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Ken Auletta has written Annals of Communications columns and profiles for The New Yorker magazine since 1992. He is the author of eleven books, including five national bestsellers: Three Blind[…]

The New Yorker’s Ken Auletta on the future of online original content.

Ken Auletta: Amazon, YouTube and Netflix have three different models.  They do original content but they do it in a different way.  In Netflix’s case most of their content is not original.  Only roughly two percent of their budget is originals but they’re increasingly spending more money.  House of Cards they made 100 million dollar commitment for two seasons but now they’ve just signed to go to a third season of that and they’ve got some other original programs like Orange is the New Black and some others.  What Amazon has done is the different model there is they basically said if you spend $79 a year to get free delivery of any Amazon product we will throw in free video.  So you can watch movies or some of the original Gary Trudeau series they’ve just done, some of the originals like that that you can do.

But essentially it’s – you’re not an individual subscriber.  Netflix you’re paying $8, you know, a month to be a Netflix subscriber.  And Amazon you’re paying the $79 for delivery.  And we don’t know and they don’t tell you how many of them are watching video.  Amazon’s very secretive about its numbers.  But in a way what they’re doing is what they did with the Kindle or with books.  They subsidize. They give things at a low price to you in order to get you into their store to buy other things.  And they’ve been very successful.  What YouTube does – still another model – they moved away from user generated content.

But increasingly they’re trying to produce more professional content.  It tends to be of shorter form, you know, quicker shows, et cetera.  But they are buying product, as is Verizon and AT&T and some others.  So there’s a lot of competition in that space.  And increasingly, I mean, Reed Hastings of Netflix predicts that within just a couple of years half of the television that we watch will be delivered over the Internet.  That’s a big deal because it means that you can do binge watching.  You can know more about your customers and you can schedule for yourself.  Then one of the questions would be – and this is a big question - if I control my television set for the digital video I’m watching and be it through my cable box or some other form, I can skip ads.

What happens to advertising supported cable networks and particularly broadcast networks that are relying on advertising?  That’s a huge question because the people who are watching Netflix and the kids who are watching YouTube or the people watching Amazon – they become accustomed to not having to watch ads.  And, in fact, half the people who have a cable box, you know, with a DVR ability to tape shows are skipping the ads.  So what happens to advertising supported television?  And if advertising supported television is in trouble, who’s gonna pay four or five million dollars an episode for some quality drama like say The Good Wife on CBS?  Big issues out there.

Directed/Produced by Jonathan Fowler, Elizabeth Rodd, and Dillon Fitton