Netflix's 'Long Term View' lays out predictions for internet vs. traditional TV delivery

Haven't been reading every Netflix quarterly report or listening to each earnings call for the last several years? No problem: you can quickly get caught up on the company's strategy thanks to a "Long Term View" document posted to its investor relations site. Boiling down many of the things executives like Reed Hastings have been saying into a single PDF, it's easier to digest road map of where Netflix thinks this whole online video thing is going. Among other things, it sees the simplicity of its offering -- no ads, no VOD, no-hassle cancellation, access on any screen at any time mobile or TV -- as a main selling point. How to keep customers happy? Make sure that they think of Netflix as the better option for their entertainment time than other possible choices. Hit the source link to dig into it yourself or check below for a breakdown.

One tack explained is Netflix's drive to keep expanding into new countries at such a rapid pace -- it's taking a page from other video subscription services. Citing others (broadcast, cable) that eventually achieved "profitability and scale in a market" and then sustained them over decades, it predicts a similar future for itself until whatever is "beyond streaming" arrives. Netflix isn't throwing dirt on their graves just yet though, saying most customers see it as complementary to standard pay-TV and specifically mentioning that despite a 30 million-strong customer base, it's observed an "absence of cord-cutting." Between that trend and its importance to so many customers, it's still holding out hope to work with more ISP / video providers for initiatives like the OpenConnect program with Super HD. So how big can Netflix get? Eyeing HBO's 30 million or so subscribers, it sees potential growth to 60 - 90 million US members thanks to the aforementioned simplicity and its cheaper price.

Much of the revenue those members generate goes to content, which it's spending around $2 billion per year to license. Even throwing around that amount of cash it can't afford to pick up every thing available, so how does it choose? According to the document, while Netflix seeks to have a broad library that crosses many categories, there are other factors at play. Though it prefers to offer the best in each category, it has so many options that even the most in demand movies and TV shows don't "materially swing" viewership numbers. How much it's willing to pay then, depends on how much it's been watched, how much similar content it has, and ratings. Things get even more complicated in international markets, or as it gambles on original content, though any competitors to the crown will have the same issues without the head start. Additional issues will arise from growing competition, and Netflix has singled out HBO as its number one future competitor to license content.

There's room left over for a description of the company's approach to original content, as the experience it's developed picking reruns out of the bargain box is applied to selecting all-new content for future exclusives. After judging concepts, it hands them off to studio partners to execute the actual production. Netflix's setup also allows for far more flexibility than the usual squeeze for prime-time hours. What we've seen so far has mostly stuck to traditional time windows and seasonal layouts despite the all-at-once release strategy, but that could change. That release method seems to fit its Watch Instantly promise and viewer expectations so far, since the company notes "huge numbers of members" are still just starting House of Cards months after launch. Still, it's not diving into original content at the expense of everything else just yet. Netflix anticipates spending on originals will be less than 10 percent of its content budget for the next few years.

These are just some of the highlights of the document of course -- a bet that 4K streaming will proliferate "long before" linear TV makes the shift jumps out -- and a full read through should display even more information. Coming in one piece instead of the drips and drabs of PR, interviews and SEC-angering Facebook posts, it's a more coherent style of communication than we're used to. What are still unanswered however, are the questions of users missing features like DVD queueing in official mobile apps, the recently-killed RSS feeds that used to serve up a comprehensive list of new content and its walking-dead public API program. Taken as a whole however, it's clear there's little room left for plans outside its main service + app approach. We've seen Netflix's rush to move forward result in setbacks before, what happens next and how viewers respond will be nearly as interesting to watch as any of the original series it has planned for the next year.