So disclaimer, other than being on one TV show[1], I've got very little experience with the business of setting up, selling, and marketing episodic content. I've read about it, I've read articles on Netflix's strategy, I've read articles on Amazon's strategies, and occasionally invested in companies that were in this space (not currently however). But with that out of the way.

My reasoning is looking at the "long" game here. For example, back in the 80s a production company would "pitch a series" to a "network". The network was a company that paid for the production and in return retained rights on the resulting show which it either aired, syndicated, or resold via other channels (essentially in perpetuity given modern copyright law). As new distribution companies have been built they have started getting their own series and having their own content.

Perhaps one of the better examples of this would be Sterling Manhattan Cable. The company got the idea for the "green channel" where they would license movies from movie studios and show them uncut and unedited to home audiences. With the financial backing of Time Life Inc they managed to launch their service which they called "Home Box Office" (aka HBO). The story of how HBO came to be, how Time Life bought them and then bought Warner and became the gorilla TimeWarner has a lot of parallels to the Netflix story, except that while HBO had to fight to get onto the cables in peoples houses, Netflix gets there for "free" because Internet. If you ever wondered what the Net Neutrality fight was REALLY about it is pretty clear what its about if you read how being able to control HBO's ability to get to customers was the tool that media companies used to get leverage over them, and then has the tables turned the tool that TimeWarner turned around and has been trying to use against streaming companies.

So what happens if there isn't this stranglehold on the "last mile" between users and the conglomerater? What happens to HBO in an alternate universe where they don't need other cable companies to "like" them to grow their customer base? I think that is the world that Amazon and Netflix live in today.

Both Amazon and Netflix have been able to develop relationships directly with production companies without having to be consumed by one of the big players. Over time their content libraries grow, and their audiences grow, and they become the 'first' place a show runs, rather than the second or third. They are starting to win Oscars and Emmys for their content so their production values are coming up to speed and they can be considered "serious" players.

A couple of things I'm looking for; The first is which one will be the first to launch a "news" channel. Amazon owns the Washington Post so they have some idea of what that might take. As I understand it, news shows (aka talking about what is happening outside, no need to get creative) are the most profitable parts of many networks. A news show might add the additional working capital to make the dependency on subscriber numbers a bit easier to manage. The second will be exclusive production contracts. When a production company like Bad Robot, or Fuzzy Door Productions signs an exclusive distribution arrangement with Netflix or Amazon, that will signal that these "channels" if you can call them that go from being "some people have them" to "everyone has them."

Then all you need is time. Old stuff sticks around but it gets easier and easier to produce new and "better" stuff. CGI has cut costs significantly according to Variety and so maybe the old guard loses out.

That's all I got :-)

[1] Robotica