Is Hollywood Afraid of Netflix?

Netflix Are network and movie producers running for the (Hollywood) hills?

It’s an understatement to say that Netflix is growing fast. In the last quarter of 2010, the company surpassed the 20 million-subscriber mark, a 66 percent increase in subscribers from a year before.

In fact, Netflix’s ability to acquire large audiences and sought-after content has Hollywood studio’s shaking in their boots. Hollywood execs have grown wary of the threat that Netflix poses and the unforeseen impacts it’s having on a studio's business.

Why?

  • Netflix is taking sales from airlines and hotels: A Netflix account allows users to watch movies from their computers. And since most airlines and hotels offer Internet access, there's decreased demand for services that offer movies for purchase or rent.
  • Users would rather wait for movies to appear on Netflix: Some studies show Netflix’s streaming service discourages user from purchasing newly released DVDs.
  • Once films become available on Netflix, their value decreases quickly: In fact, some broadcasters won’t go near a movie once Netflix begins streaming it. Netflix takes scarcity out of the equation; people can watch commercial-free movies and shows anytime they want.

Don’t think that Hollywood isn’t taking notice. This past week the major networks decided to take action.

According to the Los Angeles Times, Showtime will no longer provide old seasons of "Dexter" and "Californication" for streaming, and Starz will delay streaming episodes of its new series "Camelot" by 90 days. The LA Times also reports that Starz may also withhold movies from Netflix streaming in the future.

Aside from delaying the release of hit shows and movies, how else can Hollywood fight back against Netflix?

Don’t expect to see studio-sponsored streaming website anytime soon. DVDs have helped the film industry generate large profits so they’re not ready to see DVDs disappear.

Studio execs are now pinning hopes on UltraViolet, a technology that will enable consumers to play digital video across a range of devices and platforms, similar to a DVD.  It will also offer consumers a way to store digital media on their servers. 

Time will tell if Hollywood execs can find a way to put up a fight against Netflix, whether through UltraViolet or through another technology.

But one thing is certain: Netflix continues to grow. So, too, does unease in Hollywood. 

Contributed by Katie Gardner. Follow her @kgardner200.

Image courtesy of Flickr Creative Commons, user: _tar0_. Full terms and conditions for image use.