Tuesday, August 9, 2011

What is Netflix thinking?

Recently, Netflix decided to sever its streaming video and DVD-by-mail services, charging a flat fee for each that would raise prices by 60 percent. Given the success of its streaming service—which now comprises nearly a third of the country’s Internet traffic during peak hours—perhaps Netflix could be trying to "push" content providers to give their customers more streaming content. But this works only if customers value the "right now" over the "right movie."

It’s common knowledge that Netflix’s streaming offerings are patchy and unpredictable, light on new releases and heavy on catalog obscurities, and that a movie or a TV series you’re in the middle of watching can disappear overnight. But what if Netflix wants disgruntled customers? Sandoval speculates that Netflix assumes most customers will drop DVDs in favor of streaming, and studios will be faced with two choices: either make more titles available via streaming, or accept that Netflix’s customers will just watch something else. It’s already trained its members to wait four weeks, during which new movies are available to buy but not to rent, in order to expand its selection of Instant titles. So why not assume they’ll wait forever, or failing that, move on? Search for Drive Angry, and Instant helpfully suggests you watch Kick-Ass instead.

If this is right, it must be that Netflix faces less competition in the "streaming" industry than in the "DVD rental" industry.


  1. I wonder if the move to unbundle is a first step towards eliminating the DVD rental, given the success of such $1 outlets as Redbox and Blockbuster (which offer better, more recent selections with an immediacy that addresses the needs of single women, who own Keurig machines, who find themselves dateless on a Saturday night). If customers choose streaming in place of DVD, that would provide NetFlix with valuable market information. Or, it could blow up on them (which if they don't improve streaming technology is the more probable outcome).

  2. I imagine the only reason they are doing this is to eliminate DVD for good. The problem with that is that Netflix doesn’t have the streaming content to do that. They don’t have new releases or anything worth watching on their streaming. This is why you have to have both services with Netflix. With Blockbuster you get more options and they are going to end up being cheaper with the price increase. With my provider/employer DISH Network you can get Blockbuster free for 3 months. Check out the promotion through DISH at this link http://bit.ly/iH7nwg . It is a great time to switch over.

  3. I really enjoy looking back on this issue several years later. Since the change, Netflix streaming has improved significantly. Not only does it seem less "patchy & unpredictable" but also has more new releases, a greater range of TV series, & (most surprisingly) an extremely successful line of Netflix-produced series. The rise of streaming devices like Apple TV & Google's Chromecast has also increased the use of Netflix. It's created an entire generation of Netflix-binging, non-cable-owning watchers. Furthermore, the ability to digitally rent movies or series through these devices eliminates the need for a physical DVD service for many users. I am curious to see how much the conversation changes in a few more years; will cable TV be a thing of the past as streaming services & devices gain more rights to content? Will Netflix eliminate the DVD service, or will it's few million users fight to keep it around?

  4. Reading this post almost five years later, it looks like Netflix made the right choice to steer people away from the DVD service. I personally had subscribed to the DVD service and streaming service, but once the prices kept increasing, I did away with the DVD service. Since then, Netflix's variety of movies and TV shows has improved, which I am sure is due to the competition of other streaming companies as well, like Amazon with their Prime TV and movies selection, along with the ability to buy or rent newer movies not available on Netflix as well. It seems more and more people are moving to digital and DVDs and blue-rays one day may be what VHS tapes are to us now.