Netflix is the one to watch

Ten and Nine should watch and learn as Netflix leads the way forward for entertainment providers, making streaming the new normal.

For Ten and other traditional broadcasters to turnaround their fortunes, taking a leaf or two from Netflix could be a good foundation to build a solid digital offering. It certainly is an interesting time for Nine as it primes to become a public company once again.

After Ten’s dismal results last week, September quarter earnings from Netflix indicate there is life beyond the old-fashioned free-to-air network model. The Ten faithfuls, anchored by James Packer and Lachlan Murdoch, might believe enough to guarantee a cash-advance facility but the share price suggests the market does not. Before today’s open, Ten was down 6.8 per cent since reporting.

Netflix is leading the way forward for entertainment providers in a digital world, where the streaming of television programs is becoming the new normal. The internet subscription service allows members to stream television shows and movies for a fee of $US7.99 per month. And it’s even free of ads.

Recording 29.9 million paid subscribers at the end of the September quarter saw Netflix overtake cable television operator HBO in number of US-based paid subscribers. A solid line-up of fresh content, including Emmy-winning hit House of Cards, with Kevin Spacey, makes marketing the Netflix offering easy.

Aside from providing consumers with a flexible way to devour the latest cult television shows, Netflix is also good at marketing and content selection. In fact, Netflix cited the strength of its content offering as part of its success. An area where Ten has faltered in recent times.

Ten is trying to get its programming back on track to attract viewers once again, aggressively chasing the rights to major sporting events including cricket and upcoming Winter and Summer Olympics. In contrast, Netflix offers no sport, perhaps indicating that television series are the sweet spot where revenue is concerned.

The way we consume television has changed. Between work, family and socialising it is becoming increasingly difficult for people to schedule a regular commitment for a television program.

The rise of smart TVs and internet TV has meant Netflix can leverage on the multitude of viewing platforms available, led by AppleTV. The beauty of Netflix allows members to watch as much as they want, whenever they want, providing they have an internet connection.

Netflix’s model has resulted in a surge of earnings per share and is resonating with investors. The stock is the biggest gainer on the S&P 500 this year. For the quarter, earnings per share came in at 52 cents, up from 13 cents in the same period last year. The growth in earnings simply highlights how quickly the industry is evolving.

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