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Tag Archives: Netflix

Netflix Controls 60% of Digital Movie Business

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Peter Kafka has a new article up at AllThingsD that proclaims Netflix is “crushing the digital movie competition.” In fact, according to new market research, Netflix controls 61% of the digital movie space. That means 6 out of every ten movies streamed is via Netflix.

The next closest competitor, Comcast, controls only 8% of the market.

As NPR reported yesterday, companies such as Amazon and Facebook are looking for ways to compete in online video. Quoting from that article:

“You know, it’s pretty unusual for the world to let you run away with a couple of billion dollars of revenue and a large market cap without testing the waters,” says Ted Sarandos, the chief content officer at Netflix.

Netflix showed astounding growth last year, and has over 20 million customers. As more people stream content, expect competition in this space to intensify in the coming months.

My cord-cut TV set-up

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Following my last post, I thought I would explain my personal cord-cut situation and highlight what is working for me (and what isn’t) as I try to enjoy TV without cable.

First off, the main source of video entertainment (both TV and movies) is Netflix accessed via a Roku box.  Yes, we don’t get the latest content and yes, the selection is somewhat restricted, but there is enough there that keeps our interest.

I’m also a huge fan of webTV, which I access on Roku or online from my computer (my wife thinks I’m nuts, for a bunch of reasons of course, but my webTV hobby is one of them.)

The big gap here is sports. I get around this because I’m simply not a sports fan, so even if I had cable I wouldn’t watch a lot (or any) sports. (Full disclosure: I saw, and loved, the Vancouver Olympics on cable before I cut it)

I did get an MLB.com account (and jump on the bandwagon) to watch the SF Giants in the World Series. I loved the experimentation of it all and found the experience to be good.

The one sport I do enjoy (and miss dearly) is Formula 1 racing. Right now, I have no good way to follow my favorite fast cars. I read some of the updates online but that is a very sad alternative to watching a thrilling race live.

Also, HBO… That is another huge gap in my viewing pleasure that I miss. We get a lot of the shows on DVD via Netflix but it would be beyond fantastic to have a streaming solution.

As far as news and current events, I get that online, in magazines (I love magazines) and increasingly via electronic magazine purchases on my iPad.

My next moves? Well, I’ll be getting an HD antenna soon to watch over-the-air TV. This will let us watch some interesting shows and hopefully some big events, like the Oscars. I was considering Hulu Plus on Roku but it sounds like that offering isn’t as complete as it could be, so I may wait it out.

Two other disclosures:

1) I’m actually skeptical that this whole cord-cutter thing is a really huge trend. I think people will come back to cable once the economy improves and once cable companies up their PPV game. Cord-cutting will increasingly be a viable option, but it won’t have huge adoption in the mainstream.

2) For the record, I’m not a cord-cutter out of some religous hatred for cable companies. They aren’t my favorite companies in the world but they’re better than oil companies. I’m a cord-cutter for fun. I think it is fun to fiddle with gadgets and find ways to watch TV on my own terms.

Plus I’m super-cheap and I love saving the $60 a month. (If you cancel Comcast Xfinity triple play and get Internet and a landline separate, the savings is about $70… not a lot but I’ll take it.) Factor in the $10/month for Netflix and you walk away with $60 in your pocket and a chance to play with all the inputs on the back of your HDTV.

Is cord-cutting real?

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We’ve all heard about the recent declines in cable subscriptions as of late and the digerati are breathlessly declaring this to be the ear of “cord-cutting”. The real test of the cord-cutting phenomena will be once (or if) the economy ever picks up. As stated:

Neil Smit, president of Comcast Cable, acknowledged in a recent call with investors that some customers had dropped cable for free signals. Company executives also said they expected business to rebound with the economy.

That may very well happen.

Thus far, despite all the brou-hah-hah, the relative number of cord-cutters has been small and it has mostly been low-margin customers, the type of customers cable companies don’t want anyway.

You could reasonably assign those customer losses to the crappy economy and anticipate customer increases once things get better. If that happens, then “cord-cutting” has been a fad. But if the downward trend in customer subs (or the upward trend in cord-cutting) continues when (or again… if) housing and/or employment picks up, then the cable industry is in trouble.

I’m a fan of the cord-cutting movement (as a cord-cutter myself), but I’m skeptical about how real this trend is in the mainstream.

There are a number of wild-cards out there besides just the economy. For example, high-profile channels like HBO start making their own moves could nudge cord-cutting from fad to trend:

(Time Warner Inc. Chief Executive Jeff) Bewkes has suggested recently that HBO could be sold directly to consumers on the Web.

HBO going online is a big WOW.

Also, the big question is of course sports, and how/if you’ll be able to access outside of a cable subscription.

The question ultimately comes down to money. Yes, Netflix may have almost 17 million subscribers, but under its current deal Starz, a key supplier of content  to Netflix, makes only 15 cents a subscriber, compared to the $2/subscriber it makes off of cable companies.

Until content owners and distributers start making that kind of coin, marquee content will remain elusive on cord-cut TVs, which may squash the cord-cutting revolution.

The most dangerous media company in the world

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Apple.

Yes, Apple.

Even Apple is afraid of this company (I think). If they weren’t, then why would they let them come standard on the new AppleTV and offer a service that is essentially a competitor to their iTunes movie rental business?

The company I’m talking about is Netflix. If there is one company that should have everyone from Apple to the cable companies quaking it is Netflix.

The announcement that Netflix is standard on AppleTV solidified the company’s position as the default service to get content over the Internet. Over the past 10 years or so, while content producers, cable companies and others fiddled with Hulu, pay walls, and other ideas, Netflix built  the library and the audience and to take over the steaming content market the same way Apple took over the gizmo market.

Sure, Amazon and HuluPlus also have interesting offerings but they are more a compliment to an existing Netflix account, not a replacement. Yes, Amazon and HuluPlus offer some content you can’t find on Netflix, but there is also a lot of overlap (Why do I need to watch 30 Rock on HuluPlus with commercials when I can watch it commercial-free on Netflix?)

Even the bankers are getting in on deal! The other week CrediteSuisse pretty much called out Netflix as one of the main (among the many) nails in the coffin of cable companies. They estimated that a third of viewers age 25-34 use Netflix to cut their cable. While sadly I’m no longer in that prized demographic, I am among the Netflix-powered cable cutters.

Netflix is more than just a clever movie streaming service, it is defining the new content distribution model. When the history of online content is written Netflix will be lauded as one of the main agents that dismantled the old system and founded the new.

Rooting for Roku pt.II

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OK, so the other day I made the comment that in order to compete with all the other media streaming boxes out there, Roku should look at really doubling down on more content.

Shortly thereafter, Netflix (another one of my absolute favorite companies) announces a partnership with NBC, thereby giving Roku a helping hand (and yes, other Netflix boxes as well.)

And now this, Roku skillfully lines up Hulu Plus as a content partner. Actually, from my perspective, this is a bigger win for Hulu. As of now, I had held off of getting a Hulu Plus subscription but now, seeing that it will be on my Roku, I may just sign up!

Now with Roku you get Netflix, Hulu Plus, Pandora, Amazon and a bunch of other content providers, plus 1080p output, plus USB playback all at a sub $100 price.

Sure, none of these content partnerships will be exclusive, but Roku provides them all in such a neat, easy-to-use box that is available now.

So remind me, why would you be interested in any other offering out there?

(If they come up with a new UI, I’ll be in TV heaven)

How the Web Picks my Movies for me

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Back in the day…

  • It was all Siskel & Ebert or the guy with the crazy hair + mustache
  • The papers told you how long a movie’s been in the theaters
  • You had more than a week to decide if you were going to see a movie or not before it disappeared to DVD
  • If you missed it in the theaters, it was virtually impossible to know when you’d get to see it at home on tape

Today, we have amazing collaborative filtering systems (if you like Blah, then you’ll probably like Blah Blah), we know the exact gross a movie has made (even the ones that made, on average, $237 per screen), and every other little detailed stat imaginable.  And with the exception of reporting the revenue/gross of a movie, I think we’re mostly for the better.  These days, it only takes a little bit of trust “in the system” to weed out the good movies from the dreck. And as a father of two with virtually no movie-going times, choosing wisely is key for me.

Example one: picking a movie in the theaters.

rt-terminator

I don’t even really think about the $10 (or more) to go see a movie as much the 2 hours of my life I’m about to commit to something.  So when a movie’s in the theaters, I check just one site – rottentomatoes (RT).  On RT I see an instant score, which is the aggregate of all reviewers.  Anything under 50% and I assume it’s not theater-worthy.  The truth is, I don’t put much stock into any given reviewer’s thoughts, but the power of RT is reminiscent of fivethirtyeight.com’s ability to pull together order out of chaos.  BUT, that doesn’t mean I’ll never see the movie…

Example two: watching something On Demand (or just DVRing something)

imdb-terminator

After a movie’s made the rounds, I tend to put a bit more stock into the community/viewership as opposed to reviewers.  Movies like Caddyshack, Shawshank Redemption, and others that I’ve liked did terribly with the critics, but that doesn’t mean they aren’t worth seeing.  This is where the Internet Movie Database (IMDB) comes into play for me.  Anything above 7 is definitely watchable, below 6 is not, and in between is a judgment call.  But I never, ever DVR something without checking IMDB first…

Example three: adding to the Netflix queue

netflix-queueVirtually everything in my Netflix queue came through the internal Netflix recommendations system.  It’s just plain awesome. I barely even look at the 5-star score, I have gotten so trusting of it.  Granted, I don’t take every recommendation, but I can browse the “Movies You’ll 8>” and just add and add away.

And there you have it.  Movie picks, courtesy of the Internet, no thought required.

Why Netflix is Kicking Blockbuster's e-Butt

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While I’ve always liked Netflix, I’ve remained dubious as to their potential for long term success.  Even when they hit their first million subscribers I thought little of it.  From my perspective, with tens of millions of customers, I figured sooner or later Blockbuster would just wipe out Netflix’s market share and opportunity. Instead, Netflix is en route to 9 million subscribers, and I’m more than a little surprised.  A conversation last night with a good friend of mine helped me understand why this is happening.  It’s a few parts Innovator’s Dilemma, and a few parts just plain bad business.  It’s a Cinderella story.  Outta nowhere.

In looking back on Blockbuster, their major rise to success happened during the VCR boom.  New movies were priced prohibitively for purchase ($80+ for a movie was not uncommon), so rentals dominated.  Blockbuster utterly mastered the art of creating a retail facility to rent video tapes.  In doing so, I believe they set the groundwork for their failure to convert to a successful Internet business.

First, it’s important to look at Blockbuster for what it truly is: an excellent Retail Business, whose product is Renting Movies.  Initially the format was VHS tapes, then as the shift to DVD occurred, the company adjusted.  If the next step was Blu-Ray (which it isn’t), and the primary market was consumers needing to rent content, Blockbuster would, hypothetically, be poised for a rosy future.  But that’s clearly not the case.

The DVD market saw a major change in pricing strategy for the content industry, with movies averaging $19.99-$24.99, and often much less.  This meant the movie rental business saw its first shift to the movie sales business.

Next up, due to the form factor, sending DVDs in the mail was a viable option, enabling Netflix to exist.  While Blockbuster has “toyed around” in the area of mailing DVDs, it’s a fundamentally different business than the Retail operations the company mastered.  In fact, when considering Netflix it’s very important to recognize their core strategy of distributing content based around personal recommendations.  Netflix is actually an excellent Movie Distribution Business, whose product was primarily Mailing DVDs.

As we look at the present, the world of Retail Businesses have seen enormous change, mostly due to e-commerce.  Additionally, the world of Movie Distribution Businesses have faced not just format changes, but also the massive decay of physical media formats.  Which is why Blockbuster has responded so poorly, and is so poorly poised for the future.  In a nutshell, Blockbuster isn’t about movies, it’s about retail movies, a world whose time has come.  Whereas Netflix isn’t about retails or formats, it’s about movies, and as the variables in that world change, Netflix can more easily change with them.

So even as we see Blockbuster dabble in the digital distribution world, the company needs a fundamental sea change in order to survive.  Interestingly, I don’t think there is anything that would prevent Blockbuster from digital success.  Per the NY Times article, there are plenty of other collaborative filtering tools to give them a great recommendations system.  They already have all the relationships and licenses in place in order to be able to offer literally identical services to Netflix.  They also have an incredibly strong brand to leverage, not to mention a massive customer database and distribution facility.

All they need to do is choose to operate a Movie Distribution Business, instead of running a Retail Business.  I think the simplest solution for the company is to create a spinoff entity, one not hampered by the P&L necessities of the retail organization.  This new entity should be run like a startup, be well funded, and given a couple of years to succeed.  They should have full access to the marketing vehicle that is Blockbuster, but none of the constraints or burdens of that organization.

Until then, I’ll enjoy getting my Netflix movies by mail.  I’ll watch it streaming on my Macbook, Xbox 360, or boxee setups.  If there’s a new release I can’t find within this setup, I’ll buy it through iTunes or through my HDTV cable box on demand system (something Comcast does extremely well, btw).  In the digital age, there can be many more than only one, but only time will tell if Blockbuster will be one of them.

Netflix on the new XBOX 360 Live – disappointing so far

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On a scale from 1 to 10, the Netflix / Xbox experience is slathered in weaksauce.

I have an Xbox 360. When I heard about the new Xbox Live experience (new UI, new architecture, more features, more customization, etc.) I thought it sounded really cool. I’ve always thought it was a neat product, but I also thought there was a better interactive experience waiting to be enjoyed, if only someone would come along and develop it. Last Thursday, November 20, 2008, that experience became available for everyone.

One of the features I was most interested in was the Netflix streaming directly to your Xbox 360. I believe that digital home media have a long way to go. Networked media PC’s are a pain to set up, streaming media servers even more so, and Apple TV (even with Apple’s vaunted user-experience) isn’t an elegant or simple solution. But I have an Xbox 360, a computer (for all intents and purposes,) already hooked up to my television and with an HDMI connection.   Netflix streaming directly onto my TV? Sounds excellent.

I even resurrected a membership for this. I had Netflix a long time ago, and ended up canceling because I just didn’t get enough value from it. I get lots of movies from the Library (I know, laugh all you want, but’s it free) and I felt like I was always forgetting to return the Netflix discs and just throwing money away on the membership. So I canceled. But this Xbox partnership seemed like a good reason to renew the subscription, because of the ease, convneience, and my sheer exuberance at the prospect of streaming it right on to my Xbox. Then reality set in.

I just re-subscribed to Netflix, activated my account on the Xbox, and added (hang on) 39 movies to my queue. Thirty-nine movies. Of those, not one is available to stream the Xbox 360.  Not one.

Now that, my friends, is weaksauce.

And before you retort smartly, let me say that this is not just a bunch of brand new, extra fun movies.  Among others I have indies (Run, Fat Bot, Run – 2007), thrillers (Revolver – 2005), TV (How I Met Your Mother Season 1 – 2005), Action (Blade – 1998), Sci-Fi (Resident Evil: Extinction – 2007), and comedy (Forgetting Sarah Marshall – 2008) to name just a few.  There’s a good blend, in my opinion, of older and newer, hotter and less-hot choices in my list.  And none of them are available to stream.  That’s not acceptable.

After searching diligently I did finally find one movie, National Treasure 2, that was available for streaming to Xbox Live, and I wasn’t wholly opposed to watching it.  It worked flawlessly.  I’ve never watched any of the National Treasure movies, but my wife convinced me that I might like them, so I gave it a shot.  Truthfully, I enjoyed the movie.  Low expectations help a lot, and the history is a lot of fun.  But more importantly, the Netflix experience on the Xbox 360 was fantastic.  Moments after adding the movie to my queue, the Xbox Live page displayed it as available.  I asked to watch the movie, and in 15 seconds it was ready to go.  The picture quality was excellent, and the controls all worked perfectly.  I was REALLY satisfied with the experience of using Netflix.   Unfortunately, there’s not much for me to watch.

Netflix and Xbox have bragged that there’s a library of 12,000 shows to choose from and stream to your Xbox 360.  That’s not real helpful, if I don’t want to watch any of them.  I am sadly unimpressed, and if I were forced to give this a numeric rating between 1 and 10, right now it would get a 4.  I like the idea and the service worked well, but there’s no content I’m interested in seeing.  No bueno.

Some Related Stories & Links:

News 4 Gamers

Gizmodo

CNET News

Tom’s Guide

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Update 11/30/08:

I’ve been thinking about this situation some more.  Jivebotic and Wunder both left very good comments (on 1to10) about what movies are available, and the benefits of the Xbox / Netflix experience.  I agree with both of them.  The way I see it, there are two major problems:

1. There’s still not enough good content available on the Xbox.  Jivebotic pointed out some good movies that I can watch, sure enough.  But they’re still not the ones I want  to watch.  I don’t know why that rubs me the wrong way, but it does.  Out of 40 or so movie titles that I want to watch, I should have been able to find a couple that were available.   For me, there was not one.  

2. Netflix needs to add some kind of serach and identification mechanism, and that right quick.  Currently they do identify their “instant” titles, but there are 4 or 5 different “instant” mechanisms for streaming movies, and not all titles are available for all mechanisms.  I need a way to search for Xbox-compatible films, they need to visibly tag those films with an Xbox logo, and they need to quickly add more titles if they want to keep my business.  

This post is also available on 1to10reviews.