This week's deal between Netflix and Disney should do more than perk up the ears of the average business section reader. It might convince a few more undecided consumers to pull the plug on their cable service.
The move, combined with some sobering recent comments by Time Warner Cable's CEO, spell trouble for the cable industry while boosting the future for streaming services.
Disney CFO Jay Rasulo kept his comments vague about the new deal but reading between the lines doesn't require a business degree.
“If it does not have life somewhere else, you’ll have a hard time.” With films such as Cars and Toy Story “you can take these franchises to other places in our ecosystem.”
Translation: Disney needs its titles to breathe indefinitely in order to feed the merchandising and tie-in beasts. The mega-corporation clearly sees streaming services as being a critical part of the future, an adrenaline shot for both Netflix and the streaming market overall.
And, when taken with recent comments by Time Warner Cable CEO Glenn Britt, it should send a shiver down the spines of cable proponents.
When the channels don’t perform, owners say “next year I’ll work harder and spend more money on programming and it’ll be good.” But Time Warner Cable, along with other pay TV distributors, can no longer pass those costs along to subscribers. With the economy “bouncing along the bottom,” Britt says, “the consumer is telling us that we can’t afford these prices anymore.”
Had cable companies offered a la carte programming options all along, where viewers could choose which channels they're happy to pay for, the appeal of streaming services like Netflix would be far different today.