This decision is a result of our strategy to protect the premium nature of our brand by preserving the appropriate pricing and packaging of our exclusive and highly valuable content. With our current studio rights and growing original programming presence, the network is in an excellent position to evaluate new opportunities and expand its overall business.In other words, we cannot continue to allow Netflix to farm our content out to a growing subscriber base for the Wal-Mart ( WMT) price of $8 a month. Simply put, Netflix, because it is so cheap and all-you-can-eat, dilutes premium content. With that mind, an increase in listener hours could actually present similar problems for Netflix. But, again, we do not know the terms of its content deals because the company does not release them. There's a bigger issue holding Netflix back that very few people have discussed. We approach it from a disadvantage because, once again, we can only guess what the terms of the typical Netflix content deal are. There's lots of talk about the apparent problems Facebook, Pandora ( P) and other new media outlets have "monetizing" users, particularly those who gain access via a mobile device such as a smartphone or tablet. It seems that whether desktop or mobile, Netflix actually has the larger, more pressing monetization issue.
FB) page lauding his content licensing team for Netflix's first month (June) with more than 1 billion viewing hours.
Best-case scenario -- this means not only more subscribers, but a solid return to subscriber growth for Netflix. Even in the best-case scenario, though, Netflix has issues that warrant caution. The public never sees the contracts Netflix signs with its content partners. It was well-publicized last year, however, when Sony ( SNE) pulled its movies from Netflix streaming as part of the Starz contract, that Sony has the right to remove content once Netflix passed a subscriber threshold. Shortly after Sony made its moves, Starz severed its ties with Netflix, noting, via press release:
Netflix has never taken the e-commerce route. And it does not have ads on its website. You can think of quite a few logical tie-ins, ranging from sales of content-related merchandise to deals with pizza restaurants to deliver food to movie-watchers. Because Netflix has location data on its users, it could forge local deals much the same way Pandora does. There's really no limit, all else being equal, to what Netflix can do in this regard. But all else is likely not equal. Netflix, for all intents and purposes, counts one meaningful stream of revenue == cash collected from streaming subscribers. It's in the process of torching its DVD business, which once provided high margins and much-needed money to chase content and fuel international expansion. Investors should worry about one-trick ponies such as Netflix. Multiple, synergistic revenue streams belong on every Is this a worthy investment? checklist. Why hasn't Netflix moved forward with e-commerce in some fashion, be it from the typical to the creative? I do not buy the argument it would hurt the user experience. Done well, it could actually enhance it. Instead, and I would love an answer from the company on this, I can only assume Netflix's content contracts constrain its user monetization possibilities. If Sony and Starz felt like they were getting robbed because they were effectively giving away their content, how would they, and others, feel if Netflix turned that $8 a month into much more from users who took the bait on an e-commerce initiative? In practice, Netflix would be using somebody else's content to pump its own revenues. (Of course, it could work out a revenue share deal with the content owners.) Maybe Netflix will, at the very least, test some sort of e-commerce pilot with its own original programming. It should tinker. Like any other company in the broad tech/Internet/new media space, Netflix needs to bring multiple revenue streams to the table, revenue streams that talk to one another, that fuel one another. Buzzword: synergy. This potential issue, assuming I am not missing something or Netflix simply just chooses not to go this route out of some purist ethos, only underscores who the winners are in the media space. It's not middlemen or glorified bootleggers such as Netflix. It's the old-guard establishment. The types of media companies I argue define the word value. Facebook and Pandora do not have monetization "problems" of any kind. Both companies have incredibly clear ways forward. They're executing. You just cannot expect massive change -- and the structures that nurture it -- to complete overnight. Netflix has the issue, whether it's just not willing or simply not able to squeeze more than $8 a month out of its diverse and burgeoning subscriber base. This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.