This past weekend Netflix announced that it was not renewing its streaming deal with cable channel Epix, and as a result, movies like The Hunger Games: Catching Fire, The Wolf of Wall Street, and Transformers: Age of Extinction will be disappearing from the service by the end of September. Hulu signed up with Epix instead (Amazon Video already has a deal), and Netflix’s attempt to soften the blow — "Hey guys, we’ve got new Adam Sandler and Pee-wee Herman movies coming!" — was met with swift and merciless ridicule.
Behind all the sturm and drang is a basic truth: consumers want a single subscription service that can offer all the movies and TV shows they could possibly want, all in one place. Conditioned by years of streaming music services, audiences simply expect a Spotify-style service to become a reality, and anything that veers away from that goal is seen as a momentous failure.
There’s just one problem: a Spotify for movies and TV is never going to happen. And that’s just the way the studios and services want it.
Collecting all the content was never the point
When Netflix first got into the streaming game, it wasn’t even a matter of collecting all the content; it was a question of collecting enough content to justify the service’s own existence. A lot of those movies came from side deals with cable channels: rather than getting movies from studios directly, Netflix could sub-license from channels like Starz (or Epix), and let those catalogs flow into its own online library. There tended to be some quality issues back in the day — Starz was particularly notorious for serving up pan-and-scan versions of movies — but it was a quick way to build a catalog when Netflix was best known for mailing out plastic discs.
It also came with some pretty major downsides, like when Starz realized just how much value it gave to Netflix, and ended up pulling out of negotiations in 2011. At the time, Netflix CEO Reed Hastings estimated that Starz content accounted for 8 percent of Netflix’s domestic viewing, and his company’s stock plunged appropriately. Epix pulled a similar move in 2012, when it decided to not move forward with Netflix on an exclusive basis, and instead began working with Amazon as well.
For consumers, the Epix / Amazon deal was a great step — more places to find your favorite movies. But for a company like Netflix, non-exclusive content is far less valuable. When a movie is available everywhere, it becomes a commodity instead of a differentiator, moving the competition to less quantifiable terrain such as value and quality of service. Get in the ring with someone like Amazon, which uses its streaming service as a value-add rather than a revenue generator, and you’re talking about asymmetrical warfare.
Given that television also offers a higher chance of sustained viewership than movies — we’ve all binged a season of a favorite show, but nobody really sits down to binge all of Will Ferrell’s movies — Netflix’s decision to not renew with Epix starts looking like a sound strategic decision.
Not renewing the Epix deal starts looking like a sound strategic decision
The exclusivity war is at its fiercest in the world of TV, where, it’s become the focal point. Amazon in particular has been on a tear since 2013, locking down shows like Justified, Under the Dome, and Orphan Black. In fact, Amazon feels so strongly about exclusivity that it gave up Doctor Who earlier this year rather than agree to a deal that would have let other services have the show at the same time. The newly reinvigorated Hulu has been making headlines almost entirely around its exclusive deals, keeping everything from Seinfeld to Fear the Walking Dead out of the hands of its competitors.
And none of this is touching on the original shows and movies that all of the services are producing themselves — essentially the most exclusive content imaginable.
The objective is to make sure you never search at all
On one hand, it’s tempting to look at this scenario as a temporary moment; a transitional period between different eras of media that will eventually give way to the kind of service consumers really want. But if that’s the case, there’s no sign any of the parties involved are actually trying to make that happen. On the product side, Netflix has been laser-focused on creating a singular user experience across all devices, with one goal in mind: keep audiences watching. From its recommendation algorithms to its auto-play features, the objective isn’t to make sure you find what you want when you search — it’s to make sure you never search at all. Once the exclusive content lures you in (and when Netflix’s Disney deal kicks off in 2016, Pixar, Marvel, and Star Wars will do a lot of luring), you can just sit back and enjoy a custom-curated stream; the lean-back passivity of television reasserting its claim over the theoretical choice of digital.
The streaming companies are content to jockey for exclusive contracts, but the media companies want it that way too: for them, there’s real benefit in keeping their wares spread out across multiple services. Hollywood learned the lessons of the music industry well, and while record labels rushed into digital arms, seeking salvation, the rest of the entertainment industry has been patient and cautious in both preventing piracy (the tyranny of HDCP) and keeping any one single player from gaining too much power (sorry, Apple). Netflix’s rapid success essentially encouraged studios to breathe life into its competitors, and as long as those fears exist, it’s unlikely the dynamic will shift.
Hollywood learned from the music industry's mistakes
So instead of the versatile, open future that once seemed so possible, we’re instead looking at a fragmented landscape that looks a lot more like cable television: you can get some of the shows you want from one service, but you need all of the services to get all of the shows. Given the complexities involved, the only foreseeable way consumers could get what they actually want is for some sort of massive, dystopian merger to take place, or for a single service to achieve such incredible popularity and success out of left field that it assumes de facto monopoly status. Although I suppose the entertainment companies could all get together, hash everything out, and build one master service to rule them all.
Yeah. Good luck with that UltraViolet account.