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Reed Hastings Manifesto: Good-Bye Linear TV

25 Apr, 2013 By: Erik Gruenwedel

Netflix co-founder and CEO Reed Hastings April 25 released an 11-page essay, called “Netflix Long Term View,” underscoring his longstanding belief that Internet-delivered entertainment will steadily usurp broadcast television, among other changes to traditional content distribution.

Hastings’ edict comes on the heels of impressive first-quarter financial results, which have seen the subscription video-on-demand pioneer’s stock surge about 25% since April 22.

Specifically, the CEO says apps will replace TV channels enabling users to access content, underscored by Netflix’s availability on myriad consumer electronics devices.

“Existing networks, such as ESPN and HBO, that offer amazing apps will get more viewing than in the past, and be more valuable,” Hastings wrote. “Existing networks that fail to develop first-class apps will lose viewing and revenue.”

Emboldened with a domestic streaming subscriber base approaching 30 million, Hastings renewed his tug-of-war with HBO (and Time Warner CEO Jeff Bewkes). He said the cable channel remains the benchmark for original programming, global reach (HBO has 70 million subs abroad) and multiplatform access (HBO Go).

Hastings considers Amazon Prime Instant Video, LoveFilm Instant in the United Kingdom and Hulu Plus as Netflix’s primary competitors after HBO.

“While we are passing HBO in domestic members in 2013, it will be several years before we are peers with them in terms of original programming, Emmy Awards and international members,” the CEO wrote. “It wouldn’t be surprising to us if HBO does their best work and achieves their highest growth over the next decade, spurred on by the Netflix competition and the Internet TV opportunity.”

Meanwhile, Hastings appears less concerned with multichannel video program distributors (MVPD), reiterating Netflix’s symbiotic relationship with cable and satellite TV operators.

“The stability of the MVPD subscriber base, despite Netflix large membership, suggests that most members consider Netflix complementary to, rather than a substitute for, MVPD video. MVPDs are keeping their subscribers through TV Everywhere authentication. Internet video services like Netflix, MLB.tv, iTunes and YouTube are not currently a material strategic problem for companies that are both an ISP and MVPD,” he wrote.

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