Time Warner digital guru says Netflix will have to raise its prices

December 2, 2010 9:40 AM
Anthony Ha
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Time Warner vice president Olaf Olafsson said today that new media services haven’t figured out sustainable pricing models yet.

As an example, he pointed to Netflix, which just announced a streaming video service for $7.99 a month. That might work for now, he said, since most of the movies and TV shows on Netflix are older, so the studios charge less for them. However, if Netflix wants to compete with network and cable TV companies in offering new content, that model starts to break down. Acquiring the first-run rights to a single TV episode can cost millions of dollars, he said.

Olafsson made the comments at Business Insider’s Ignition conference in New York.

“It’s just not going to happen at $7.99,” he said. “We’re fooling ourselves [if we think it is].”

That doesn’t mean Time Warner isn’t open to online distribution. After all, Time Warner cable made the leap to satellite television. But these Web companies need to offer a lot more money before Time Warner is willing to sell its best content.

“We encourage all of that stuff, as long as people pay for the content,” Olafsson said. “That’s why we’re not on Hulu.”

  • http://solertium.com/alison Alison Heittman

    “Acquiring the first-run rights to a single TV episode can cost millions of dollars, Olafsson said.”This is applying the traditional TV business model to the internet – but they're apples & oranges. How do you define first-run when it comes to online viewing? I get that there's a release date/time, but we're not all parking ourselves in front of our monitors to watch a show the second it comes out. We watch it at our convenience – not the network's.

  • http://twitter.com/logicalmoron Matt Lynley

    I can see it coming already. Battlestar Galactica Season 5, Episode 12 — EMBARGOED UNTIL 9 P.M. EST.

  • http://www.venturebeat.com Anthony Ha

    Good points, but I guess I'm not quite making the connection between “we watch shows at our convenience” and “Netflix shouldn;t have to pay a premium for early access to those shows”?

  • http://www.venturebeat.com Anthony Ha

    I bet Cylons love embargoes.

  • http://solertium.com/alison Alison Heittman

    I'm questioning the concept of first-run, not early access. Is there a difference between the two? First run sounds very applicable to the TV model – as in Glee can be first seen on Fox on Wednesday at 8/7c. On the internet, would that be “Glee can first be seen online at Fox.com at whatever time the next day”? Is the first week or month it's available online considered a first run period? Because use of the word first is not accurate – I probably watch it twice, since I tend to be multitasking while streaming TV. How users get their TV is completely different when it comes to broadcast (I or my DVR has to access it at a certain day/time) and the internet (I can access it at one or more websites and watch it when I feel like it, or buy it on iTunes if I need to). Execs shouldn't expect to be able to apply the same business model when it comes to the internet. Accessing TV via the internet is about how and when and where the user chooses to do it, not when they decide to give it to us via a single fixed point in time and space.

  • http://wpcom.paidcontent.org/2010/12/03/419-what-netflix-wants-next-hint-not-in-season-tv-shows/ What Netflix Wants Next (Hint: Not In-Season TV Shows) — paidContent

    [...] hostile to Netflix in recent days, with CEO Jeff Bewkes and executive vice president Olaf Olafsson publicly questioning the movie service’s ability to maintain its recently discounted $8 subscription fee for the [...]

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