Netflix: TV's future is in the apps

• TV apps from Netflix%2C HBO and ESPN part of TV evolution.
• HBO is biggest rival for Netflix%2C company says. Amazon on the rise%2C too.
• Netflix and Net TV not driving consumer pay TV cord-cutting.

Apps are the future of television.

That's the vision of Netflix CEO and co-founder Reed Hastings and the streaming video provider, which has posted an 11-page Netflix Long Term View essay on the company's web site.

"Over the coming decades and across the world, Internet TV will replace linear TV," it reads. "Apps will replace channels, remote controls will disappear, and screens will proliferate. As Internet TV grows from millions to billions, Netflix, HBO, and ESPN are leading the way."

The company's vision statement comes two days after Netflix announced that it had gained more than 2 million new U.S. streaming customers in the first quarter of 2013. Worldwide, Netflix now has 36.3 million streaming customers, including 29.2 million in the U.S.

Despite Hastings and Netflix's statements that they are unconcerned about the company's market valuation, "I think Netflix's stock surge since Monday reinforced his desire to effuse scholarly advice on home entertainment," says Eric Gruenwedel, news editor at Home Media Magazine. "With the prevalence of Netflix apps on CE devices, Reed undoubtedly speaks from a position of strength. The fact an app can directly link a consumer to particular content with a click cannot be understated."

The move to apps over linear TV has begun, Netflix says, noting that traditional pay TV providers have begun providing TV Everywhere apps for subscribers, just as individual channels and services such as Netflix and HBO have done. "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," the essay says.

Apps that provide on-demand viewing are critical because "people don't love the linear TV experience where channels present programs at particular times on non-portable screens with complicated remote controls," the document reads. "Finding good things to watch isn't easy or enjoyable."

Netflix spending enumerated in the report: About $2 billion per year on content licensing and creation of original shows; more than $450 million annually on global marketing; about $350 million annually on service improvements.

In the past, Hastings has mentioned HBO and its HBO GO app as the company's most-feared rival. And that is reiterated in the vision statement. "The network that we think likely to be our biggest long-term competitor-for-content is HBO. They recently won, for example, long-term exclusive domestic movie output deals with Universal and Fox. They bid against us on many Original projects. They are not currently a bidder against us for prior-season television from other networks. They have global reach and strengthening technology capacity."

The number of Netflix subscribers is expected to surpass that of HBO this year, the company estimates, but "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."

Behind HBO? Amazon, Lovefilm, Hulu and Now TV. "Amazon in particular is spending heavily and commissioning its own original programming, presumably because they see the same exciting big picture for Internet TV that we do," the essay says. "Many consumers will subscribe to multiple services if they each have unique compelling content."

And that idea of Netflix' success leading to pay TV cord-cutting? Nonsense, the company says. Pay TV services have held steady at about 100 million subscribers.

"The stability of the MVPD (multichannel video programming distributor, or pay TV) subscriber base, despite Netflix large membership, suggests that most members consider Netflix complementary to, rather than a substitute for, MVPD video," Netflix says. "MVPDs are keeping their subscribers through TV Everywhere authentication. 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."