Netflix could soon pose a big competitive threat to cable networks seeking rights to brand-name reality TV series, according to analyst firm MoffettNathanson.
In a new report following this year’s NATPE conference, MoffettNathanson said a combination of tighter margins for producing reality shows on cable networks and Netflix—along with other subscription video on demand providers—seeking a less expensive way to keep up its breakneck content pace means nonscripted series will be more coveted by SVODs.
“Concurrently, SVOD players have started to show interest in buying non-fiction content which could start to put pressure on the bigger non-fiction cable networks. Netflix has continuously emphasized increasing original content. However, given the high cost of scripted originals, Netflix will need to incorporate more unscripted content in these efforts. As a result, Netflix (and the other SVOD players) will start to bid away name brand non-fiction shows from cable networks,” MoffettNathanson wrote in a research report.
Netflix’s ability to lure away high-profile nonscripted series has already shown itself, most recently when the SVOD provider managed to nab Jerry Seinfeld’s "Comedians in Cars Getting Coffee" away from Sony’s AVOD (ad-based video on demand) service Crackle. But, aside from that case, MoffettNathanson says that Netflix’s assertive quest for content is having wide-reaching impacts on the pay-TV universe.
“Networks are now admitting the top Netflix content is generating broadcast network audience levels, albeit for shorter duration than steady network TV hits. Furthermore, the increased viewership is coming at the detriment of traditional linear broadcast and cable network channels,” MoffettNathanson wrote.
The firm goes on to say that Netflix and other SVOD players are continuing to win over talent from the traditional TV ecosystem because SVOD presents an easier opportunity at getting shows made and less chance of shows getting canceled.
In a bit of good news for both linear networks and SVODs, MoffettNathanson said that international demand for U.S. original content remains high and that is “keeping prices elevated.”
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While Netflix’s plans to spend $6 billion on content this year should help it retain its market lead among other SVOD providers, the company could start to see other expenses increase amid its push for continued subscriber growth.
Analyst firm Jefferies predicts that increasing market pressure could force Netflix into relying less on word-of-mouth advertising.
“Netflix has done a very good job driving subs via non-traditional forms of marketing—much better than traditional networks,” wrote Jefferies analyst John Janedis in a research note. “As both penetration and competition increase, NFLX may find a need to augment its current marketing with more traditional platforms.”