Fitch: Netflix woes proof of pay-TV ascendency

Joseph O'Halloran ©RapidTVNews | 31-10-2011

The recent travails, particularly subscriber losses, incurred by Netflix provide firm evidence that over-the-top (OTT) television will remain largely incremental to traditional pay-TV according to a Fitch Ratings report.
The ratings firm says that it continues to believe that the cable and broadcast TV models, and their subscriber bases, will not be significantly negatively affected through at least the medium term.
Furthermore it cautions that OTT service providers' content line-ups need to be significantly larger and more compelling than is the current case in order to be a viable substitute for traditional TV for mainstream audiences.
Yet Fitch expresses concern that Netflix's and other OTT providers' content acquisition costs will continue to rise due to both library expansion and higher prices demanded by the content providers.
Even though Fitch accepts that subscriber growth will offset some of the costs, it also expects higher prices will be inevitable to retain profitability.It also does not believe Netflix will have the ability to raise price to a degree that would allow it to quickly scale its library to compete with cable and broadcast television.