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

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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.”