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How can Netflix put all kinds of cool TV shows online for less than $10/mo with no commercials when cable companies charge people $75+/mo?

Netflix: Rising Content Costs Stump Growth - Seeking Alpha

From Reddit's "Explain Like I'm Five" subreddit.


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Great answer from Redditor bug-hunter:

Netflix may well get more expensive, as they signed their first round of content contracts early on, when no one expected Netflix to boom. Those contracts were comparatively cheap. (Here's a graph of how their content costs are rising fast.) They are somewhat protected now by their large number of subscribers.

Cable operators, on the other hand, have to buy content by the channel, and channels are bundled together by contract and contractually placed in their tiers. For example, you probably pay $4/mo for ESPN. In this case, the channel model is established, and content providers do not want to move to a la carte bundling (where you pay for only the channels you want). Cable also covers current events that Netflix can't (you can't get news coverage, live sports, etc.), though these outlets are finding competition (to varying degrees) by the internet.

Finally, Netflix gets to offer the cool shows after cable and the content providers have already funded their creation. Netflix can't exist in its current format without cable (hence why they are funding their own shows). Netflix is still somewhat priced as a value add-on for content creators, though new content contracts show that future pricing will be based as part of the total value expectation for content (so movie income will be based on its ability to draw viewers at theatres, buyers of DVDs, eyeballs on cable, as well as downloads on Netflix.

That Netflix cost-rising chart is telling:

Netflix: Rising Content Costs Stump Growth - Seeking Alpha

I never realized that sports channels account for about 40 percent of cable fees.

Sports channels are immune to iTunes and pay-for-streaming efforts from Amazon, Google, Netflix, Hulu, etc.

but not immune to,, etc.  some of the league websites are really good is great on my desktop and TERRIBLE on my smartphone.

But good point!

The Masters iPad app is pretty excellent if you're into, you know, golf.