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Rewind: On Netflix, Hulu and Kilar Bold Moves

In February, I wrote this post on Jason Kilar’s treatise on video licensing economics (a great 101 if you’re interested in media licensing).

In Kilar’s post, he makes a big stink about rights owners demanding a per user per month fee for their content (something that is standard in cable deals between folks like Comcast and channels like ESPN). I speculated that Kilar was pushing this out of fear — that he was worried about this big pot of money Netflix could spend on simple fixed-fee deals (instead of per-month, per-user fees), an area where Hulu doesn’t have the cash to compete.

Reading Megan McCarthy’s piece tonight on The Atlantic (hat tip @persingerscott) makes me think it was a more nuanced, and much bolder, move — indeed, a smart bit of chess playing by Kilar. As McCardle points out, when media companies push for traditional cable-style per-subscriber per-month license fees (accompanied by hefty guarantees of course) it puts enormous pressure on Netflix’s margins. Kilar (and Hulu) know that.

Whereas similar demands (which most certainly are being made) to Hulu are less painful for them. Hulu’s subscription offering is, at least at this point, non-strategic. It’s a nice to have. The main game for them is advertising. So they can better afford to advocate these stye deals, which in turn are painful for Netflix to digest.

I don’t know, of course. what Kilar was thinking, but it’s all a good reminder that there is a fascinating battle being waged right now for digital media rights, and that even an entrenched digital incumbent like Netflix is struggling to keep pace with the rapidly changing terrain.

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