Studios are starting to play hardball with Netflix: Things are going to get dicey for Netflix in the next couple years. Content providers were willing to go cheap when renting DVDs at Blockbuster were the big thing, and streaming content from Netflix was an “other” thing. But now Blockbuster is dying and streaming is quickly becoming the thing, and when these contracts come up, the studios are going to want to be compensated for it.
Pachter predicts Netflix’s streaming content licensing costs will rise from $180 million in 2010 to a whopping $1.98 billion in 2012.
When streaming video was new, Netflix was able to secure contracts with the likes of Warner Bros. Studios and MTV to license big TV and film catalogues for about $5 million to $10 million per year. This time around, Pachter says, those costs could increase more than tenfold.
Look at those numbers again. That’s more than a ten-fold increase in licensing costs. You’re crazy if you don’t think you’re going to see that on your monthly bill.