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