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TheStreet Open House

How Netflix Will Be the Next TV Network

Stocks in this article: NFLXCBSFOXAWWETWX

NEW YORK (TheStreet) -- Netflix (NFLX) is the king of online streaming video, with its 35 million and growing domestic subscribers, and seemingly ubiquitous mind-share in the space. However, as content gets more expensive, and as more consumers turn to wanting content when they want it, Netflix is going to head to head with larger cable networks -- and in some cases winning.

Speaking at the Streaming Media East conference in New York, Beth Clearfield, senior vice president of Digital Distribution & Business Development at BBC Worldwide Americas, noted both Netflix and Hulu are already rivaling small and large cable networks as consumers eyeballs turn to streaming media for content, and less to traditional methods, including standard television.

"Netflix is growing faster than the overall steaming market," BTIG analyst Rich Greenfield said during the same panel discussion as Clearfield, noting that video on-demand services from the content creators themselves, including companies like 21st Century Fox (FOXA), are subpar to those from Netflix, Hulu and other streaming video on-demand services.

Research firm Sandvine noted Netflix accounted for 34.2% of downstream traffic during peak traffic time, up from 31.6% in the second half of of 2013. The Sandvine report the increased traffic was being driven by "the availability of higher bitrate Super HD content to all subscribers, while in our 2H 2013 report it was only available to subscribers on networks where Netflix's OpenConnect CDN appliance had been installed."

Netflix has become more known for its original series, such as House of Cards and Orange Is the New Black, as the company transitions into becoming a content creator, as opposed to a content distributor. Right now, content companies such as CBS (CBS), Fox, Walt Disney (DIS) and others rely on Netflix for additional revenue for licensing their content.

"Right now, the money companies are getting from Netflix and Hulu is great -- it's free money," Greenfield said. "The fear is when do people start producing own content on their own nickel, and stop needing distributors?" He cited two prime examples of this, Glenn Beck's The Blaze and World Wrestling Entertainment (WWE).

In January, WWE launched the WWE Network, a streaming service for $9.99 a month that packages all of their content, including their pay-per-views (now known as special events), including WrestleMania.

With Netflix paying "a couple of billion" for content a year, as Greenfield noted, the company has to evolve to becoming an original content creator, similar to what HBO has done, because of how expensive has gotten in recent years. Netflix recently instituted a price increase of $1 or $2 a month in certain countries, due in part to help pay for rising content costs.

It won't happen overnight, however.

"It comes down to content," Greenfield said, when asked whether Netflix has room to raise prices even more. "If it's great content people will find it. People will pay for it. There's something new on HBO every month, and Netflix, they're shooting to be that. HBO started out with Dream On, and now it's on Game of Thrones. Netflix is making progress, but it's not going to happen overnight."

Also See: Netflix Proves Cash Is King When It Comes to Content

Also See: Here's Why the WWE Network Is a 'Ground Breaking Event'

Also See: Why Netflix Is Raising Prices

--Written by Chris Ciaccia in New York

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