Netflix shoots itself in the foot... aka no more free streaming

Discussion in 'TV & Media' started by bigdaddy, Jul 12, 2011.

  1. Robert Maxwell

    Robert Maxwell Comfortably Numb Premium Member

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    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:

    1. Datacenters
    2. Bandwidth
    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.
     
  2. gh4chiefs

    gh4chiefs Rear Admiral Rear Admiral

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    Yeah from what I read on news sources, apparently the studios are demanding really large licensing fee increases beause they're figuring out that if everybody is streaming their content, no one is buying dvds/blu-rays.

    I understand the physical costs of the DVD service are high compared to streaming, but one has to wonder if in the end, the ROI is really going to be that much better for the streaming business.
     
  3. Flying Spaghetti Monster

    Flying Spaghetti Monster Vice Admiral Admiral

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    I only have streaming right now. Honestly, having all the Trek shows was a big incentive, and the episodes look great.
    Can't wait for Deep Space Nine.

    My problem with streaming is that I never know what aspect ratio it will be. Even on widescreen streams, I'm not sure that it is "correct" as much of it looks too cramped, to stretched or too severe. Sometimes the video quality is awful... as in Hunt for Red October.
     
  4. Robert Maxwell

    Robert Maxwell Comfortably Numb Premium Member

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    I think Netflix knows that streaming is the future, and they want to be the first to corner that market. The fact is, DVD sales are down, and while Blu-ray sales continue to rise, they aren't making up for the decline in DVD sales. Demand for physical media continues to fall and Netflix is not ignorant of that trend.
     
  5. Captain Craig

    Captain Craig Vice Admiral Admiral

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    Same here. I was fine with it, as it was still a reasonable value imo. This splitting it up though is what irks me.
    It's like someone said, "Hey, you know what we didn't piss off nearly enough people with just the price hike so....are you ready boss? Lets split the company into two parts!!!"

    I don't know if all this juggling is the reason or if the connections reset but went to view a streaming movie last night and my connection had been severed. Don't know if Netflix themselves hit a massive reset button or if my BluRays connection glitched. Anyone else encounter this? If not it was likely just my system and only a coincidence with everthything else going on.
     
  6. gh4chiefs

    gh4chiefs Rear Admiral Rear Admiral

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    I would venture to say that Netflix is in a large part responsible for that decline, coupled of course with the godawful economy. I'm sure I'm not the only one that scaled backed their DVD purchasing because of Netflix.

    I still say streaming is going to run afoul of the move by ISPs to cap bandwidth at some point and then where will the "streamers" be?
     
  7. TemporalFlux

    TemporalFlux Commodore Commodore

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    I really don't understand the appeal of streaming on Netflix? I've tried watching some of their content; it looks like low res crap, and it's constantly jerking and stopping as it needs time to load. I've got AT&T DSL (highest speed offered), so I don't think that's the problem. I've also tried watching on my iPad using Wi-Fi outside of my home and 3G; same low res junk that jerks and stops. I even tried my iPhone thinking about the old convention that smaller screens improve resolution; it still looks like low res crap and doesn't load.

    I've watched streaming on other sites like Hulu; it looks good there and works very well on loading (I don't remember Hulu ever jerking or stopping).

    This is the other big problem out there. For instance, AT&T caps at 2 GB on iPad 3G for $25.00; and that seems to only give me four to five hours of streaming capability a month. Given that I'm not around WiFi for significant amounts of time, this a BIG problem for me with streaming. If it were decent quality, I could end up watching as much as 30 hours of streaming over 3G each month, and there's no way I want to pay AT&T $175 a month for that.

    Anyway, I had stayed with Netflix for just the DVD / Bluray service mostly because I've rated close to 5,000 movies, and the suggestions system is pretty good for me as a result. I guess now that I'll start looking at something else because "Qwikster" is obviously set up to fail, but the options are probably going to be relegated to RedBox given that Blockbuster is on its last legs.
     
  8. Coloratura

    Coloratura Snuggle Princess Premium Member

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    It may be your area's CO. It may be equipment, it could be anything, but it's probably not Netflix. I watch HD movies that look almost as good as blu-ray, without a single instance of stopping and starting. I have Roadrunner now, but when I had AT&T DSL, I could still do the same thing.
     
  9. Robert Maxwell

    Robert Maxwell Comfortably Numb Premium Member

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    Yeah, I have no problems watching Netflix stuff in HD, but then I have a new computer and Verizon FiOS. :p
     
  10. Skywalker

    Skywalker Admiral Admiral

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    I have Roadrunner and I usually don't have a problem streaming Netflix in HD, either. Occasionally it'll drop, but not very often.
     
  11. Snaploud

    Snaploud Admiral Admiral

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    My Netflix picture has always been crisp, and I've never experienced any jerking or stopping. I use Netflix on two laptops and a 32 inch tube tv (with Comcast high-speed internet).
     
  12. TemporalFlux

    TemporalFlux Commodore Commodore

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    I would agree except for stuff like Hulu actually working. In any case, Netflix streaming is pretty worthless to me; and I'm sure I'm not alone. I guess the main point I'm trying to make is that the cheers for streaming do not compromise the entire world's population; hell, there are places in the U.S. that still don't even have the basic infrastructure for high speed internet (and satellite only goes as long as you don't have trees blocking the signal).
     
    Last edited: Sep 20, 2011
  13. TemporalFlux

    TemporalFlux Commodore Commodore

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    Enh. I've got an Acer Aspire 8930G. It's a few years old, but it's no slouch.
     
  14. Coloratura

    Coloratura Snuggle Princess Premium Member

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    Is it wrong that I sometimes hug my cable modem? :shifty:

    Hulu runs at a much lower resolution than Netflix. Even Hulu's HD broadcasts are inferior to Netflix's standard resolution. It also depends upon what equipment you use. There is a small but important difference if you use devices. I use a Roku box for my Netflix streaming, which has a different API than the PC, which has a different API than the XBOX 360 and so on.

    If you're having trouble on all of your devices, then it's likely your provider isn't giving you enough throughput to keep a stable, higher end connection. That would likely be with the CO. Again, my netbook gives me DVD quality resolution, my PC gives me HD resolutions, my Roku box gives me HD resolutions, without a single hiccup (well, 99% of the time), and maybe an 8 second pre-buffer.

    In regard to the cheers for streaming, no one here is saying that it comprises the world's population. It is true, though, that streaming is the future, and while physical media may have it's place in the future as well, it's role will be severely diminished.
     
  15. Professor Zoom

    Professor Zoom Vice Admiral Admiral

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    Weird. I stream to my TV, through my bluray. It's a wireless signal, with the router in another room, and I RARELY have a problem. Image is always good. The occasional rebuffer, like 5 times in a year, but, I love it. Tons of documentaries, BBC shows, older movies, foreign movies.

    I'll give up the discs before I give up streaming.
     
  16. TemporalFlux

    TemporalFlux Commodore Commodore

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    I did forget to mention this. I've tried XBox 360; PS3 and even Wii. I also briefly had a Roku HD until I sold the thing after I saw how crappy Netflix looked.

    So pretty much screwed then, and nobody is going to fix that. Even my local cable company is crap; it's a local monopoly, so they don't dump money into upgrading anything. The HD package currently consists of about 30 channels. We get HBO HD, Showtime HD and TMC HD; but no MAX HD or STARZ HD (even though you can pay for the standard def versions).

    Then the future looks pretty damn bleak from where I'm sitting.
     
  17. Coloratura

    Coloratura Snuggle Princess Premium Member

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    Sure you can fix it. You tell them you think it's bottlenecking and that they need to look into it, and also at the distance you are from the CO.
     
  18. Temis the Vorta

    Temis the Vorta Fleet Admiral Admiral

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    Streaming is digital information and all digital information businesses are headed the same place: zero value.

    The music biz has already gotten there. DVD sales are dropping to zero because of piracy. But squawking about piracy is pointless because it's not really the pirates' fault. They are a symptom, not a cause.

    The music labels are trying to turn things around by expanding the definition of their business. They defined their business as 'selling plastic disks with music on them,' but there's no law that says that must be their business. That business went bust, so they're trying to redefine their business to encompass a musician or groups' total career: touring, licensing, endorsements, merchandise.

    Similarly, there is no law that says Netflix, or Starz, or hulu, or anyone else needs to define their business as 'selling streaming TV/movie content.' Netflix could define their business like YouTube does - a place that's valuable because you can get everything there, with sorting, PR and community value provided for free by the customers. You give away the streaming content free and charge for something else.

    For example, Netflix or someone with that business model is in prime position to partner with the struggling theater business by organizing their customers into a community with an interest, say, in sci fi space adventures, Tyler Perry comedies, Jason Bourne movies or what have you. When a movie that suits their tastes hits the theater, they could organize groups in each city through Netflix's community to sell out the theater.

    This would follow the music-industry model, where music is given away free and serves as loss-leader for the concert appearances where the money is actually made. It would transform the theater business which is currently depending on 3D to help it survive (a strategy that has met with very mixed results) and turn it from an experience where you have to tolerate a bunch of strangers who are idiots, yakking on cell phones, which is why people don't want to go to movies anymore, and make it more like a convention, filled with like-minded people, many of whom you'll already know from the Netflix community. Instead of just selling popcorn, the theaters could sell a range of merchandise related to the interests of that particular group.

    Netflix gets a % of the box office for putting butts in seats, and a % of the merchandise (which it can also sell via ads on its website). So Netflix now has a viable business that is based on something more durable than digital content, and the theaters can transform their dying business from an unpleasant experience to an ongoing party.

    The infrastructure for the party is already there, let's use it before it all gets torn down. (Ironically, I can think of a great real-world example, on Van Ness Ave in San Francisco there's a concert venue that has lines around the block all the time. Right across the street, there's a movie theater that went out of business and is being torn down!)

    Netflix is an invaluable potential marketing source for theaters, because if they give away content free, their customer base will explode. The customers can sort themselves into interest groups, and do a lot of the marketing legwork for theaters and merchandisers.

    Netflix, Starz et al are behaving like old media business, defining themselves restrictively in ways that aren't sustainable. Netflix at least is a bit more on the ball; Starz and other content producers are going to re-learn the bitter lessons of the music industry unless they manage to get out of their dinosaur mindset. I'm not betting any money that they will.

    The studios will resist the idea of their content being streamed for free online, but they're fools, because that's going to happen whether they like it or not. Since free streaming content in the future is a given, they need to start thinking now how they're going to make money regardless.

    And they can do that through the sheer size of the audience that can be coralled into one place online, such as Netflix, where the customers will cheerfully do a lot of the work for the corporations, sorting themselves into groups who are easier to monetize. Just give them the tools to do that!

    Only because you're not thinking about it right. Think about the marketing value that you can build when millions of people are online, sorting themselves into groups and telling you what interests them, what they'll pay for, what kinds of ads will appeal to them!

    Think about the value of reaching a global audience - the middle class is exploding worldwide and America's entertainment business already is geared for global appeal. Think about making money off just 5% of the Chinese pirates that you currently make no money off. Think about all the new consumers in India, Indonesia, Brazil, etc.

    I'm telling ya all, look at the games business. That's leading the charge. Games are a digital content business and they're all charging straight towards FREE as a business model.

    For instance, pogo.com gives away games for free but charges for premium subscriptions and even better, for avatars that let you present the image you want to the community that is built via game playing. They also sell badges that advertise your expertise in playing games, which of course is part of your identity.

    Now that is smart! They're not selling games, they're selling your identity on the internet. People can get bored of games, but the more people interact with the community, with their avatar and their badges as the "front end," the more invested they will be in their avatar and in the community. They'll keep playing games in order to buy more stuff that lets them hone their community identity, change it up, and get comments from their friends.

    It's the same idea as the theater-going-party notion, except kept entirely online, because there's no convenient infrastructure out there to make it real-world. Which is a disadvantage, because the real-world thing is a great money-maker and community builder, but game content costs far less to make than TV or movies, and lasts longer, so the economics still work out fine.

    If you want to see the future of all digital content, you should watch the games industry. For cultural reasons I guess (software people are less resistant to change than the LA entertainment industry), games are pioneering new forms that the entertainment industry as a whole will eventually need to follow. The games biz isn't crying about having to give away their content for free. They're getting busy getting rich from free content.
     
    Last edited: Sep 20, 2011
  19. Professor Zoom

    Professor Zoom Vice Admiral Admiral

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    Also: netflix is beginning to make it's own original content.
     
  20. Temis the Vorta

    Temis the Vorta Fleet Admiral Admiral

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    Netflix shouldn't bother to make their own content, unless they're planning to make content that allows them to bolster their real business, which is building the Facebook of TV-and-movie viewing/fandom.

    For instance, if they perceive that certain interest groups are being neglected (ahemstartrekahem), they can make content that allows a new, huge interest group to form. But note that their business is not making a Star Trek TV series. It's corralling the Star Trek fans into one convenient place, where they can be sold movie tickets to JJ's next opus, merchandise, books, DVDs, and see promotions for other interest groups that appeal to Star Trek fans (who might also like Jason Bourne movies or for all I know, Tyler Perry comedies). If Netflix can convince CBS to take on the burden of making Star Trek themselves, so much the better. Netflix would only step in and make content if they see opportunities going to waste.

    The value to Netflix is not the content, which they give away free, but the sheer size of the audience they can attract, and the intelligence that the audience provides about themselves, which allows for more targetting marketing. (And before anyone objects to this, I'm assuming Netflix will be a great deal more savvy about PR and position this marketing as a benefit to the customers - we're showing you what you want to see anyway - not some scary Orwellian crap. That's just a function of hiring the right people to do your PR, which is the first thing Netflix needs to look into.)
     

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