Websites with paid TV series viewing are gaining popularity: Hulu, Amazon Prime, Amediateka and their peers have become main cinema houses for millions of viewers. Netflix is ahead of others in the market. This company has managed to earn half a billion dollars by combining the entertainment part of its business with up-to-date IT technologies.
In the 20th century, showing films and TV series was the source of income for traditional TV channels. They purchased video products from third party producer companies and got their costs compensated by selling advertising. In the modern world, viewers do not want to see advertising. And people are even less willing to wait for a certain period of time for the TV channel to run their favorite show. Films and series viewing has moved online.
Online video companies have not treated content production as their priority task either. Netflix changed this model, having become both a broadcaster and a producer of its own shows. This is the largest OTT operator in the world now (OTT stands for “over the top” and means providing video via the Internet), and the Price per share/Earning per share (P/E) ratio of the service is many times as high as that of other technology companies.
The P/E ratio of Netflix is above 200, while that of Google is around 60, Facebook – about 30, and Apple – around 20. The operator also wins comparison with Hollywood studios owners: the P/E of Time Warner is about 100, 21st Century Fox – below 20. Consumers value the service, too: 37% of all Internet traffic in North America is attributable to Netflix.
It is not by accident that telecom operators, Internet companies and media holdings have been demonstrating interest to video content recently. Globally, the situation is similar: the Comcast cable operator has gained full control over NBC Universal, one of the largest studios in the world producing proprietary content. AT&T was ready to buy Time Warner, which includes Warner Brothers, for more than $85 billion, however, questions raised by antitrust services resulted in the transaction being postponed till 2Q 2018. They must all be dreaming to repeat the success of Netflix. This will take repeating the eight steps that have brought the current leader to success.
Read full article on Forbes.ru here.
