Netflix has been a victim of its own success. For
about $8 a month, the company woos subscribers with programmes and films that
normally require a pricey pay-TV subscription. Consumers love it: the average
Netflix subscriber watches more than five TV shows and nearly three and a half
films per week, according to a report from GfK Media, a market-research firm.
But this threatens the producers of the programmes that Netflix rents out.
Broadcast and cable networks earn a great deal more from licensing deals with
pay-TV companies than they do with outfits such as Netflix—some $41 billion in
2012 with the former, against $3.5 billion with the latter. So any sign that
Netflix is hurting a broadcast or cable network’s bottom line quickly leads to
higher licensing fees or curbed content sales.
