05.01.2013 11:38 AM
Netflix unveils plan to replace broadcast television
The company’s “Long Term View” lays out its role in the battle with OTA distribution.

While detailing its predictions for the future of video distribution, Netflix gets to the point quickly: “Over the coming decades and across the world, Internet TV will replace linear TV. Apps will replace channels, remote controls will disappear and screens will proliferate. As Internet TV grows from millions to billions, Netflix, HBO and ESPN are leading the way.”

That's according to Netflix’s “Long Term View,” a new document that lays out the company’s role in the battle with traditional television broadcasting. While Netflix agrees that viewers love television content, it doesn’t think viewers care so much for the linear television experience.

“ ... People don’t love the linear TV experience where channels present programs at particular times on non-portable screens with complicated remote controls,” the company wrote. “Consumers click through a grid to choose something to watch. DVRs and VOD add an on-demand layer at the cost of storage and increased complexity. Finding good things to watch isn’t easy or enjoyable. While hugely popular, the linear TV channel model is ripe for replacement.”

Netflix said most of the world’s leading linear TV networks are moving toward Internet TV. The WatchESPN app runs on many Internet platforms and is specifically designed to showcase sports. ESPN will keep improving their app to try to stay ahead of MLB.tv, which is another Internet TV sports app.

The HBO GO app, Netflix said, makes HBO’s films and series much more accessible than on HBO’s linear channel. The BBC iPlayer app in the UK provides a rich and popular on-demand interface for a wide range of BBC programming. The other major linear networks are not far behind.

From a business terminology standpoint, HBO and ESPN are cable TV networks, and Netflix is an Internet TV network. From a consumer terminology standpoint, however, Netflix is a service and an app, while ESPN and HBO are channels, and WatchESPN and HBO GO are apps.

While Internet TV is only a small percent of video viewing today, Netflix said it will grow every year for the following reasons:

• The Internet will get faster, more reliable and more available;

• Smart TV sales will increase and eventually every TV will have Wi-Fi and apps;

• Smart TV adapters (Roku, AppleTV, etc.) will get less expensive and better;

• Tablet and smartphone viewing will increase;

• Tablets and smartphones will be used as touch interfaces for Internet TV;

• Internet TV apps will rapidly improve through competition and frequent updates;

• Streaming 4K video will happen long before linear TV supports 4K video;

• Internet video advertising will be personalized and relevant;

• TV Everywhere will provide a smooth economic transition for existing networks;

• New entrants (like Netflix) are innovating rapidly.

Eventually, as linear TV is viewed less, Netflix said the spectrum it now uses on cable and fiber will be reallocated to expanding data transmission. Satellite TV subscribers will be fewer and will mostly reside in places where high-speed Internet (cable or fiber) is not available. The importance of high-speed Internet will increase.

Netflix said its key strength is simplicity. “We are commercial-free unlimited-viewing subscription TV,” it said. “We don’t have pay-per-view and we don’t have advertisements. Those are fine business models that other brands do well. We choose to be the best at our model, and to have our brand stand for commercial-free, unlimited viewing and low flat monthly fee.”

Netflix said it could look decades into the future at the ways that people access entertainment. “We would no doubt see a very different image than we see today — mind-blowing video quality, a proliferation of screens, yet-unimagined natural user interface and an unbelievable range of choice.”

The full “Long Term View” document is available online.



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