While I'm rooting for Netflix to succeed in the short term, I have doubts about its long-term viability. Currently, in the media-delivery industry, Netflix is elbowing out the un-innovative rent-extracting cable TV industry, which is unequivocally a good thing. Delivering better choices for lower prices, while consigning cable companies to delivering commodity broadband access can only help consumers.
In the longer term, however, I fail to see how Netflix can avoid having its product turn into a commodity. Delivery of digital video to consumers will only continue to get cheaper and easier. Obviously Netflix has gotten amazing deals on bandwidth (see their recent spat with Comcast) but other the prices it pays will only continue to converge with the prices for commodity CDNs.
The only major part of Netflix's business that's resistant to commoditization is having a huge base of subscribers that allows them to cut deals directly with studios like Dreamworks. Obviously Netflix is trying to position itself as a cheaper, better middleman between consumers and content producers than the combination of cable channels and cable companies. This could be very attractive to studios in the medium-term, but ultimately why not cut out the middleman? When (not if) quick, flexible, and easy online payment comes to the internet, what's stopping Dreamworks from simply charging and delivering the movie to consumers directly?
> In the longer term, however, I fail to see how Netflix can avoid having its product turn into a commodity.
One way is by targeting as many delivery platforms as possible and just being there first. My TV for example has a Netflix "app" so I would likely pick Netflix. Many BlueRay players have built-in access to Netflix. Maybe built native apps for all the major mobile devices.
> what's stopping Dreamworks from simply charging and delivering the movie to consumers directly?
Becaus then users would end up having a bunch of hardware/software specific to each studio. Not common way to organize & sort your media queue.
Yes, Netflix already fucked it up by splitting off Qwickster but imagine having a different service for each studio.
I'm not so sure things are at all bad for Netflix (though I see the stock market is punishing the hell out of them, that may have just been because the stock was ridiculously over-valued based on a number of indicators).
I remember back in the olden days, like a decade ago, the argument about music and media and writing online was that the company or companies that figured out how to curate the vast array of available data would be the successful media companies of the coming decades. Netflix is better at it than anyone. Because I run Linux most of the time when I'm working, and Netflix doesn't work on Linux, I was using Amazon's video service, and Hulu, to keep myself entertained while working on a server migration. The lack of good recommendations is notable for both services. I feel like I find good things to watch much more readily and with less clicking around on Netflix than on Amazon or Hulu. The overlap is relatively large, particularly with the low-budget movies and older TV series, but the ability for me to find the stuff I'd want to watch is vastly different, and I prefer Netflix by a large margin.
I still go to Amazon sometimes for stuff that I can rent there but can't get on Netflix. And I still go to Hulu for TV that is not yet on Netflix. But, when I sit down with a friend to watch a movie, we fire up the XBOX or Wii and browse Netflix. There's no contest about which is more likely to get my viewership when I'm sitting down to actually watch a movie.
What I'm trying to say is that if the "curator" concept holds water, and I think it will for the next few years anyway, then Netflix is the best placed company in the world right now to play that role. Even if HBO and Sho and various networks wanted to deliver their shows online, history indicates they'll suck at it, and it's unlikely they'll be able to deliver to an XBOX or Wii or Roku...and even if they can do so, they'll be tempted to think they can get 20+ bucks a month from me for a subscription to their cable service for the "on the TV" viewing. All around, the old way they've made money is going to prevent them from making the hard decisions to accept lower revenue per customer, in exchange for more viewers. Classic Innovators Dilemma situation.
I may be wrong...maybe some of the Netflix competitors will figure out the recommendation thing. Maybe they'll get a nice UI. Maybe they'll make the deals they need to put it on televisions rather than just computer screens. Netflix just has an awful big lead in those areas.
All things considered, I'm awfully tempted to buy some NFLX while it's on sale. I bought Google when it hit its 52 week low a few years ago, and have been pleased with the return. NFLX isn't as good a company as GOOG (probably), but it's even more heavily discounted right now.
I don't see how any online streaming service can survive longterm.
There is still quite a digital divide (lack of affordable, highspeed internet access in the US in many areas).
By the time this is resolved, storage media will become so inexpensive and dense, it will be possible to store years of tv shows and movies locally and very cheaply.
Personally, I have grown tired already of having certain tv shows or movies available one week and gone the next. I also dislike having to watch Hulu commercials if I decide to watch the same episode multiple times.
It doesn't make sense to spend billions of dollars on infrastructure when cheap, ultra high capacity media can do the job.
Try telling that to Apple. Consumers had been downloading software off the internet for more than a decade, and along comes Apple, puts a bunch of "apps" in one place, takes a huge cut, and totally changes the industry.
Note: The iOS App Store is somewhat different, in that Apple started with a really popular hardware device, then said "if you want to make this thing useful you have to buy from us". But the Mac App Store seems to be doing pretty well too, and thats a much better comparison.
The exception to this was their movie suggestion algorithm. But lately it seems to be pointing me to their cheapest-to-consume content, not the best content given my rating history. (I say this primarily because of the prevalence of old, old movies, of which I am pretty much never a fan.)
It will become a commodity. That's a problem for Netflix but less of a problem for us. Netflix could still survive by offering better service or lower margins or what-have-you (isn't internet search a commodity? how does google survive?)
Much as content producers may want their own self-focused delivery stores, there isn't a chain of Nabisco Stores or such around. Some stores kinda get there, with heavy promotion of "store brands" or label-focused ones like Trader Joe's and Aldi, but while they win on price their success is tempered by lack of range. Likewise, Dreamworks and Sony and Disney etc. may want to provide direct sourcing of their material to customers, and may succeed to some degree, what most customers want is a centralized "I don't care who made it, I just want it" aggregator & distributor and not have to hunt down "awright, what studio made Shrek...good graphics, so it must be Pixar, which is owned by Disney, check Disney.com...nope, not there...Sony Animation Stuido? they did Open Season which looked similar, check Sony.com...nope, aw crap ya wanna watch my Over The Hedge DVD again?"
So the aggregator/distributor model is key. Publix, Wegmans, Piggly Wiggly, IGA, Whole Foods, etc. make deals with major product/content producers for distribution rights. Smaller ones have to pay for those rights, bigger ones are paid; the supply-and-demand model works out in its intricate complexity. Different distributors provide one benefit or another (ditto deficiencies), which when in competition with other near-identical distributors means innovating and maintaining something which garners more attention. They can exist side-by-side, what with Super Walmart carrying the greatest quantity & variety of most popular stuff cheap, Aldi giving near no variety (but pretty good what's there) stuff dirt cheap, IGA being "it's a grocery store, no more or less", Wegmans selling everything imaginable albeit higher priced, Whole Foods having high-priced premium selection, etc. Likewise, Netflix gets first-there broad-spectrum appeal, Hulu having better TV options, ABC/CBS/NBC/etc. having super-popular but limited offerings, Redbox (assuming they go streaming) featuring broad-range latest big-name short-availability content, etc.
The content producers can't develop enough following to garner customer loyalty to a single streaming source; nobody is a Dreamworks fan to the exclusion of most everything else. An aggregator/distributor can, however, will have to license Dreamworks content because customers want it (even if they don't know who made it). No aggregator can satisfy all customers; improving one feature set will degrade others; a complete slate of new big-budget titles will be limited and pricy, a long-tail library is thorough and "affordable" but lacks the biggest latest cheap, a low-price source may limit to second-tier content, a small distributor may specialize in obscure content for a premium.
NOBODY can provide EVERYTHING with COMPLETE satisfaction; there will always be room for a varying portfolio of content to offer, various delivery mechanisms which will appeal more to some than others, pricing which mirrors demand, etc. Just like grocery stores, each has its limits and annoyances and features and preferences.
This is already happening for me. NBC and ABC (and Justin.tv and TED and Podcasts and Hulu) all have great iPad apps. I use them more often than I use Netflix.
I had a lot of confidence in Netflix as recently as 6-8 months ago.... enough to buy a substantial amount of their stock. Obviously that confidence turned out to be expensive to indulge.
It would be different if they were merely catching bad breaks like the loss of the Starz content, but they're actively acting stupid. I didn't know WordPress had a 5000-comment default limit until the Netflix corporate blog overflowed with angry messages from customers after they destroyed the Web front end for their instant-watch service a couple of months ago. The movie browser page still hasn't been fixed, and is still completely unusable, but it looks like they have learned how to disable commenting on most of their subsequent blog posts.
And now, the Quixtar/Quickster/Quickstar/Qwikstar/Quicster/Qwickster/... business, and the... interesting way it was announced by Hastings. Not much can be said about this move that hasn't already been said. About all I can suggest, as both a customer and a stockholder, is that a certified laboratory be engaged to check the Los Gatos municipal water system for heavy-metal content.
All snark aside, it's going to take a smart, agile, innovative, and above all, customer-focused company to deal with the Comcasts and the AT&Ts and the Starz and other middlemen who stand between Netflix and a sustainable business model. Unfortunately the events of the past few months are telegraphing precisely the opposite signals. What in the world is going on over there? Either the world's first corporate suicide plan is in progress, or a brilliant and utterly obscure rope-a-dope strategy is being executed. Either way, the MBA program case studies are going to be really interesting when Netflix finally pulls off whatever they're trying to accomplish.
Well, it certainly is nice to see that Netflix's promise of securing higher-quality content is at least partially coming to fruition.
Also, it is nice to see a content creator finally start talking seriously about internet streaming versus traditional cable as a means of content delivery.
[+] [-] stephenjudkins|14 years ago|reply
In the longer term, however, I fail to see how Netflix can avoid having its product turn into a commodity. Delivery of digital video to consumers will only continue to get cheaper and easier. Obviously Netflix has gotten amazing deals on bandwidth (see their recent spat with Comcast) but other the prices it pays will only continue to converge with the prices for commodity CDNs.
The only major part of Netflix's business that's resistant to commoditization is having a huge base of subscribers that allows them to cut deals directly with studios like Dreamworks. Obviously Netflix is trying to position itself as a cheaper, better middleman between consumers and content producers than the combination of cable channels and cable companies. This could be very attractive to studios in the medium-term, but ultimately why not cut out the middleman? When (not if) quick, flexible, and easy online payment comes to the internet, what's stopping Dreamworks from simply charging and delivering the movie to consumers directly?
[+] [-] rdtsc|14 years ago|reply
One way is by targeting as many delivery platforms as possible and just being there first. My TV for example has a Netflix "app" so I would likely pick Netflix. Many BlueRay players have built-in access to Netflix. Maybe built native apps for all the major mobile devices.
> what's stopping Dreamworks from simply charging and delivering the movie to consumers directly?
Becaus then users would end up having a bunch of hardware/software specific to each studio. Not common way to organize & sort your media queue.
Yes, Netflix already fucked it up by splitting off Qwickster but imagine having a different service for each studio.
[+] [-] SwellJoe|14 years ago|reply
I remember back in the olden days, like a decade ago, the argument about music and media and writing online was that the company or companies that figured out how to curate the vast array of available data would be the successful media companies of the coming decades. Netflix is better at it than anyone. Because I run Linux most of the time when I'm working, and Netflix doesn't work on Linux, I was using Amazon's video service, and Hulu, to keep myself entertained while working on a server migration. The lack of good recommendations is notable for both services. I feel like I find good things to watch much more readily and with less clicking around on Netflix than on Amazon or Hulu. The overlap is relatively large, particularly with the low-budget movies and older TV series, but the ability for me to find the stuff I'd want to watch is vastly different, and I prefer Netflix by a large margin.
I still go to Amazon sometimes for stuff that I can rent there but can't get on Netflix. And I still go to Hulu for TV that is not yet on Netflix. But, when I sit down with a friend to watch a movie, we fire up the XBOX or Wii and browse Netflix. There's no contest about which is more likely to get my viewership when I'm sitting down to actually watch a movie.
What I'm trying to say is that if the "curator" concept holds water, and I think it will for the next few years anyway, then Netflix is the best placed company in the world right now to play that role. Even if HBO and Sho and various networks wanted to deliver their shows online, history indicates they'll suck at it, and it's unlikely they'll be able to deliver to an XBOX or Wii or Roku...and even if they can do so, they'll be tempted to think they can get 20+ bucks a month from me for a subscription to their cable service for the "on the TV" viewing. All around, the old way they've made money is going to prevent them from making the hard decisions to accept lower revenue per customer, in exchange for more viewers. Classic Innovators Dilemma situation.
I may be wrong...maybe some of the Netflix competitors will figure out the recommendation thing. Maybe they'll get a nice UI. Maybe they'll make the deals they need to put it on televisions rather than just computer screens. Netflix just has an awful big lead in those areas.
All things considered, I'm awfully tempted to buy some NFLX while it's on sale. I bought Google when it hit its 52 week low a few years ago, and have been pleased with the return. NFLX isn't as good a company as GOOG (probably), but it's even more heavily discounted right now.
[+] [-] chopsueyar|14 years ago|reply
There is still quite a digital divide (lack of affordable, highspeed internet access in the US in many areas).
By the time this is resolved, storage media will become so inexpensive and dense, it will be possible to store years of tv shows and movies locally and very cheaply.
Personally, I have grown tired already of having certain tv shows or movies available one week and gone the next. I also dislike having to watch Hulu commercials if I decide to watch the same episode multiple times.
It doesn't make sense to spend billions of dollars on infrastructure when cheap, ultra high capacity media can do the job.
[+] [-] russell_h|14 years ago|reply
Note: The iOS App Store is somewhat different, in that Apple started with a really popular hardware device, then said "if you want to make this thing useful you have to buy from us". But the Mac App Store seems to be doing pretty well too, and thats a much better comparison.
[+] [-] boredguy8|14 years ago|reply
[+] [-] InclinedPlane|14 years ago|reply
[+] [-] ctdonath|14 years ago|reply
Much as content producers may want their own self-focused delivery stores, there isn't a chain of Nabisco Stores or such around. Some stores kinda get there, with heavy promotion of "store brands" or label-focused ones like Trader Joe's and Aldi, but while they win on price their success is tempered by lack of range. Likewise, Dreamworks and Sony and Disney etc. may want to provide direct sourcing of their material to customers, and may succeed to some degree, what most customers want is a centralized "I don't care who made it, I just want it" aggregator & distributor and not have to hunt down "awright, what studio made Shrek...good graphics, so it must be Pixar, which is owned by Disney, check Disney.com...nope, not there...Sony Animation Stuido? they did Open Season which looked similar, check Sony.com...nope, aw crap ya wanna watch my Over The Hedge DVD again?"
So the aggregator/distributor model is key. Publix, Wegmans, Piggly Wiggly, IGA, Whole Foods, etc. make deals with major product/content producers for distribution rights. Smaller ones have to pay for those rights, bigger ones are paid; the supply-and-demand model works out in its intricate complexity. Different distributors provide one benefit or another (ditto deficiencies), which when in competition with other near-identical distributors means innovating and maintaining something which garners more attention. They can exist side-by-side, what with Super Walmart carrying the greatest quantity & variety of most popular stuff cheap, Aldi giving near no variety (but pretty good what's there) stuff dirt cheap, IGA being "it's a grocery store, no more or less", Wegmans selling everything imaginable albeit higher priced, Whole Foods having high-priced premium selection, etc. Likewise, Netflix gets first-there broad-spectrum appeal, Hulu having better TV options, ABC/CBS/NBC/etc. having super-popular but limited offerings, Redbox (assuming they go streaming) featuring broad-range latest big-name short-availability content, etc.
The content producers can't develop enough following to garner customer loyalty to a single streaming source; nobody is a Dreamworks fan to the exclusion of most everything else. An aggregator/distributor can, however, will have to license Dreamworks content because customers want it (even if they don't know who made it). No aggregator can satisfy all customers; improving one feature set will degrade others; a complete slate of new big-budget titles will be limited and pricy, a long-tail library is thorough and "affordable" but lacks the biggest latest cheap, a low-price source may limit to second-tier content, a small distributor may specialize in obscure content for a premium.
NOBODY can provide EVERYTHING with COMPLETE satisfaction; there will always be room for a varying portfolio of content to offer, various delivery mechanisms which will appeal more to some than others, pricing which mirrors demand, etc. Just like grocery stores, each has its limits and annoyances and features and preferences.
[+] [-] nostromo|14 years ago|reply
[+] [-] riffic|14 years ago|reply
Infrastructure, I'd assume.
[+] [-] CamperBob|14 years ago|reply
It would be different if they were merely catching bad breaks like the loss of the Starz content, but they're actively acting stupid. I didn't know WordPress had a 5000-comment default limit until the Netflix corporate blog overflowed with angry messages from customers after they destroyed the Web front end for their instant-watch service a couple of months ago. The movie browser page still hasn't been fixed, and is still completely unusable, but it looks like they have learned how to disable commenting on most of their subsequent blog posts.
And now, the Quixtar/Quickster/Quickstar/Qwikstar/Quicster/Qwickster/... business, and the... interesting way it was announced by Hastings. Not much can be said about this move that hasn't already been said. About all I can suggest, as both a customer and a stockholder, is that a certified laboratory be engaged to check the Los Gatos municipal water system for heavy-metal content.
All snark aside, it's going to take a smart, agile, innovative, and above all, customer-focused company to deal with the Comcasts and the AT&Ts and the Starz and other middlemen who stand between Netflix and a sustainable business model. Unfortunately the events of the past few months are telegraphing precisely the opposite signals. What in the world is going on over there? Either the world's first corporate suicide plan is in progress, or a brilliant and utterly obscure rope-a-dope strategy is being executed. Either way, the MBA program case studies are going to be really interesting when Netflix finally pulls off whatever they're trying to accomplish.
[+] [-] kloncks|14 years ago|reply
Lovely. See you in two years.
[+] [-] jonknee|14 years ago|reply
[+] [-] snorkel|14 years ago|reply
[+] [-] mitjak|14 years ago|reply
[+] [-] felipemnoa|14 years ago|reply
[+] [-] swanson|14 years ago|reply
[+] [-] antimora|14 years ago|reply
[+] [-] burgerbrain|14 years ago|reply
[+] [-] bryanallen22|14 years ago|reply
Edit: According to rglullis, this is wrong. I have left it for context. Sorry - I had read something about it, but it appears to not be true.
[+] [-] ZipCordManiac|14 years ago|reply
[+] [-] icarus_drowning|14 years ago|reply
Also, it is nice to see a content creator finally start talking seriously about internet streaming versus traditional cable as a means of content delivery.
[+] [-] dafarian|14 years ago|reply