Netflix CEO Hastings: Internet TV will bury linear TV

In the vision of Netflix (Nasdaq: NFLX) CEO and co-founder Reed Hastings, the future has already been written and his company--and Internet-based video as a whole--has conquered the traditional linear TV business.

Reed Hastings, Netflix

Hastings (Image source: Netflix)

"If we could look decades into the future at the ways that people access entertainment, we would no doubt see a very different image than we see today--mind-blowing video quality, a proliferation of screens, yet-unimagined natural user interface, and an unbelievable range of choice," he wrote in the online treatise.

All that TV, which will continue to be consumed by huge audiences, will not come from today's traditional providers and will not be delivered via today's linear methods, he continued.

"Internet TV will replace linear TV. Apps will replace channels, remote controls will disappear, and screens will proliferate," he wrote.

The movement, he predicted, is being led by Netflix, of course, but also by programmers and content owners who have tapped into the value of the Internet as a delivery mechanism for their channels. MVPDs, he said, are following after that.

"Netflix, HBO, and ESPN are leading the way," he wrote.

The reason the transformation will take place is because video is becoming less about channels and more about apps that are delivered across the Internet to connected devices both within and outside the traditional residential viewing space, Hastings posited.

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

"People love TV content, and we watch over a billion hours a day of linear TV.

But people don't love the linear TV experience where channels present programs at particular times on non-portable screens with complicated remote controls. Consumers click through a grid to choose something to watch. DVRs and VOD add an on-demand layer at the cost of storage and increased complexity. Finding good things to watch isn't easy or enjoyable. While hugely popular, the linear TV channel model is ripe for replacement," he wrote.

Hastings never really predicts that Internet TV--or Netflix, more specifically--is going to win a battle with existing pay TV service providers. He even concedes that most of those service providers already appreciate the value of the Internet.

"Some large MVPDs will do their own multi-channel app for viewing all of the networks they carry," he wrote, citing the examples of Comcast (Nasdaq: CMCSA) Xfinity, Sky Go, and Horizon. "These will win viewing also, by offering a great Internet on-demand experience on multiple screens."

But they are just in an initial skirmish in a longer war.

"The competition for Internet TV viewing, however, is just beginning," he wrote.

When it heats up it will include the existing networks who own the content; the providers who deliver the content and a new breed of players "like Netflix, YouTube,, and iTunes to build large-scale direct-to-consumer services that are independent of the traditional MVPD bundle," he concluded.

For more:
- see Hastings' investor blog post

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