Warp Coil wrote:
It seems pretty clear to me that Netflix wants to eliminate its DVD business model entirely. First they split the company up, then wait for Quickster to crash and burn, then conveniently get rid of it due to lackluster performance. They'll say that sales figures clearly indicate that viewers only want to stream content now and that no one wants physical media via DVD.
Why do you think that is? Is it really that unprofitable? Or is streaming just that much more lucrative?
The DVD service has overhead costs that the streaming service doesn't: the envelopes, postage, the DVDs themselves, replacement expenses when the DVD is too scratched to keep sending, etc. Those things all require manpower, too, since it involves handling physical media.
Contrast that with streaming, where your major expenses are:
3. Licensing costs
Those items--particularly 1 and 2--are easier to estimate and you can scale them based on your number of subscribers, so capital investment keeps pace with revenue increases.
The licensing costs are where Netflix is liable to get fucked in the foreseeable future, which may be why they're going to focus on streaming, so they can dominate that market and have a better bargaining position with the studios.
Problem is, Netflix is just a middleman, so what's to stop the studios from colluding to create their own streaming service, or multiple competing services, and leaving Netflix out in the cold? The loss of Starz is not that big a deal by itself, but if it spurs other companies to abandon Netflix then Netflix is going to be in for a world of hurt.