To The Distributors Go The Spoils: Why Netflix & Amazon Will Win

The distributors that control consumers’ preferred distribution channels will win the entertainment media business. Nobody likes to buy bundled Cable content. However, the content we all like can only be gotten through bundled cable, for now.

I love digital distribution channels such as Netflix, Amazon Instant Video and Hulu for entertainment media because I can watch what I want when I want.

Cable seems antiquated. Certain shows are only available at specific times. I have to buy 100+ channels to only watch a few. Watching 30 minutes of TV means ~9 minutes of commercials that are minimally targeted to me, at best.

Clearly, the digital channels have many advantages except one: content. If I can only watch my favorite shows on TV at a designated time with commercials then I will, for now. Previously, cable controlled the means to produce quality content. They also had the cash and audience reach to lure big time stars. This has changed. Digital distributors now have large audiences and  stockpiles of cash.

Yesterday, I was watching Alpha House (great show) on my laptop through Amazon Prime. My roommates were watching House of Cards (another great show) on our Apple TV through Netflix in the other room. It has begun to happen. Our preferred distribution channels have equal or better content to Cable.

Now comes a race. Will today’s entertainment leaders adapt to our distribution preferences or will today’s digital distributors make premium content first? HBO GO is the best attempt I have seen at the former, but it is not digital-only distribution because you still need to pay a cable company for HBO.

Netflix & Amazon are starting to make content that is awesome. They are motivated to de-risk their business by reducing their need to pay for content licenses so they are willing to invest and take risks.

On the other side of the spectrum, Cable is motivated to maintain the status quo. They will be slow to cannibalize their current business model as it is profitable now and until recently, they had no reason to do so. They had the best content and that was unassailable. Now, distributors have the cash, data, confidence and motivation to break the content monopolies of cable companies.

The data piece is crucial. Amazon knows what shows and topics are popular with their audience. They know what cliffhangers compel someone to watch the next episode right away and which scenes in a show precipitate a viewer stopping and writing a bad review for the show. This is the definition of big data. Cable is very behind with Nielson.

Distributors will win in the long term because they have better data on their consumers, own the preferred distribution channels and they have the motivation to take risks while Cable is motivated to maintain the status quo for another quarter.

Digital distributors will win, but what is the best content release strategy? I talk about the different distribution release strategies here.

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