribers at all. To watch these shows online, viewers will have no choice but to subscribe to Showtime's streaming service. The only Showtime original programming that will remain available on Netflix are the series that have already been cancelled.

This week ...
... another pay TV channel has made it clear that they will not stand by as Netflix aims to reduce their revenue and continue to emerge as a competitor. Starz is distancing itself from Netflix as well. Netflix used to be able to stream new episodes of original series as they aired on Starz. As early as next month, Netflix won't be able to stream any new episodes from original programming for ninety days after the debut. This restructuring will also have an effect on movies as well.

These changes will drastically influence Netflix subscriber numbers because this is what enticed many to join in the first place. If Netflix becomes somewhat of a final resting place for shows and movies, rather than the go-to spot for current entertainment, profitability will be affected. The issue isn't so much that these channels view Netflix as competition right now. They just visualize the potential for this to happen, particularly after the purchase of House of Cards. This sent the signal that Netflix wanted to become just as relevant as a pay TV channel like HBO, Starz and Showtime. Now these channels are scrambling to hinder Netflix in any way that they can while still maintaining a profitable relationship.

These contractual changes will surely force Netflix to take a step back and analyze the possible outcomes of become a full fledged pay TV competitor. Netflix will have to weigh how much their actions could trigger other actions that could eventually stifle their business. Most of the weighing will have to be speculative as the pay TV channels are only getting started with reestablishing their relationship with Netflix. There is no telling how extreme this could become or which other pay TV channels will want to make a change in regards to their Netflix agreement.

If Netflix is smart, they will halt their quest for domination and regroup before any more damage can be done. Netflix should encroach in a more subtle way that won't alarm the traditional entertainment industry.