We can at least agree on this, though: HBO and Netflix are both very interested in figuring out the best way to deliver TV-quality video over the Internet, and both have around 30 million subscribers in the U.S.

Which gives this personnel move a little bit of zing: Rob Caruso, an HBO engineer who had been working on the cable channel’s HBO Go service, has taken a job at Netflix.

No word on what Caruso’s new title or job description will be; his LinkedIn profile describes his HBO post as “Vice President, Digital Products.”

HBO confirmed Caruso’s move but didn’t offer any other comment; no comment from Netflix.

Earlier this year, HBO began re-orging its technical team, and longtime strategy and development exec Hans Deutmeyer headed out. In a memo announcing the changes, new tech head Otto Berkes also announced that Caruso would be moving around:

“Rob’s new charter is to build software engineering capabilities to optimize digital asset creation, management, and security, and to create technologies that unlock the full potential of software in the digital content area. Rob and his team will collaborate closely with Digital Products to ensure that our digital content technologies and our consumer-facing products inform each other to enable unique and innovative content-driven user experiences. This new role and group will be critical to achieving end-to-end software technology excellence.”

Last month, in his own memo laying out his vision for video’s future, Netflix CEO Reed Hastings said his company was spending $350 million a year improving its core service and app, not counting content spending.

iPad image copyright Skylines

Napster was the first of its kind, providing music fans with easy and free access to albums and tracks and giving them a reason to avoid buying expensive CDs — the lifeblood of the music industry’s business. The ability to share files around the globe reduced the barriers to music discovery and allowed Napster users to find new artists and songs in ways never imagined. It was a truly disruptive service, and it scared the hell out of the music industry.

Instead of embracing the massive adoption of this new service, finding a solution to accommodate the changing landscape or harnessing Napster as a future platform, the music industry held onto its rigid CD-based business, prayed that file sharing would go away and eventually tore Napster down.

Today, you can draw several parallels between the music industry in the late ’90s and early 2000s and the TV industry today. Viewing habits are changing. Just like music in the early 2000s when young adults started turning away from physical media and opting for singles versus complete albums, viewers are “tuning in” very differently to movies and TV programming.

Today, if Netflix were part of a cable package, it would be one of the top viewed networks, according to a Facebook post from CEO Reed Hastings. Meanwhile, Nielsen recently reported that cable cutting is up by 150 percent since 2007, marking a significant shift in viewer behavior. Additionally, Aereo CEO Chet Kanojia is now assuming the role of Shawn Fanning by intimidating the cable companies with a disruptive service that lets viewers access broadcast programs at a much lower cost than cable packages.

But, instead of adapting to changing viewer behavior, the cable companies, Hollywood and broadcasters are holding onto old business models for dear life and calling the lawyers. Sound familiar?

Avoiding a Bad Sequel: Lessons for the TV Industry

Ignoring or fighting digital consumer behavior is a recipe for disaster — resulting in rejection faster than an unpalatable creation by a contestant on Hell’s Kitchen. It’s time for TV broadcasters, content creators and advertisers to innovate their businesses instead of maintaining existing models through threats and litigation.

First, they need to understand that their viewers are setting the rules and defining the life expectancy of their programming and services. They will decide your fate — not you. Consider the following:

• You Can’t Take Content Away: The outdated model based on controlling distribution is dying. If you force it underground — that is, “illegal streams and downloads” — you’ve lost the battle.
• Adapt or Die: The millennial generation is addicted to YouTube, on-demand and streaming services. They no longer tune in at a specific time and date, and are increasingly shying away from paying for premium cable bundles. With filmmakers and producers spending the time and resources to make great TV programing, like “Homeland,” “Girls” and “Mad Men,” delivery methods should be figured out to get these shows to viewers who won’t pay $150 per month in subscription fees.
• Open the Windows: The “distribution window” is used by Hollywood to define how long a VOD and streaming service can distribute movies and TV programming. The problem? If the window for season one of “Downton Abbey” is about to close from Netflix or your cable provider, and you haven’t watched any of the episodes, you better call in sick to work to get your fill of the Granthams and the Crawleys, or miss the entire season altogether.
• Stop Explaining Business Models: Movie and TV viewers don’t give a sh*t about business models. They just want to watch their favorite shows — whenever and wherever they choose. The music industry followed the same pattern in the early 2000s, explaining why the economics of music streaming and downloads would not support artists and the industry. Guess who won?
• Open Up to Developers: Don’t assume innovation will only come from within your organization. By tapping the developer community, you will be able to move faster and find new ways to use or distribute content, which could result in new monetization strategies. Some of the more forward-thinking media properties, including ESPN, are already doing this, allowing developers to hack ad strategies and sports data.
• Rethink Discovery: As video distribution evolves, there needs to be a corresponding evolution in how people discover new movies and TV programming. If viewers are paying hefty monthly subscriptions (which today support a lot of what they don’t watch), it is critical to provide paths to find what they really want to watch. The current TV guides embedded in our set-top boxes have to be completely rethought.
• Reinvent Measurement: We still depend on a small sample of viewers to rate the popularity of programs and we base all advertising decisions on this data. However, the technology to measure real time usage inside the TV exists today and has the potential to enable more precise measurement and better targeting of advertising.

The TV industry’s fate is as much in the hands of viewers as the next American Idol. Not only accepting, but also realizing that TV programs and movies are easily accessible via proliferating distribution channels such as Netflix and Aereo, the industry can turn the tables and find opportunities with additional platforms and options to reach viewers for their eyeballs and spending. Most importantly, cable, broadcasters and Hollywood have the opportunity to move forward and determine better and more efficient business models to thrive.

Forward-looking networks like HBO have slowly worked toward a compromise by offering specialized content that depends on the Pay-TV ecosystem. However, with cord-cutting slowly beginning to eat into cable subscriptions, the HBOs of the world need to take distribution models a step further and offer everything streaming with direct-to-consumer subscription models, or risk losing their next core audience. If TV viewers are willing to pay for subscription streaming services, then the industry needs to jump on that bandwagon.

Rewriting the Ending: To Be Continued

The nature of distributing media is evolving, and the music industry learned the hard way as it struggled to adapt to a new generation of music fans. More than 10 years after the music industry forced Napster to tear down its P2P platform, the same industry has embraced free, ad-supported services from Spotify, Rhapsody, Deezer and others. In fact, this year marked the first time that the music industry made a profit since 1999.

Instead of struggling against the Internet Age and the connected world, broadcasters, cable companies and Hollywood can capitalize on the audience’s need to enjoy what they have to offer — great TV programming. Content will always be king and the industry creates a tremendous amount of really compelling material. It just needs to keep the crime scenes to “Law & Order” and save the video star by taking a cue from music’s past.

As president of Gracenote, Stephen White has played a critical role in shaping the company into a digital entertainment leader. He spearheaded the development of Gracenote technologies for top entertainment platforms and brands, including Apple, Ford and Sony. Today, he oversees all company strategy and operations, and is responsible for growing Gracenote’s core business and vision.

In case you missed anything, here’s a quick weekend roundup of the news that powered AllThingsD.com this week:

1. Daily-deals site LivingSocial was hacked, compromising the names, emails, birthdates and encrypted passwords of 50 million users.
2. In an essay, Reed Hastings laid out his predictions for the future of streaming video, which includes not just his company, Netflix, but also HBO, ESPN and anyone else transitioning from a channel to an app.
3. Walt Mossberg reviewed the Galaxy S 4, Samsung’s new flagship smartphone, and concluded that “while I admire some of its features, overall, it isn’t a game-changer.”
4. What are Google’s plans for its high-speed Internet project, Google Fiber? Theories abound, but good luck divining an answer from CEO Larry Page’s words.
5. According to multiple sources, Twitter is testing local discovery features that will help you better understand what’s happening not just around the world, but also down the block.
6. Android’s seemingly inexorable ascension over the iPhone may not be inexorable, after all. A new report says customer loyalty will let Apple overtake Google in smartphone market share by 2015.
7. On the 10-year anniversary of its sale to Google, Applied Semantics co-founder Eytan Elbaz explained what he and his partners learned from starting up and getting acquired.
8. For the first time, Yahoo CEO Marissa Mayer publicly commented on the controversy created after Yahoo banned its employees from working from home.
9. Speaking of Mayer, she’s officially joined the board of wireless gadget maker Jawbone, and it’s likely to be a good fit.
10. Apple needs some new hit products to drive growth, and CEO Tim Cook says they’re on the way… just not until this fall.

To stay on top of the latest, follow AllThingsD.com on Twitter and Facebook, and subscribe to our daily email newsletter.

So why is this man smiling?

Because he owns a big chunk of Netflix stock. And that stock has gotten much, much more valuable in the last 12 months.

A year ago, when Netflix was trading at $106, Hastings owned a 4.4 percent stake in the streaming video company, which was worth $265 million. Today, Hastings’s stake is up to 4.5 percent (more than half his ownership comes via options); at $215 a share, it is worth $559 million.

That is: The value of Reed Hastings’s Netflix holdings increased by almost $300 million in the last 12 months.

So he’s probably not smarting from a one-year pay cut.

Just in case he was, Netflix has boosted his 2013 pay. His salary will increase from $500,000 to $2 million, and he’ll get an option allowance of $2 million, up from $1.5 million.

If you want to see another happy Netflix shareholder, by the way, talk to Carl Icahn. Icahn accumulated a 9.9 percent stake in Netflix last fall, paying $58 a share. Today those shares are worth nearly $1.2 billion, which means Icahn is up close to $900 million in less than a year.

A lot to say: The Netflix CEO has written an 11-page essay that lays out his vision for the future of streaming video.

If you’re looking for news, you won’t find much here — nearly everything in the document, published on Netflix’s investor website, is a repeat of things Hastings has said or written in recent years.

But if you’re at all interested in the way Hastings thinks things are going to play out in the battle for video eyeballs, and why he thinks Netflix will win many millions of them, it’s well worth a read.

I’ve embedded the document below so you can scan it at your leisure. If you’re in a hurry, some bullet points:

• The one new nugget here is a Hastings prediction, held by many other people, that we’re moving to a world where “apps replace channels.” Hastings mentions apps nearly 3 dozen times in his essay, and makes it clear that he sees Netflix first and foremost as an app provider.
• Hastings figures that lots of other video services will figure the same thing out. And he goes out of his way to mention others that are already there or close to it, citing ESPN, HBO and the BBC.
• But those who don’t get it are screwed, he says: “Existing networks, such as ESPN and HBO, that offer amazing apps will get more viewing than in the past, and be more valuable. Existing networks that fail to develop first-class apps will lose viewing and revenue.”
• In the past, Netflix has tacked back and forth on whether it is competing head to head with HBO. Now Hastings is back in “we’re coming for you” mode: “The network that we think likely to be our biggest long-term competitor-for-content is HBO … They have global reach and strengthening technology capacity.”
• But while Netflix now has as many U.S. subscribers as HBO — and while Hastings thinks he can eventually double or triple his current 30 million — he figures it will take him a while to truly compete with HBO. “While we are passing HBO in domestic members in 2013, it will be several years before we are peers with them in terms of Original programming, Emmy awards, and international members. It wouldn’t be surprising to us if HBO does their best work and achieves their highest growth
  over the next decade, spurred on by the Netflix competition and the Internet TV opportunity.”
• But Hastings also reiterates his argument that there’s room for lots of streaming video services, just like there are lots of cable channels today. Translation: Don’t worry, Jeff Bewkes: Just because we’re coming for you doesn’t mean we’ll crush you. Also, please keep selling us Time Warner’s content! Thanks!
• Hastings also continues to offer olive branches to the entrenched cable guys, especially those that also sell broadband: “At times we have worried about the strategic motivations of ISPs that are also MVPDs, but the absence of cord-cutting has mitigated this concern. … Internet video services like Netflix, MLB.tv, iTunes and YouTube are not currently a material strategic problem for companies that are both an ISP and an MVPD.” Translation: Hey Comcast, Time Warner Cable, Verizon! It would be pretty cool if we figured out a way for you guys to bundle us along with your other video services! Let’s (continue to) talk!

Lots more below. Well worth your time.

Netflix Ir Letter

Things are different now.

Reed Hastings made a point of that yesterday when he used his quarterly investors’ letter to announce that Netflix was letting a “broad” programing deal with Viacom expire.

Netflix might still end up with some Viacom content, Hastings explained, but he only wants to buy particular shows from the cable giant.

My hunch is that Hastings cares a lot about Nickelodeon mainstays like “Dora the Explorer” — because kids love Netflix, and parents love to shove their kids in front a Netflix screen.* And not at all about MTV reruns like “Laguna Beach” — because who loves a nine-year-old reality TV series?

But Hastings doesn’t care enough about Dora to buy shows about Kristin Cavallari, too. And if he can’t get them separately, he may not buy them at all.

That is: Just like lots of TV viewers, Netflix wants to buy its programming a la carte.

Netflix’s pronouncement didn’t seem to be a surprise to Viacom. I asked the cable network for a response to Hastings’s letter a few minutes after he published it, and they had a statement in my inbox nine minutes later. By corporate PR standards, that’s basically simultaneous.

And it shouldn’t have been a surprise for the content industry in general.

Hollywood has enjoyed a very nice run for the last few years, where it could essentially take any old TV show or movie that it couldn’t sell anywhere else, and unload it on Hastings.

The deals were high-margin windfalls for the networks and studios. A network guy once chortled when he told me about a deal he had struck that would force Hastings to “gag” on his reruns, whether he wanted to buy them or not. But they couldn’t last.

And it’s been easy to see why in retrospect: Success and competition.

When Amazon joined Netflix in the digital streaming business, things got even better for studios, because they could sell the same shows to everyone. But now that the Amazon and Netflix catalogs look so similar, both services have started trying to distinguish themselves, just like HBO and Showtime.

They’re creating their own exclusive programming (Hulu is trying to do the same), which reduces their dependence on other people’s stuff. And when it comes to other people’s stuff, they’re much more particular, because they have a data set that gives them a pretty good idea of what their customers want to watch.

This doesn’t have to be bad news for the TV and movie guys. Hastings suggested on yesterday’s earnings call that any money he doesn’t spend on Viacom shows he doesn’t want could go right into Viacom shows he does want.

And for certain titles that the streamers really want, they may pay extraordinary prices. I’ve heard Amazon beat out Netflix for exclusive rights to “Downton Abbey” this year by paying PBS an eye-popping sum.

If Netflix keeps growing (quite possible — they are at 30 million U.S. subscribers right now, and Hastings says he’s aiming for 60 million to 90 million) and Amazon keeps chasing them (also very possible, since Jeff Bezos isn’t hung up on profits), then Big Media may continue to see their aggregate digital rerun dollars increase, because their buyers’ budgets are increasing, too.

But individual content owners who used to be able to unload anything, at any price, may find their pool of buyers is shrinking. It was good while it lasted.

* Guilty as charged!

Revenue came in at the billion-dollar mark that analysts were looking for, and the company’s U.S. streaming subscriber total hit 29.2 million — also around consensus. The big win was a net income number (after adjusting for one-time hits) of 31 cents per share, well above the 18 cents or 19 cents per share the Street expected.

What about everything else? As usual, Reed Hastings’s shareholder letter is filled with interesting nuggets. Here are some of them:

• As predicted, Hastings doesn’t offer any real numbers for “House of Cards,” the company’s much-hyped foray into original productions. But he does take credit for building big buzz with “House of Cards” via its decision to release all 13 episodes at once. If Netflix had followed a standard release schedule, you’d be watching the last episode of the series this week, and presumably more people you know would be talking about the show right now. But Hastings says the big bang worked just fine: It ended up “reinforcing our brand attribute of giving consumers complete control over how and when they enjoy their entertainment.”
• Hastings also says that almost no one signed up — for free, for a month-long trial — to watch the show and then left Netflix afterward. “There was very little free-trial gaming — less than 8,000 people did this, out of millions of free trials in the quarter.”
• Those less-than-stellar reviews for “Hemlock Grove,” the new horror show Netflix put out this month? No biggie: “Hemlock Grove” was viewed by more members globally in its first weekend than was “House of Cards” and has been a particular hit among young adults.
• Though Netflix is paying up for originals and certain stuff it values a lot, like its recent Disney deal, it is going to stop buying other stuff from the networks, especially when other people can get the same stuff. For instance: Hastings says the company will let a “broad” deal for Viacom content lapse in May, but that the two companies may negotiate licenses for specific shows. (Translation to parents: May want to have your kids binge on Dora and Diego right now).
• Here’s what Viacom has to say about that, by the way: “We continue to be in discussion with several parties, including Netflix, on distribution of our content.”
• Speaking of kids: You may at long last stop seeing Dora show up next to Kevin Spacey in your Netflix history: The company says it will finally start rolling out a “profiles” feature “in the coming months” that will let different family members track their own viewing habits and make specific recommendations.
• And along those lines, Netflix will offer a family pricing plan for people who want to run multiple Netflix streams at the same time: “A few members with large families run into our 2-simultaneous-stream limit. To best serve these members, we’re shortly adding a 4-stream plan, at $11.99 in the U.S., and we expect fewer than 1% of members to take it.” (Note: An earlier version of this story incorrectly reported that Netflix wasn’t offering this plan.)

The much-hyped miniseries had a big budget, big names in front of the camera and behind it, and a Big Idea — binge viewing! — that generated even more buzz for the launch.

Today, the company releases its Q1 numbers, so lots of investors are going to be wondering what all that meant. They will have questions for Reed Hastings and company along the lines of:

• How many people watched the series?
• How many people signed up with Netflix to watch the series?
• How many people who signed up with Netflix kept subscribing after they watched it?
• What has happened to “House of Cards” numbers since the initial burst of buzz?

They are likely to be very disappointed: Netflix has already announced, over and over, that it won’t release anything like ratings numbers for the show. That should also apply to any kind of discussion about the show’s impact on subscriber numbers.

And even if Netflix did want to talk up numbers for the series, doing so would highlight the bind the company has when it comes to discussing any particular show or content deal. Netflix wants to brag to consumers and investors about the content wins it gets, but it doesn’t want to suggest that it’s overly dependent on any one show, studio deal or even a genre — because if it does, it becomes vulnerable if that stuff goes away (See Sony, Disney circa 2011.)

For what it’s worth, my uneducated gut guess is that even though you don’t hear people buzzing much about “House of Cards” anymore — my Twitter stream is full of chatter about “Game of Thrones” and “Mad Men,” and it spikes every Sunday, when a new episode comes out — Netflix should still be very happy with the splash it made with the show.

It most likely can’t and won’t spend anything like that on its other original programs — note the comparatively silent launch for “Hemlock Grove” this month — but getting a lot of people to spend a lot of attention on anything is a very hard task in 2013, and Netflix pulled that off. That may be worth $100 million in programming costs alone.

Now, on to today’s numbers: Wall Street is expecting Netflix to report just over a billion in revenue today, and earnings of 18 cents a share or 19 cents a share, depending on who you ask. But investors will likely focus more intently on subscriber numbers and guidance for future quarters.

Most analysts are expecting to see Netflix post more than 29 million streaming-only U.S. subscribers. And here’s a useful chart from Bernstein’s Carlos Kirjner to evaluate the Q2 guidance you’ll see today:

BTIG analyst Rich Greenfield crunches those numbers (registration required), and concludes that this makes Netflix the equivalent of the most-watched cable TV network: He figures there are 28 million U.S. Netflix subscribers watching an average of 87 minutes of Netflix per day, or 43 hours per month. That puts it on par with the Disney Channel.

Presumably some of those hours were spent watching “House of Cards,” Netflix’s first big-budget foray into original programming. Which leads us to the maybe-not-such-good-news for Netflix: Its next show may be a dud.

You can’t say the reviews are in for “Hemlock Grove,” a horror series from director Eli Roth that debuts next week. But one prominent review is in, from the Hollywood Reporter’s Tim Goodman.

And it is not good at all.

“Here comes the company’s first truly bad series,” Goodman writes, then goes on to complain about the show’s writing, acting, casting and everything else.

Even people who are really, really high may not be satisfied with this one, Goodman says: “Is there a bong big enough for this show?”

If you want to spin this positively on Netflix’s behalf, you can point out that this is a single review. [UPDATE: An eagle-eyed tipster directs me to a much more positive review from People magazine, which gives the show three out of four stars: "Imagine "True Blood" directed by Sofia Coppola". You can see a screenshot of the review below.]

And if you want to keep going, you can argue that there are lots of popular TV shows that critics don’t like (though no one was making this argument when “House of Cards” got raves).

Want more? Okay. Even if “Hemlock Grove” is a real stinker, Netflix gets more chances, just like any other TV network. A new season of “Arrested Development,” up next month, is almost certain to succeed, based on the show’s rabid fan base, much of which was cultivated on Netflix in the first place.

* Don’t worry! The SEC has now blessed this form of communication, which is a good thing, since it’s 2013. Phew.

Here’s that People review:

The streaming-video service, which recently dodged a bullet from the Securities and Exchange Commission over a Facebook posting, told investors Wednesday in a regulatory filing it may use the social-networking site or Twitter to disclose material information.

Read the rest of this post on the original site »

Reed Hastings found that out the hard way, after he shared some company user numbers to his Facebook page last fall. The Securities and Exchange Commission wasn’t cool with that, saying at the time that Hastings had disclosed material information to only a subset of his shareholders by not simultaneously filing a disclosure with the SEC. For his sharing, Hastings was slapped with a nice little SEC investigation.

Fortunately for Hastings — and other share-happy CEOs — the SEC came back with a ruling on Tuesday, essentially saying a Facebook disclosure is public enough for stockholders to learn about any material info.

“Most social media are perfectly suitable methods for communicating with investors, but not if the access is restricted or if investors don’t know that’s where they need to turn to get the latest news,” said George Canellos, Acting Director of the SEC’s Division of Enforcement, in a statement.

So basically, it’s cool to share material info on a social network. As long as you disclose just which network you’re sharing said material on, the SEC stipulates.

In other words, go ahead, Reed! Share all the data points you want about Netflix on your social networks. Just remember to point out to your shareholders that you’re doing it on Facebook, not Twitter. Or vice versa.

The whole point of this kerfuffle is that all stockholders should be privy to the same info at the same time. And typically, the SEC’s official website was the best place to go for that (or at least, the default place — “best” is arguable).

“One set of shareholders should not be able to get a jump on other shareholders just because the company is selectively disclosing important information,” Canellos said.

But as I’ve argued in the past, and as the SEC seems to have recognized on Tuesday, social networks like Facebook and Twitter have massive reach, touching upward of 1.2 billion people on a monthly basis (if you combine the two networks). And in the tech community at least, PR email blasts and newswire releases are giving way to Facebook and Twitter blitzes, eschewing the traditional means of distributing information for other, arguably more effective methods.

(Dan Primack over at Fortune has some good thoughts on this as well, as he’s quite learned in the ways of Reg FD, the antiquated legislation that got Hastings in trouble in the first place.)

As for Hastings, he’ll be getting off scot-free, with the SEC dropping its investigation because of the novelty of social media and sharing practices.

I’m just waiting to see what happens when a CEO snaps an Instagram of their company’s 10-K.

Or at least they say they have. Check out the results of a recent survey of U.S. Web users, conducted by Goldman Sachs. And notice the Netflix bump across all ages — but particularly with teens and twentysomethings:

Goldman doesn’t attempt to explain why people like Netflix so much more now than they did a year ago (the survey was conducted in mid-January, before the deluge of press for “House of Cards,” so it’s unlikely that Kevin Spacey is the cause). But the numbers do give some credence to Reed Hastings’s contention that old and new customers are beginning to forgive the service for its multiple mistakes in 2011. Then again, the blowout numbers in Netflix’s last earnings report suggested the same thing.

It’s crucial to note that this is a self-reported survey, so users’ actual behavior may be quite different from what they’ll admit to Goldman or themselves.

For instance, I’m sure that YouTube occupies a lot more viewing time than people suspect, or are willing to admit. Similarly, the Goldman report suggests that YouTube and Hulu are in the same league when it comes to viewing time, and that’s certainly not the case.

That said, I would love to know why people are reporting significant drops in iTunes engagement — particularly since iTunes has always had a fairly modest video component.

The goal is to become HBO faster than HBO can become us.

– Ted Sarandos, Netflix’s chief content officer

Who knows? Amazon is fiercely dedicated to the notion that it won’t say squat about its business, and things stayed true to form during yesterday’s earnings call.

But the question did come up a few times during the call. Which makes sense, because Jeff Bezos is pumping a bunch of money into video — by Netflix CEO Reed Hastings’s account, perhaps a billion dollars a year.

So Amazon CFO Thomas Szkutak did make a point of telling Wall Street that things are moving up and to the right — both in terms of usage and investment dollars. A collection of his video-related quotes, via Seeking Alpha:

• “The percentage of Prime customers who were watching free content through Prime Instant Videos has gone up dramatically year-over-year.”
• “We have also increased Prime membership dramatically, year-over-year. They are also purchasing a paid content. Those customers that are using this, they watch free but they are also paying for new content which is great.”
• “I can’t give you specific for attach rates but the business is making good progress on the video content side. Again it’s still very early.”
• “We will continue to expand our selection, both in terms of Amazon Instant Video as well Prime Instant Video and we will do that in a number of different ways. We think we have a very interesting selection right now and you should expect that will be spending more on content as it relates to Prime over time. We will continue to add selection on the Instant Video. Beyond that, you have to stay tuned.”

In other words: Yes, we’re spending a bunch of money. And yes, based on outsiders’ guesstimates, we’re way, way, way behind Netflix in terms of overall video streaming usage. But we think our “spend now, earn later” strategy is going to pay off here, too.

But here comes Netflix, which is getting into the TV show business and doesn’t have any experience promoting TV shows. Plus, it doesn’t have its own TV network to do the heavy lifting.

So how is it going to tell people about new shows like “House of Cards,” which comes out in a week, or “Arrested Development,” which comes out in May?

Reed Hastings and company have long argued that not being tied to a traditional TV network gives them a ton of freedom, since they don’t have to convince an audience to watch a certain show at a certain time. In theory, they won’t care if lots of people watch “House of Cards” on February 1, or if lots of people watch the show over the next couple years.

And they say they’ll primarily rely on Netflix.com to do the bulk of their promotion, by telling some subscribers — but not all subscribers — about the new shows. We saw a taste of this last year, when the company trotted out “Lilyhammer,” a kind of trial run for its original programming plans.

Still, depending on where you live or what you do online, you may bump into some Netflix promotions in the next few months.

During his earnings call this week, Hastings noted that he’ll be trying to attract “a lot of attention in certain cities doing a highly concentrated, large scale promotion to … stimulate the creative community awareness and generally build a lot of buzz around those shows.”

Translation: If you’re in New York or Los Angeles, there’s a good chance you’ll see billboards like the one Variety’s Andrew Wallenstein spotted this week. These are presumably supposed to hit both “influentials” — perhaps you’re one of them! — as well as current and future Netflix creative partners, who like to see their work promoted just like a “real” TV show.

Meanwhile, if you’re a hard-core “Arrested Development” fan who has been looking forward to the show’s reboot since last year, Netflix is offering some treats to whet your appetite. Digiday notes that Netflix has inserted some easter eggs onto the site, which will end up leading you to the service’s archive of old “Arrested Development” episodes, like the excellent “The One Where Michael Leaves.”

We’ll hear more about the Netflix marketing strategy in a couple weeks, when content boss Ted Sarandos stops by our D: Dive Into Media conference, along with at least one principal from “Arrested Development.” And yes, that counts as marketing, too. See you there.

As always, Hastings’s quarterly shareholder letter has all sorts of interesting tidbits about the company, including the fact that it’s considering raising debt to finance more original productions like “House of Cards,” which debuts February 1.

Hastings also brings up an idea the company has been discussing quietly with would-be content partners: The new stuff that Netflix pays for doesn’t have to come in conventional TV time increments, which means a sitcom could be 40 minutes long or 12 minutes long, instead of the standard 22, etc.

But based on the visual evidence, what Hastings really wants us to pay attention to is what he considers a big advantage over his competition: A much bigger video catalog.

In the past, Hastings has made respectful comments about the likes of Amazon and Hulu Plus, which offer their own video subscription services. And he does that again this time around.

But then he also points out the results of the survey his company conducted, where it looked to see how many of its most popular movies and TV shows were available at Amazon, Hulu and the recently launched Redbox/Verizon service.

You can’t miss the results, because he’s displayed them in a giant graphic:

That one doesn’t require much translation, but just to be clear, here goes: You know how people like to complain about the selection on Netflix? Well, take a look at the other guys. Perhaps that’s why we have more than 30 million paying subscribers, and the other guys don’t seem to be anywhere in sight.

Hastings’s earnings calls are often entertaining/informative as well. So I’ll listen in there and report back if there’s anything worth noting.

The two companies announced a new pact today that will move more Time Warner shows to Netflix: Animated stuff from Turner’s Cartoon Network and Adult Swim, along with TNT’s “Dallas.”

As with every other Netflix TV deal, these are all repeats: No one is selling Netflix stuff that they’re still running on their own network.

But, at the right price, the deal is a nice addition for Netflix, particularly the Cartoon Network stuff, which bolsters a kids lineup that’s already a key part of the service.

It also helps buffer Netflix in case Viacom gets itchy and ends up taking away its Nickelodeon programming when that deal ends. And the Adult Swim stuff is great for stoners.

Bigger picture: This is the third deal Netflix has made to get its hands on Time Warner programming. In October 2011, it paid up big for stuff that used to run on the CW Network, which is jointly owned by Time Warner and CBS. Last week, it struck another deal for shows made by Warner Bros. studio, including NBC’s “Revolution.”

Biggest picture: This doesn’t mean that you’re going to get the video stuff Time Warner values the most — its movies and its HBO shows — on Netflix, now or ever.

Jeff Bewkes has made it quite clear that he’s happy to use Netflix as a syndication outlet for stuff he’s already gotten maximum value from. If Reed Hastings thinks he can make money with Bewkes’s leftovers, he is happy to sell them.

The streaming-video service said it would pay Mr. Hastings a $2 million salary with $2 million of compensation through stock options, according to a document filed late Friday with the Securities and Exchange Commission.

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And it’s now very close to doing that for American users: The U.S. Senate has passed a bill that would give the video service the go-ahead to facilitate “frictionless sharing” of users’ viewing history with Facebook or other online services.

The House passed the same legislation earlier in the week, which means it now just needs a signature from President Barack Obama.

Facebook has pushing for the legislation, designed to update the 1988 Video Privacy Protection Act, for more than a year.

Outside of the U.S., the service has already integrated directly with Facebook; Netflix CEO Reed Hastings is a Facebook board member.

Here’s Netflix PR rep Joris Evers, via email: “We are pleased the Senate has moved quickly to modernize the VPPA, giving consumers more freedom to share with friends when they want. After the President signs the bill, we will introduce social features for our U.S. members in 2013.”

The bad news: Netflix went through the same exercise a year ago, but the bill never made it out of Congress.

So it’s way too early for CEO Reed Hastings and company to celebrate. Still, it shows that the company’s lobbying effort, designed to tweak the 1988 “Bork Law”* that prohibits disclosing movie-rental information, has gotten some traction.

In many countries outside the U.S., Netflix already has an integration with Facebook that lets users tell their pals what they’re watching. Hastings, who is also a Facebook board member, has wanted to do the same thing for American Facebook users for the last couple years.

*The earlier law stemmed from Supreme Court nominee Robert Bork’s confirmation hearings, in which his video-rental history surfaced. The Senate ultimately blocked Bork’s appointment; he died Wednesday morning.

Amazon’s Prime Customers can now watch “The Closer,” the crime series that ran for seven years on TNT, and “Falling Skies,” the earthlings-versus-aliens drama that’s still running on Turner’s cable channel.

“The Closer” never got the kind of critical buzz heaped on “Mad Men,” etc., but it was very popular. And “Falling Skies” does pretty well, too.

A press release says viewers can watch “current” episodes of the latter, but that’s a bit misleading — you won’t be able to watch any new shows from the series until at least three months after the end of a new season.

So those are nice additions for Amazon. But not game-changers for the service, which doesn’t appear to be attracting many eyeballs right now — at least not compared to Netflix.

The main reason the deal is worth noting is that it’s another exclusive for Amazon and Time Warner, which has held almost all of its streaming content off of Netflix. Earlier this year, the two companies announced a deal to stream “The West Wing,” “Fringe,” and other Time Warner-owned shows on Amazon.

Meanwhile, the only Time Warner-owned content that you can see via Netflix streaming are shows that ran on the CW Network, which is co-owned by Time Warner and CBS.

But it wouldn’t be a shock to see that change sooner than later: While Time Warner CEO Jeff Bewkes used to go out of his way to denigrate Reed Hastings’s service, his newish position is that he’s happy to take a Netflix check — once he’s finished selling his stuff everywhere else.

Well, almost ready: “Redbox Instant by Verizon” will go into an invitation-only beta launch this month, and the official push won’t start until next year.

Still, this means the company is officially unveiling its offering. Which is exactly what we told you it would be: A service that’s supposed to offer some streaming video, a la Netflix, and some movies via DVD, a la the old Netflix and the curent RedBox. And the ability to buy and rent individual movies online, like iTunes and Amazon.

The basic offer: $8 a month for a selection of streaming movies and the ability to rent up to 4 DVDs a month from Redboxes’ kiosks, plus an online store where you can buy or rent newer movies.

If you don’t want to or can’t use the Redbox kiosks, you can go for a streaming-only option for $6. If you want to rent Blu-ray discs, that’s $9 a month.

Like Netflix and Amazon, Redbox has a deal with Epix, which means you’ll get newish movies like “Thor,” along with some big titles like “The Hunger Games,” after they’ve been available for rental and on pay TV. It also has a similar deal for older movies from Warner Bros., which hasn’t cut deals with Netflix or Amazon (yet).

But the joint venture won’t have the deeper catalog titles its competitors have built up. And it has pretty much ignored the TV titles that Netflix in particular has concentrated on in recent years.

On the other hand, it will have an online store where you can rent and buy movies, which Netflix doesn’t offer — because, says CEO Reed Hastings, everyone else does. Though this store will be different from those run by other online retailers like Amazon and iTunes: For whatever reason, the company hasn’t signed on all of the studios, so there will be notable gaps from the likes of Disney and Sony. (Update: Redbox Instant says it does have a deal with Sony, after all.)

So basically: Costs about the same as Netflix, without some of the stuff people like about Netflix, with other stuff Netflix doesn’t have.

Is that compelling enough to take market share away from Hastings? We’ll have to wait some time to see, but it’s worth noting that Amazon and Hulu, which have been at this for a while, have yet to make a real dent.

In the meantime, the most interesting thing about Redbox Instant is what it could be, one day, if Verzion wants to push it. The service isn’t confined to Verizon’s fiber or wireless footprint, which means it could truly make it a national video service, if it wants to commit the resources. So far this looks more like a toe in the water than anything else.

Except, that is, for the Securities and Exchange Commission, which is considering taking action against Netflix for a Facebook post made by Netflix CEO Reed Hastings.

The whole scenario is strange. The SEC’s main beef: Netflix didn’t disclose potentially market-moving information in a regulatory filing or a press release, which are the usual methods of pushing out information to the public all at once. Hastings instead used a status update, and the SEC says that’s just not good enough.

Sorry, SEC — I’m calling shenanigans on this one.

Chew on this: If the aim of the Regulation Fair Disclosure rule — the very rule the SEC claims Netflix is breaking — is to relay important information at scale, what better way to do it than on the world’s most widely used social network?

In this day and age, I’d argue sharing something on Facebook is one of most public acts one can make. It’s built into Facebook’s very mission statement, to “make the world a more open” place.

Public figures like Hastings can allow hundreds of thousands of people to subscribe to his Page — which he has done — pushing out information to them near instantaneously via status updates. Netflix can set up a brand Page, posting stats and significant milestones to the 3.6 million Facebook users that follow Netflix on the social network.

In the tech community at least, PR wire services are giving way to in-house, DIY methods of publishing information, with sites like Facebook and Twitter becoming crucial platforms to carry that out.

Even Facebook itself uses its platform to communicate milestones to the public, publishing statistics to the company’s many organizational Pages on the site. Similarly, sites like Twitter make major announcements via its own messaging service (though unlike both Facebook and Netflix, Twitter isn’t publicly traded).

Like it or not, we’ve arrived in a new era of mass communications. Facebook users flock to the platform to vote en masse. The state of Israel announced a military operation last month not by press release or on television, but through a full-scale social campaign using Instagram, Facebook and Pinterest. Even the pope himself has blessed Twitter with his presence.

While the messages may still be the same, the mediums are changing around us so fast it’s tough for anyone — especially D.C. regulators — to keep up.

Maybe that will change a few years from now. Perhaps at Facebook’s two billion user mark.

Back in July, Hastings wrote on his Facebook page that Netflix users had streamed more than 1 billion hours of video in June. The SEC is apparently looking into whether or not that violates fair-disclosure rules.

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The answer comes via a deal industry folks have been buzzing about for a while: Starting in 2016, Netflix will get exclusive access to all of Disney’s big movies — including the Pixar movies and the ones based on Marvel superheros — in the “pay window.”

That is, after they’ve been available for rental and for sale. Or in other words, when pay TV channels like HBO and Showtime get their big titles.

That’s not the first time Netflix has landed a deal like this — it had already inked similar ones with Dreamworks Animation and Relativity — but it’s by far the most important one.

It fills an important hole in the Netflix catalog that opened up last year when the company lost access to Sony and Disney movies it used to get via a deal with Starz. And it’s particularly valuable for Netflix, which already has a reputation as a cheap way to entertain/pacify kids. And it helps bolsters the claim that CEO Reed Hastings has been making for a while: We’re just like HBO (or any other cable channel people like).

Next pressing question for Netflix: Can it afford to pay for stuff people want to watch?

Today, investors seem to think it can, since they’ve bumped up Netflix shares by 14 percent. But Netflix investors are a fickle bunch, so hold off on reading much into that.

Netflix and Disney won’t disclose the deal terms. The Los Angeles Times’ plugged-in reporters quote a “person close to the matter” (likely on the Disney side of the table) who says “Netflix could ultimately pay more than $300 million” a year for the movies.

That figure seems plausible, at the very least: A year ago, Netflix said it was willing to pay $200 million or more a year for the Starz/Sony/Disney deal. This deal doesn’t include Sony and Starz’ stuff, but it does include a lot more content from Disney, including the studio’s direct-to-video deals, along with a selection of classics like “Dumbo” that will be available immediately.

Since the Starz deal fell through, Netflix has been arguing that the loss wasn’t that big a deal, since it has increasingly become a place to watch TV shows instead of movies; it’s also been playing up its upcoming foray into original productions, like “House of Cards.” And CEO Reed Hastings repeatedly said that while he liked having the Disney and Sony movies, they didn’t account for a whole lot of streaming hours.

So Hastings and company may have to do a bit of finessing here: They need to convince Wall Street that they’re happy to get this stuff, but that they weren’t buying it at any price. And, crucially, that the new titles will help bring in new subscribers and hang on to existing ones, so that Netflix can afford its steadily increasing content tab.