A major report from investment bankers Exane/BNP-Paribas states bluntly that Netflix is not just a major disrupter of all that is ‘normal’ in broadcasting, but its unique global approach to content and product, plus lower costs than its incumbents, means that Netflix is capable of “shifting the ground beneath [the traditional players’] feet”.
The study reminds readers that Netflix has added more subscribers in one year than Canal+ or Sky UK did in 25 years! By 2020 Netflix could have a staggering 150 million subscribers.
Report author Charles Bedouelle cheekily asks “Is the TV industry a House of Cards” in a heavy reference to Netflix’s recent success with the highly-rated series. He says, not unreasonably, that in some 250 meetings the analysts have held with investors in the past six months, the Netflix name has been mentioned in almost all of those meetings, but “is hardly mentioned by broadcasters”.
“We believe this notion is misguided and can be traced to two common misconceptions: First, Netflix’s disruptive nature is being overlooked by many players. Second, the incumbents think that specific characteristics of their local markets will afford them protection – despite the numerous examples of online business models unleashing disruptions on a global scale; just think “Google Apple Facebook Amazon”.
The 90-page report looks in considerable detail at the prospects for the players concerned. It praises Netflix’s key strengths (more connected devices, and growing in number), its DNA (as a true disruptor as evident from its 1997 introduction of DVDs by post), and unique (“revolutionary”) strategy as far as global content supply is concerned. “It is increasingly shifting toward original content as a way to break the cosy relationships between the US majors and dominant TV groups around the world. Netflix is taking a global approach to content licensing that lets it pay less than it otherwise would if it had to make purchases for each market separately. This will increasingly give Netflix a sustained cost and quality competitive advantage.”