Netflix Splitting in Two

Well, the company is called Netflix for a reason. The vision for the company wasn't originally DVD deliverables - it was network-served media - but the technology to do so simply wasn't there yet. Keep in mind that Netflix was founded when the vast majority of the population was still on dial-up service! Now, if you believe what Reed has been saying in the past (not so much right now, strangely), you know that he isn't one to let his service rot away under his feet.

Many are calling Quickster the sacrificial lamb, and, if this is the case, Reed chose wisely. Netflix remains shiny and bleeding-edge in that its delivery model is always out in front of everyone else. Recall that Netflix introduced computer-based streaming at no charge for existing users. These enhancements met with much fanfare and when Netflix negotiated themselves into hundreds of models of devices for streaming content, nobody complained.

We may see Quickster, sometime not too far down the road, transition from mail-based deliverables to kiosk-served media. They might franchise it? The transition has been clunky.

They walked away from $4 per month in revenue they'd been getting from me for nearly a year when I dropped my $11.99 hybrid service (1 DVD / Blu-ray + Streaming) in favor of streaming only. But maybe Reed is smarter than everyone? Maybe he can see the future - one where cars still don't fly and the postal service is a more expensive, five-day-weed shadow of its previous self?

The DVD service might not be everything we've cracked it up to be. And it might get even more expensive down the road.
 
Taylor Rudd said:
Since streaming media is likely the future - both technologically and economically .
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You won't find any arguments about streaming being the future of media delivery. However I have doubts that content delivered via the internet will be a cheaper alternative to delivering physical media. Businesses and consumers are grabbing all the bandwidth they can get their hands on. The internet service providers are more than happy to offer their customers tiered packages that offer higher speed for a higher price. As demand steadily increases so will the price of delivery.

Will the average consumer that is currently paying $25 a month for internet service be willing to pony up an extra $50 a month in order to improve the quality of the streaming?
 
This move on the part of Netflix is stupid, not because they pissed off their customer base, but because they're abandoning what little leverage they had with the studios.

With DVD's being tossed away, Netflix will now lean solely on streaming rights - streaming rights which are expensive and are only going to get more so. The studios have Netflix by the balls, as they find a way to do with every upstart company that tries to challenge them (honestly, I root for the studios, not the middle-men).

So now Netflix needs to up the ante by increasing streaming libraries, but with Starz flipping them the bird, they're taking this new step at a preexisting disadvantage. The studios know that Netflix desperately needs new streaming licensing, and they're going to have to pay dearly for it. The only possibility that Netflix has of making it through is if enough subscribers stay on with Netflix (instead of, or in addition to Qwikster) and Netflix cuts enough of a loss by not having to pay for DVD mailing costs, that they can afford the hike in streaming rights. Still, the studios know there's blood in the water, and I'd be surprised if Netflix isn't MySpace'd by 2016.

EDIT: To clarify the first line of this post, the leverage Netflix had was that their DVD service was biting deep into studios' traditional DVD and other post-theatrical profit venues. This made studios nervous and feeling like they were about to get "left behind" by the new age of streaming, but this move is clearly an attempt on Netflix's part to finally abandon DVD service altogether in favor of a streaming-only system - one which will leave them at the mercy of studios. Their best bet, really, is to sign long-term deals with upstart studios like they did with Relativity. Unfortunately for them, after the Netflix-Relativity deal, pay channels like Showtime and Paramount's new "Epix" reached out to the other small studios for access to content (LGE and MGM went with Epix, TWC and Summit with Showtime).
 
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vcassel said:
But is that only for Dreamworks Animation? Because if so, I don't think that would be so exciting to people feeling the lack of content since Starz pulled out.
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Yep, as I understand it, it's DWA content only. It's an interesting turn, but at an estimated $30mil per film, it rings more of excess spending than of major acquisition on Netflix's part (who've already spent $75mil on Mad Men and $200mil on some old CBS shows earlier this year). It is probably a better deal than Netflix's earlier deals this year, but you're right, vcassel, it's not a very good replacement for Starz' content.
 
I think you guys are off-base on the DWA thing. Take a look at how many of the top grossing movies of the last 10 years have been DWA movies. Tons of families will be putting that part of their selection to serious use. I think some of DWA stuff could become the most popular on their site, but that's me.

We decide what we think is a good buy based on what? What we think of the films personally in the lineup? You better believe that are those costs per film and deal that their very sure they'll deliver. You don't spend that kind of cash flippantly...

Not saying they couldn't be making a bad move here/there, but they're probably going to be just fine.
 
KyleProhaska said:
I think you guys are off-base on the DWA thing. Take a look at how many of the top grossing movies of the last 10 years have been DWA movies. Tons of families will be putting that part of their selection to serious use. I think some of DWA stuff could become the most popular on their site, but that's me.

We decide what we think is a good buy based on what? What we think of the films personally in the lineup? You better believe that are those costs per film and deal that their very sure they'll deliver. You don't spend that kind of cash flippantly...

Not saying they couldn't be making a bad move here/there, but they're probably going to be just fine.
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Yes, of course the films will "perform" well among family-oriented subscribers. But the problem there is that the Children/Family selection on Netflix is already aptly filled. My little brother and sisters back home never run out of movies or shows to watch on Netflix, and if my parents wanted to watch a movie with them, there's plenty of selection there as well.

The people complaining about a lack of streaming selection aren't often talking about family-oriented viewing. If I hadn't cancelled my Netflix subscription, I'd want to see everything from Hesher to Transformers 3 coming out on streaming.

So yes, it's not going to break Netflix that they just signed on to a $90mil/year deal for kids movies, but no, it's not going to fill the gaping hole in Netflix's streaming library. It's a bad buy in light of what they really need to focus on, which is a combination of intelligent arthouse flicks and blockbuster "popcorn movies" to keep the general customer base happy.

Mad Men would have been a good buy if they hadn't spent an estimated $75-100mil on a show that has failed to please more than it's built-in audience from AMC. The CBS deal would have been good if they hadn't spent an estimated $200mil on a bunch of non-currents from the 90's.
 
Well I recently cancelled with Netflix, but for a different reason. Here in Canada 'Netflix' only has online movies (no mail DVD service), and not a lot of options. In fact it was frustrating as I wanted to see some old classics, and some new just released films, but it has neither. Maybe now that they've slipt the two they'll bring both to Canada.

but for now I've gone to Zip.ca, the Canadian Netflix. The only problem is they are ONLY mail in dvd services, and it seems to be more expensive.

Doesn't help that all the rental companies around my place just closed down...
 
A good decision for a tough problem. Netflix also announced another exclusive broadcast window agreement this week. Prepare for an ever more decentralized market for video content. It is a great equalizer for content producers - like de-regulation - but one where the consumer must use dozens (hundreds?) of different services to find the content they're looking for. And someone will have to pay for all of it somehow.
 
I guess I'm glad they're keeping it all one business - but, really? How many times are you gonna change your mind? Sheesh. It's like a group of 13-year old girls making business decisions.

Sheesh.
 
i'm more concerned about them keeping up the streaming content than i am them trying to appease everyone who got mad about them raising their prices...

Content is only going to get more expensive as the market gets more competitive. They recently did not reach a renewal deal with Starz, which is like 1,000 movies or something... nothing in hd in the starz stuff, but still a lot of content they will be losing.
 
Starz was always a mixed bag for me. They have some great titles, but the streaming content always looked worse than SD broadcast to me. Like TV on my parent's big old Magnavox console set circa 1975. I want it all in HD quality and I want it now.
 
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