Time Warner doubts NetFlix model
December 3, 2010
Time Warner Chief Executive Jeffrey Bewkes has questioned the sustainability of Netflix’s current business model. He said a subscription service has to provide the best content and that means paying top dollar for films as soon as possible after theatrical release.
Bewkes told the Reuters Global Media Summit “It’s hard to see how that kind of economics can fit into a service that charges $8 or $10 a month because the math doesn’t work.” Bewkes did admit he sees the fast-growing Netflix as a direct competitor HBO.
Bewkes also cast doubt on Netflix’s long-term sustainability given the postal costs involved in Netflix’s traditional business of sending rental DVDs through the mail to customers. “The problem that theyhave got if you start going through sustainability questions is not so different from (the now bankrupt) Blockbuster.”
Netflix, which now has more than 16 million subscribers, has said it wants to reduce the size of its DVDs-by mail business to focus on its online service.
Last month Netflix unveiled an unlimited streaming subscription for $7.99 a month while raising the price of some of its other streaming plus DVD rental plans.
Bewkes was responding to the issue of cord cutting with subscribers moving from more expensive providers, like HBO, to internet distributed alternatives like Netflix.