With ad pages in freefall, magazines shedding titles, and the future of magazines in flux, things are looking more than gloomy for the ad industry lately. And the same fate is likely to befall the dvd industry, according to Netflix CEO Reed Hastings.
Speaking at Magazine Publishers of America’s Innovation Summit, Hastings noted that his business is on track to suffer the same fate that magazines are enduring now. Is there anything to be done about it?
Netflix has made its name out of eating Blockbuster's lunch — capitalizing on the changing technological landscape and moving consumers toward a subscription model rather than a pay per use rental system. But as technology continues to change, the physical rental of dvds is also soon to be a thing of the past.
Netflix currently straddles both worlds. While it offers streaming movies online for free to paid subscribers, that model is not yet providing a viable revenue stream.
According to PaidContent, Hastings says they are just getting users acclimated to the online viewing experience at this point:
"We have the same tensions between print and online. The broadband people can’t believe they have to support the DVD side. But we’re working towards the day when streaming is dominant. We’ll have to deal with it. But right now, our focus remains on the DVD side.”
Asked if a "Netflix-for-magazines" could work, Hastings said that bundling magazines for a subscription fee could be a working business model. But the problem arises when John Byrne, BusinessWeek.com’s editor-in-chief, asked Hastings if he'd be willing to pay for that service. According to PaidContent:
"Hastings hesitated, but with Byrne’s gentle prodding—and looking out over a magazine audience who just finished their lunch—shrugged and said sure."
That's not a very reassuring answer. And unfortunately, consumers who are making purchasing decisions are even less likely to pay for something they currently get for free online.
Hastings is aware that a similar digital transition is coming for his own business, which puts him one step ahead of Blockbuster when Netflix came gunning for its business a few years ago.
But coming out on top at the end of the next shift is another story. There are more high quality video purveyors online every day. While Hulu may mostly stream television content now, if users get accustomed to going there for their video needs, it will be hard for Netflix to peel off users in the space. Similarly, YouTube is working toward partnerships with more film companies to get their content streaming on its site. And YouTube's footprint with consumers is a powerful thing.
When web viewers do start going online for all their film needs, will they be interested in a subscription model like Netflix' or an ad model, or something entirely different?
It's clearly not a content problem that faces the magazine industry now, or Netflix in the future. It's a payment issue.
As Hastings said of magazines, and foreshadowed his own issues, at the Innovation Summit:
“I read them online. I love the content, only now I don’t pay for it.”
Image: PaidContent
Based in New York, Meghan Keane is US Editor of Econsultancy. You can follow her on Twitter: @keanesian.
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6:31PM on 15th October 2009
Stupid title for this article, it is discussing whether the dvd rental business will go the way of the magazine industry. There will still need to be a film industry to produce the films regardless of whether consumers access them via streaming or dvd.
US Editor at Econsultancy
6:33PM on 15th October 2009
Hi Andrew. Sorry to disappoint on the title, but it's not just dvds. It's also streaming videos. Awhile ago it was VHS. It's more film distribution than dvds. Actually, might change the title to that.
Director Marketing at Sharkstores LLC
11:41PM on 16th October 2009
I don't believe the magazine industry will die. Neither will the feature rich dvd's (or whatever physical form they take). Why? People need social objects. When i go to a friends apartment i can learn a wealth of information about them by the newspaper they have laying around, the dvd case next to the television, the magazine in the bathroom. Not only do this act as clues to understanding what the person values but they also provide an amazing conversation starter.
Now, have i facebooked the person before going to their house? Do i know their favorite movies the music they're into, and what they've been doing lately?...probably. But nothing bonds people together then sharing over a physical social object.
Right now we're on the extreme of the pendulum with everyone consuming online and assuming the next generation is going to continue the upward consumption of online media. This isn't going to be the case, we're about to flatten out. Based on my experiences with the 'next generation' i can tell you that they value the physical world and time away from the computer as much as everyone else.