Is $1B enough to buy Netflix into the 'Big Boys' video club?

Jim O'Neil

Is the $1 billion check Netflix will write Epix over the next five years a big enough chunk of change for the DVD-by-mail company to buy its way into that more exclusive club of streaming video players like HBO? Does this signal a tipping point for over-the-top delivery?

Maybe, but maybe it's just another sign of how Hollywood is struggling and looking for new revenue streams as its own DVD revenue flow becomes a trickle.

It reminds me a little of the way many country clubs, which used to charge huge initiation fees for the chosen to become full members, have dropped their fees to try and balance their books as golf's popularity, and the disposable income level of Americans, has sagged.

The deal, announced Tuesday, gives Netflix subscribers--all 15 million of them--streaming access to new releases and older library titles from Paramount Pictures, MGM and Lionsgate, 90 days after they debut on Epix pay-TV channel and VOD outlets. For subscribers who stream--more than 60 percent do--that's a whole new catalog of titles to search and watch instead of paying for the right to access them through their pay-TV operators.

The Epix deal is the most recent move by Netflix to throw money at a problem--very little current content on its stream--that hasn't really seemed to bother consumers who continue to join the service and plop down $8.99 a month or more for regular mail-dropped DVDs. But, as those subs have increasingly turned to its streaming service to grab some instant entertainment, the company has worked to bring on more current content, like the deal it made with Relativity Media last month, and its agreement with Warner Bros. for some TV episodes.

There's no question Netflix increasingly is pressing against the pay wall set up by MSOs and IPTV operators; that wall is going to start to sag eventually as over-the-top delivery continues to mature.

Still, Jeff Weber, AT&T's VP of U-verse and video products, says he thinks the hype surrounding over-the-top delivery is a little, well, over the top, saying it was "a little Y2Kish."

"The business model around content and advertising and how that ecosystem fits together would suggest that the content guys aren't willing to just blow that relationship with the Comcasts and DirecTVs and AT&Ts of the world," he said. "Most people talk about over the top as a disruptive business model, and I see less threat there."

I think OTT holds more promise than operators ackowledge. And the Netflix deal with Epix, which makes Epix profitable for the first time (it's had trouble gaining acceptance from pay-TV operators), is a sign that perhaps not all the content guys are on board that train. The fact that Netflix can pony up $1 billion for a relatively small catalog of releases--and make a content provider a buck in return--also is a pretty good sign that the times, they are a changin.'-Jim

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