Since 2011, Netflix CEO Reed Hastings has sat on Facebook’s board, and as Facebook’s plans to fund TV-style shows take form, many are naturally curious what ideas Hastings shares with Mark Zuckerberg — and whether Netflix and Facebook will ever be seen as head-to-head competitors.
Netflix and Facebook seem to share a crucial thesis about the future of TV shows (NFLX, FB)
Netflix and Facebook appear committed to the idea that, with global digital scale, TV-quality shows can be sustained primarily by a single big revenue stream.
That said, with Netflix predicting its negative free cash flow will be $2 billion in 2016, and that it will continue to burn cash for “many years,” that is a thesis that may not be completely tested for awhile.
It’s not a sure thing for either Netflix or Facebook that standing on one major revenue leg will be able to sustain the kinds of shows you’d see on cable TV. (Netflix could diversify beyond subscriptions and into things like merchandise, without having to get into advertising, but subscriptions will likely remain the major pillar.)
Other companies looking to disrupt TV are going the more traditional pay-TV route, with a combination of advertising and subscription.
It’s not surprising that Hulu, which is owned by big TV companies, is trying to keep that business model intact. The ad load might be lower than cable, but Hulu is still firmly in the dual revenue camp. And those betting on new online “skinny bundles,” which are essentially cable packages delivered over the internet, are also hoping the subscription-ad combo can make it across the digital divide. That includes services like Sling TV, DirecTV Now, YouTube TV, Sony’s Vue, and many more to come.
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