Yet another week, yet another slew of Netflix news, this week dominated by Netflix's Canadian master plan.
This week Netflix locked up Canadian rights to hundreds of titles from (Viacom's) Paramount Pictures (yes, the same Viacom complaining about TWC's iPad app). As reported in The Financial Post, the five-year deal is for exclusive distribution of "first runs" on all future premium titles such as pending releases Iron Man 2 and The Last Airbender, which essentially puts Netflix in direct competition with Canadian pay-tv operators and their premium movie channels. (Really? Come on!) The multi-year deal basically deprives incumbents of the rights to new Paramount titles and hands them exclusively to Netflix (on top of another 350 older titles which Paramount is providing to the Netflix library). Yep, that's a competitive threat, one even Netflix cannot wash away with wordplay.
Netflix is keenly aware that Canadian incumbents and regulators will bring greater pressure on the U.S. company as its capacity for disruption grows. In a move to preempt these forces - and counter the bandwidth caps that characterize Canadian residential broadband service - Netflix announced this week that it will give Canadian viewers the option to view a Netflix movie at lower bandwidth, thereby aiding consumers in their efforts to stay within their bandwidth allotments.
Netflix Chief Product Officer Neil Hunt noted that the new service will use two thirds less data "...with minimal impact to video quality." For example, 30 hours of Netflix streaming consumers only 9-Gbytes of data, "well below most caps." If users notice lower picture quality with these new settings, they can switch back to their higher usage settings.
In the words of one Bay Street investment banker:
"Netflix is now securing exclusive distribution rights to content in Canada, and it is selling subscription-based access to this content to Canadian households. Therefore, they are acting as both a pay TV operator [such as Astral] and a cable company [such as Rogers]. Fine and dandy, except that in Canada both pay TV operators and cable companies need to be Canadian-owned and licensed by the CRTC. Netflix does not meet these requirements and it does not pay the fees to support Canadian content that legal providers in Canada pay."
Consequently, many Canadian observers believe that Netflix will be forced to comply with Canadian regulations, even set up a Canadian subsidiary. This would no doubt mean extra costs for the new Netflix-Canada, which are likely to be passed on to subscribers in the form of higher monthly fees.
In separate news, Miramax announced it will soon join the OTT mix and is in licensing talks with Netflix, Amazon, Hulu, Google, and others to distribute its 700-film library via the net. No agreement has yet been reached, though terms of deal are said to in the $100 million range, and would include titles such as Pulp Fiction, Chicago, and Good Will Hunting.
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