I don't see Netflix, which is a tech company, being able to compete with the movie studios on the production side.
Could you extrapolate as to why? I don't know anything about the industry, but it seems like the only reason the movie studios control production is because they own distribution. With Netflix controlling a massive distribution channel and having access to large amounts of capital, it seems that they could easily compete with the movie studios on production (and probably win because they're not encumbered by old business models and can offer better deals to top talent).
My point is that movies are the movie studios' core business. It's what they've specialized in for decades. The article specifically mentions HBO as a key competitor, and HBO is known for incredibly high-quality shows. I have a very hard time believing that Netflix will be able to make anything remotely as good and popular as Hollywood's movies and shows, unless Hollywood collectively does something very stupid to piss off its existing actors, writers and producers.
Netflix are great at distribution, but they need to have something to distribute. There is no use in distributing a product that no one wants. The movie studios' key product isn't distribution, it's the movies themselves. Things are different in the music industry, where many of the labels are simply an intermediary between the musicians and the customers. But the product and distribution are much more connected in the movie industry.
I don't think it's an insurmountable challenge. It seems like over the past decade, a number of cable channels have started producing more HBO-like content with decent success. FX with Nip/Tuck, Justified, etc., AMC with Mad Men, Breaking Bad and The Walking Dead, and even Starz with Boss.
Could you extrapolate as to why? I don't know anything about the industry, but it seems like the only reason the movie studios control production is because they own distribution. With Netflix controlling a massive distribution channel and having access to large amounts of capital, it seems that they could easily compete with the movie studios on production (and probably win because they're not encumbered by old business models and can offer better deals to top talent).