Will Netflix Survive the Death of DVDs?
By Mike Schuster Jun 24, 2009 11:50 am
Internet is rental company's next big competitor.
Netflix (NFLX) CEO Reed Hastings is certainly preparing for the moment when DVDs are no longer viable.
The inevitable death of the DVD has long been on Hastings' radar -- ever since the company's inception. Though Netflix set the standard for snail-mailed movie rentals, it has always been poised to take advantage of instant-streaming technology -- as the company name makes clear.
But the shift to streaming media involves a completely new set of issues.
As the DVD industry emerged in the late '90s, Netflix was able to usurp Blockbuster's (BBI) throne by offering up warehouses of narrow, easily-stored discs rather than the bulky cassettes that clogged the limited space at store locations. Netflix had a seemingly unlimited selection of classic and genre films available -- and for a flat monthly fee. But the video-rental industry was changing faster than Blockbuster was able to move, and has left the chain far behind.
Netflix responded to a drop in DVD rentals by introducing subscriber streaming in January 2007 for around 1,000 titles -- a far cry from the over 100,000 available on disc. Since then, members have been able to watch selected films instantly on their home computers for no more than it used to cost to have discs mailed. Impatient users prefer instant streaming, and it's vastly cheaper for Netflix.
The main problem for Hastings has been -- and continues to be -- procuring licensing fees from the studios. Premium cable networks, such as HBO (TWX), Showtime (VIA), and Cinemax, are already in bed with most movie studios and have purchased exclusive rights to air their programming on cable or through on-demand services. For Netflix, obtaining Internet rights is just as complicated -- if not more so, since the revenue model for streaming video has yet to be determined.
Netflix has found itself in hot water more than once: Sony (SNE) claimed the rental company never had the right to stream its titles online and blocked streaming access to compatible TV units -- including Microsoft's (MSFT) Xbox consoles. PC users were unaffected.Streaming video to television is a major concern for the top media companies. Netflix's wide selection of films and TV shows trumps anything that network or on-demand services have to offer.
Netflix is also facing a surfeit of competitors. While Blockbuster is no longer a threat, Google (GOOG), Apple (AAPL), Amazon (AMZN), Hulu.com, YouTube, and countless others are scrambling for more eyeballs, more click-throughs.Speaking with the Wall Street Journal, Hastings said, "As a capitalist, I'd rather have Blockbuster as my primary competitor than all those Internet companies."
But if this competition means a wider selection of titles in a larger format and crisper resolution, those who like to curl up with Jiffy Pop at home are about to be very happy indeed.
No positions in stocks mentioned.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.
(9)
Reply
2009-06-24 12:07:33
CDs dead?
"And now that commercial music has all but abandoned a physical media format,.."
I don't think the numbers will back that up. Last I heard, most music is still purchased on CDs, but internet gaining fast.
I don't think the numbers will back that up. Last I heard, most music is still purchased on CDs, but internet gaining fast.
2009-06-24 22:28:30
Poorly researched, no fact checking
1. Netflix does NOT stream to a PC; you have to have or buy a dedicated device.
2. They DO stream to XBox.
3. There are only 12,000 titles available for streaming, most are NOT movies.
Took about 30 seconds to get this info, looking on NETFLIX.COM. Is it that hard to check facts?
2. They DO stream to XBox.
3. There are only 12,000 titles available for streaming, most are NOT movies.
Took about 30 seconds to get this info, looking on NETFLIX.COM. Is it that hard to check facts?
2009-06-25 14:43:17
Poorly researched, no fact checking
I'm a netflix subscriber and they stream to my PC. I watch about two streamed films a week through my computer. Very convenient. Title selection is good. They will spot run a few time limited popular title selections everyday that are not in the regular listings. Good service at a great price.
2009-06-25 14:51:28
Poorly researched, no fact checking
Mike -- I am a POTENTIAL new subscriber to Netflix, and would love to see where, on their website, they allow a PC as a "Netflix Ready Device." I can't find it.
The device list is at:
http://www.netflix.com/NetflixReadyDevicesList?lnkce=nrd-l&trkid=425738&lnkctr=nrd-l-n
The limited choice in streaming, vs. snail-mail DVD, is described at:
http://www.netflix.com/NetflixReadyDevicesFAQ?lnkce=nrd-f&trkid=699060&lnkctr=nrd-f-n
"There are over 12,000 movies & TV episodes available to watch instantly, but very few are new releases. It's a separate, smaller library from our over 100,000 DVD titles.
While movie studios and television networks have great flexibility in what they offer on DVD, there are many limits to what they can make available to watch instantly due to long standing contractual obligations.
Our library of choices available to watch instantly is growing every month, but there will be much greater selection available on DVD for a long time to come."
--Johnathan
The device list is at:
http://www.netflix.com/NetflixReadyDevicesList?lnkce=nrd-l&trkid=425738&lnkctr=nrd-l-n
The limited choice in streaming, vs. snail-mail DVD, is described at:
http://www.netflix.com/NetflixReadyDevicesFAQ?lnkce=nrd-f&trkid=699060&lnkctr=nrd-f-n
"There are over 12,000 movies & TV episodes available to watch instantly, but very few are new releases. It's a separate, smaller library from our over 100,000 DVD titles.
While movie studios and television networks have great flexibility in what they offer on DVD, there are many limits to what they can make available to watch instantly due to long standing contractual obligations.
Our library of choices available to watch instantly is growing every month, but there will be much greater selection available on DVD for a long time to come."
--Johnathan
2009-06-25 15:20:53
Poorly researched, no fact checking
Yes, the Netflixs site facts you give are correct. All I can say is that I can and do recieve the available streaming library through my PC. Netflixs is kinda funky unique. Once you start to use their service things begin to pop up as recommedations based on your prior viewing history. The more you view the more the database learns about your tastes and recommends films in those catagories. Often instant view rec's appear from this that may or may not be available in their instant title library. At first I thought it was going to be a big disappointment but now have over 73 instant view titles in my viewing que and everytime I select I get a few more. I will say this the instant view library is skewed to older films. Newer titles seem to be reserved for DVD viewing, but thats fine for me I'm an old geezer anyway and like the classic stuff. Mail DVD service has been excellent. If I time it right I get about two dvd's in a 10 day period. About all the time I can afford to watch anyway. I have the 1 dvd + unlimited instant service for about $10 a month. Give'em a try they offer this for a 2 week free trial.
2009-06-25 15:27:01
Poorly researched, no fact checking
How did you get them to stream to your PC, rather than their proprietary gadget?
I'd rather avoid adding yet another gizmo to the pile...
I'd rather avoid adding yet another gizmo to the pile...
2009-06-25 15:52:46
Poorly researched, no fact checking
LOL, I hear ya. I didn't have to add anything to my desktop PC software or hardware. I just login to their site, make the selection from the instant view que, and in about a minute it starts. I do have an upgraded video card installed (Nvidia 6400), but thats been with the PC for a while now, which is a 2004 HP desktop, old Athelon processor and XP OS. Most built in video controllers, say within the last 3-4 years, should produce good quality pictures. If you can get good quality on youtube you'll get about the same performance on the netflix stream. Quality may vary due to how the title was remastered, but I've not been displeased.
2009-06-25 16:26:14
Clarification
Johnathan, It dawned on me that you are probably trying to view this on your digital TV. I'm using my computers monitor as the dispay device. You can get adapter cards that will output video to DTV's. You'll have to match the input /output interfaces. Last I was into this stuff there were several diferent types of interface methods and none had evolved as a standard. SPDIF (sony/phillips digital interFace) was the most prevelant at the time, but I'm sure it's changed since then. You'll need to find someone who can assist you in matching your DTV and the PC's adapter card. In that case you will have to add gizmos.
2009-06-29 04:25:28
Your Uninformed Spin of a Market You Do Not Understand
The basis for your entire article is this stated premise: "And now that commercial music has all but abandoned a physical media format, DVDs' days are numbered." Someone told you this, right? Someone in the music business, or was it someone who thinks he knows about the music business?
I am in the commercial music production business, and I deal with real companies, real markets, real sales figures, in short...that which is real. Physical CDs compose about 60 % of all music sales in the year 2009. 60 %, not "all but abandoned." Certainly CD sales have lessened significantly over the years, and this trend will continue until CDs become as relevant as cassette tapes. But that time has not come yet. Physical media format has not been abandoned. And although it will be only a matter of time until it does happen, that amount of time will be measured in years...not minutes.
I am in the commercial music production business, and I deal with real companies, real markets, real sales figures, in short...that which is real. Physical CDs compose about 60 % of all music sales in the year 2009. 60 %, not "all but abandoned." Certainly CD sales have lessened significantly over the years, and this trend will continue until CDs become as relevant as cassette tapes. But that time has not come yet. Physical media format has not been abandoned. And although it will be only a matter of time until it does happen, that amount of time will be measured in years...not minutes.
Get real-time options trading ideas from Steve Smith, veteran options trader and newsletter author, plus let him show you the way to cut risk and boost your returns through the strategic use of options. Click here for a free 14 day trial to OptionSmith by Steve Smith.
Copyright 2009 Minyanville Media, Inc. All Rights Reserved
