Netflix has just turned its back on the Silicon Valley tech firms in a move that signals a seismic shift in the entertainment business.
The streaming video giant pulled out of the Internet Association, which is the lobbying entity for web-based businesses, and locked arms with Silicon Valley’s nemesis, the Motion Picture Association of America (MPAA), Hollywood’s preeminent lobbying organization.
The Internet Association is a highly influential trade group that represents the biggest technology companies in the world, including Google, Facebook, and Amazon. The MPAA members are the six studio giants of Hollywood: Disney, Paramount, Sony, 21st Century Fox, Universal, and Warner Bros.
Although the tech firms of Silicon Valley and the entertainment companies of Hollywood have some common interests, they are on opposite sides when it comes to copyright protection and statutory immunities that are of benefit to Internet intermediaries.
Because of recent data scandals and charges of censorship by the largest tech firms, U.S. lawmakers are raising questions about two existing statutes: 1) Section 230 of the Communications Decency Act, which shields Internet concerns from liability for content published by their users; and 2) The safe harbor provision of the Digital Millennium Copyright Act, which helps to protect such firms from copyright claims.
Hollywood, via the MPAA, has been pursuing more severe anti-piracy measures in an effort to prod Internet intermediaries into taking steps to prevent and remove illegal content that has been uploaded by users.
Immediately after Facebook CEO Mark Zuckerberg made an appearance in Washington, D.C. before a congressional committee, MPAA head Charles Rivkin requested that Congress begin looking into the possibility of holding Internet platforms accountable, which, of course, raised the specter of government regulation.
Rivken’s rhetoric infuriated Internet Association’s Michael Beckerman, who characterized the MPAA leader’s calls to regulate Internet companies as “shameless rent-seeking.”
Netflix is looking to the MPAA to assist in helping the streaming company expand into markets that in the past have proven to be difficult, if not impossible, to penetrate, which has been especially true with regard to China and India.
Netflix gradually morphed into a different entity from what it was at its onset. In the beginning, Netflix was a streaming platform that hosted third-party content and served as an alternative to Blockbuster and other video rental stores. The Netflix of today, though, is a full blown mega-studio, having reportedly spent about $13 billion on content just last year. Its service seeks to actively pair up content with needs and preferences of its subscribers.
In a recent letter to investors, Netflix CEO Reed Hastings indicated that because of the company’s success in producing original content, it plans to move away from outside programming and make content production the company’s primary objective.
Once dismissed by the industry as an entertainment flash in the pan and a mere rerun platform, Netflix has reshaped the way in which the public consumes entertainment. The industry realized that Netflix had become a threat to traditional entertainment business models, so CEOs sought comfort in mega-mergers and the establishment of new streaming services.
AT&T acquired Time Warner, and the newly formed entity presently has plans to launch a streaming service later in the year. Disney is also set to launch a streaming service, following its pending acquisition of 21st Century Fox. And Comcast will reportedly get into the streaming service business as well, after its acquisition of NBCUniversal is completed.
Netflix recently shocked its subscribers with its biggest price increase ever. A recent survey by Streaming Observer and Mindnet Analytics reveals that Netflix might lose up to 27% of its subscribers due to the price hike.
Another factor that poses a threat to Netflix’s bottom line is that major streaming service competitor Hulu reportedly has plans to lower its monthly charge from $7.99 to $5.99, starting at the end of February 2019.
Netflix is likely to lose much of its licensed third-party content at approximately the same time that Disney’s much-anticipated streamer is launched, complete with entertainment fare from its “Star Wars,” Marvel, and Pixar catalogues.
The current corporate model of Netflix is predicated on rapid growth. However, it now looks as though Netflix will have the brakes applied as emerging competition from Hollywood causes the streaming business to go through a remake.