Netflix prepares to live up to its name
By Raghu Kakarala on Thursday, January 18th, 2007Netflix took the next step to living up to its name by starting to allow select customers to download movies online rather than receive them via mail - net flix indeed. Netflix innovated the movie rental space when it began operations in 1997 with its service that allowed subscribers to select movies online and receive them by mail with an indefinate return date. Like any innovator it has faced the classic problem of being copied and sometimes bettered by well financed rivals such as WalMart and Blockbuster.
It’s the innovators dilemma that has seen two waves transpire in the last decade since Netflix debuted. Netflix’s service disrupted the business model of Blockbuster, and now the coming of on-demand digital downloads available by Apple’s iTV, Microsoft’s XBox 360, and the delivery networks such as Comcast has disrupted the mail only portion of Netflix’s core business. Netflix is going it alone at this point and is investing $40 million to get the service off the ground. If any aspect of this move is bold, that is the one that should stand out. There are several key components to the much anticipated ability to view the movie you want to watch when you want to watch it.
- The front end interface to select the movie needs to be enticing - a check in Netflix’s column, their queue and recommendation interface is good and always attempting to get better.
- The ease of getting the movie off the computer and onto the tv - a big check in the column for the XBOX and the cable companies with their ubiquitous set top boxes.
- The network needs to be robust - an advantage for the cable companies with their closed systems but broadband speeds continue to increase which will shrink this advantage over time.
- The selection of movies needs to be vast - an interesting note in Netflix’s gradual rollout of this new service is that only 1000 of the 70,000+ movies Netflix offers today will be available for download - a function of the complicated technology behind on demand downloads.
I don’t see how Netflix can be successful in this venture. The movie industry has been dealing with a variety of issues in the past few years regarding their own profits, and they are still in the midst of adjusting to these fluctuations that are popping up in the market. Movie Theater sales have gone down because of the increase of home theater systems and the increase in popularity of HD, which has meant that movie profits are starting to come more from DVD sales. This is the perfect time for HD-DVD and Blue-Ray, because if people are moving more towards DVDs, then what’s better than a new similar format that people could adjust easily too, offers a lot more functionality, and people would be willing to spend more on.
Movies over the internet has its advantages, mainly quick easy access which everyone is demanding more of, but it also suffers from a few flaws; The quality of the movies might suffer. Most computers aren’t equipped to play surround sound, and most might not have the computing power to play the movie without a few glitches here and there, so it can’t offer the full cinematic experience yet. There’s also the big nagging problem of copyright infringement. With movies being downloaded digitally off the net, there’s more of a chance of the data being taken, and then sent freely around the world. Because of this issue, the film industry is going to be more reluctant to let their movies be used in this format, which is probably why Netflix will only allow you to download 1000 of their titles. All of the on-demand digital movie download services suffer from this problem, including XBOX 360.
Maybe this is the new up and coming technology that I haven’t jumped on the bandwagon yet for, but it seems that if Netflix isn’t going to be making any additional income off of this feature for the foreseeable future because of their flat-rate system, and the fact that this format has a lot of obstacles to overcome before it becomes more popularized, it seems like this might be a bad move for Netflix at the moment.
Interesting news. I am disappointed that the resident video down-loader at Spun didn’t add this entry to the blog though.
Marc Cuban has posted an interesting entry http://www.blogmaverick.com/2007/01/19/computer-to-tv-shouldnt-it-be-the-other-way/ today on his Blog Maverick site on how he views the delivery model for content and whether the computer or the set top box/dvr/xbox is the preferred leader in downloading video content at home. Nice to now someone smarter and richer tham me has some similar thoughts.