CBS is rebooting 'Star Trek' and it's a huge win for Netflix

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CBS is getting ready to reboot "Star Trek."

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And this is a huge strategic win for Netflix for two reasons:

1. CBS will sink time and resources into Star Trek, allowing Netflix to go pursue original, new shows CBS is passing on.

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2. CBS is going to be a streaming service, lowering itself to the same level as Netflix, wiping out one of its big advantages as a channel fed straight into your home on a cable box.

Let's dig into these further...

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1.

The "Star Trek" movie reboots have been enormous financial successes - which means at least two more are slated to be released before the end of the decade - and this, of course, led to the inevitable TV show reboot.

But not only will CBS distribute this show through traditional broadcast TV, it will also stream the show through "CBS All Access," its sort of in-house Netflix offering that gives users access to live CBS and archived shows for $5.99 a month.

So in terms of media strategy, there are two things going on here and both of them are wins for Netflix.

Reed Hastings

REUTERS/ Mike Cassese

Netflix Chief Executive Officer Reed Hastings.

The first is that the economics of nostalgia and repetition have proven reliable for movie studios over the last several years, and as a result we've seen a healthy dose of remade classic movies or sequels of recent hits.

And now this trend is coming for TV.

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So while CBS is and should be confident in the success of producing more "Star Trek" content, they are doing this at the expense of something else and potentially something original. The next "Big Bang Theory" or "Everybody Loves Raymond" is not being made by CBS, which gives smaller studios willing to take bigger financial risks, like Netflix, the chance to acquire projects that are going unmade by entrenched players.

And why does this count as a win for Netflix? Because Netflix plans to spend a lot more - $5 billion more next year alone, in fact - on original content. This means that Netflix wants to become the place you go to watch its own shows, like "House of Cards," for example, instead of reruns of "Friends."

The reason for this strategy shift is that as the cost of buying the rights to stream old episodes of shows like "Friends" increases, Netflix could eventually see the core appeal of its business fall apart. So to preempt this shift, Netflix has decided to just make the good stuff itself. In this sense, Netflix wants to become more like HBO.

And so seen this way, CBS' decision to invest in original content that isn't exactly original makes Netflix's value proposition as an original content studio stronger, which is exactly what Netflix wants.

Earlier this year Netflix announced it would increase the price of its most popular streaming plan to $9.99 a month from $8.99. The company also expects that at the end of this year, it will have about 74 million members.

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But clearly the company doesn't think it's next leg of price increases or user growth is going to be driven by people who want to re-watch "Breaking Bad": this will be driven by people who want to watch whatever original show you can only find on Netflix.

2.
House of Cards

Netflix/House of Cards

The second way the "Star Trek" news benefits Netflix is that by putting "Star Trek" on its own in-house Netflix-like streaming offering, CBS is trying to force itself into a "next-generation content bundle," which will probably be a sort of collection of apps that offer a few channels each.

Basically, CBS is now playing Netflix's game.

This next-generation bundle could involve you the viewer having, say, an Apple TV, and then through that device subscribing to Netflix, HBO, maybe an ESPN offering, and a package of Turner channels (like CNN, TNT, and TBS, for example). This would be in lieu of a cable box and traditional cable subscription.

There would probably, in this future bundled world, also be apps for CBS (perhaps combined with some Viacom channels), an app for ABC + Disney channels (either with or without ESPN), and then an app for Discovery Networks channels (which include channels like Discovery, TLC, and Animal Planet, among others).

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This list goes on (we can easily imagine, say, a BuzzFeed TV app), but you get the idea: you're probably going to buy a slimmed-down collection of channels from various content creators through an app.

Netflix CEO Reed Hastings kind of sketched out what this could look like on the company's latest earnings call, telling Re/code's Peter Kafka that these types of apps could emerge over the next 5 or 10 years, adding that, "I think everyone is just racing to make a great app like Netflix, like HBO Now, those things." In short, Netflix doesn't think it will be considered a "streaming TV service" in the future so much as it will simply be a TV channel.

And so what you would want to offer inside one of these apps is what media executives would call a "differentiated suite of content offerings."

This, while being an an epic mish-mash of corporate speak, means a lot of different things to different companies, but more or less means you need to offer good content a user would expect to get from your brand.

A "differentiated suite" for Netflix probably means lots of good TV shows their subscribers want to binge watch.

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The same thing for CBS probably means a mix of sporting events - CBS currently has NFL games, professional golf, and some college football and basketball - and easily-watchable sitcoms like "The Big Bang Theory" and a re-boot of "Star Trek."

star trek

NBC

Star Trek's original series.

But whereas the cable bundles consumers have become conditioned to purchase over the last 20 years include lots of stuff you want and a similar (or greater) amount of stuff you don't, the bundle of the future probably has fewer channels but is more tailored to your preferences.

You want to watch sports? You can subscribe to two or three apps and get all of those needs met.

You only want to watch TV dramas? Same thing, except you're probably subscribing to two or three completely separate offerings.

Right now, cable and content companies are getting both of those services paid for by the same customer. In the future, that will change, and with it will go a very large and stable revenue stream.

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But so while few things might be more dependable than a rebooted version of "Star Trek" and a half-dozen NFL games each week, the attractiveness of CBS' bundle isn't what matters to Netflix.

What matters to Netflix at this point in the cycle is that other content creators and distributors are starting to play the game their way.

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