How Media Companies Let Netflix in the Henhouse

The term disruptor gets used liberally in regard to tech companies, but it’s hard to find a more apt descriptor to explain what Netflix has done to the entertainment industry.

Its rise from a DVD-by-mail service to perhaps the entertainment industry’s most significant buyer of video content is lore in both media and tech.

Like other tech companies, it has focused on and arguably perfected delivering content, building its own platform of instant gratification that has been the mark of the current tech era.

And it did so with the cooperation of creators of high-end content, the major entertainment companies, despite the risk that Netflix’s business represented to their TV networks. To them, Netflix’s willingness to license their libraries of old movies and TV shows represented a welcome source of extra cash.

But in helping Netflix build its streaming service, the entertainment companies made a dangerous gamble: facilitating a shift away from traditional television, highlighted in recent months by weaker ratings and advertising dollars. For media companies, the short-term gain of Netflix money appears likely to have come at the cost of their business' long-term prosperity. (This is the fourth installment in the “Over the Top” series. Earlier stories here, here and here.)