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Netflix Is Bluffing

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Re: Netflix Is Bluffing

#31

Post by Timothee »

saurik wrote: post #17

I often find myself using Netflix to watch a movie, decide I want to see more titles by that director or starring that same lead actor, find out I can't stream that movie and would need to wait for a mailing, and then task switch to iTunes for a rental. I would be perfectly happy giving Netflix that money; if nothing else, they deserve the iTunes affiliate cut for making me want to buy something at that moment. I rea…

I was recently thinking of how much money I've spent on iTunes in the past two years (since we've "cut the cable") and a lot of our purchases were from TV series seasons that we bought after we watched the first seasons on Netflix and wanted to catch up with the latest. (Breaking Bad, Sons of Anarchy, Dexter, etc.)

Yes, they would deserve a cut on most of our iTunes purchases, but for one thing, I don't know what that would amount to. Maybe not enough. (I believe the iTunes affiliate rate is 5%, so that would be $1-$1.50 per TV show season, 25 cents per movie rental)

And indeed it doesn't seem to make sense: let's say they added a "latest season is on iTunes" link. It would tell the user "we are not able to secure the latest content for you". And if they added exclusive rentals on top of the flat fee, it would be tempting to delay the switch from exclusive to regular catalog for how long as necessary. It would be going against everything Netflix has been about from the start: flat-fee for unlimited consumption.

Re: Netflix Is Bluffing

#32

Post by Timothee »

mitultiwari wrote: post #2

Netflix focusses on movie/tv-series subscription model (streaming+dvds), and they are laser focussed on improving consumer experience in this area. On the other hand, Apple, Google, Amazon focus on other businesses (hardware, advertising, and e-commerce). That's why I think Netflix will survive, and that's why startups survive and thrive: Focus!

I was just about to comment about that: browsing for content on Amazon is a terrible experience, because they use mostly the same layout as the rest of their products. Netflix has the advantage of focussing and a single type of products and (hopefully) give a better experience.

Re: Netflix Is Bluffing

#33

Post by SoftwareMaven »

CamperBob2 wrote: post #12
dave5104 wrote: post #8

Earlier quoted context omitted.

But how much do you think the average consumer cares about that (or is even smart enough to think about it)? Sure, we all understand the ecosystems because we're developers and we follow that sort of thing, but I'm not sure that the average consumer would see it the same way. If anything, they might be swayed by the whole "Oh, that will work with my iTunes account!" factor.

Netflix's independence is potentially a big deal. In a rational world, the content producers would see Netflix's platform agnosticism as a big selling point. No producers want (or at least should want) their hit TV series or movie to be viewable only on iOS devices or Android devices or Windows devices.

If the price is right, producers couldn't care less about platform lock. If Google, Apple, Amazon or anybody else is willing to pay the right number of dollars, they can throw the bits into /dev/null for all Hollywood cares.

Re: Netflix Is Bluffing

#34

Post by slykat »

I think the guys who will truly disrupt Hollywood will figure out how to produce & distribute content without the Hollywood machine. Youtube was one of the first ones to do this, and I believe there will be many more startups who will continue on this path; the key to beating Hollywood is by not playing their game.

Or in pg's words: http://ycombinator.com/rfs9.html

Re: Netflix Is Bluffing

#35

Post by sown »

So how long until one of the major tech players buys (or we hear rumors or talks of purchasing) a TV network or even a studio?

Re: Netflix Is Bluffing

#36

Post by CamperBob2 »

SoftwareMaven wrote: post #33
CamperBob2 wrote: post #12

Earlier quoted context omitted.

Netflix's independence is potentially a big deal. In a rational world, the content producers would see Netflix's platform agnosticism as a big selling point. No producers want (or at least should want) their hit TV series or movie to be viewable only on iOS devices or Android devices or Windows devices.

If the price is right, producers couldn't care less about platform lock. If Google, Apple, Amazon or anybody else is willing to pay the right number of dollars, they can throw the bits into /dev/null for all Hollywood cares.

I don't know about that. Nothing like a major motion picture or TV series has ever been platform-locked, has it? Video games, yes, but not traditional "mainstream" entertainment.

Re: Netflix Is Bluffing

#37

Post by mtgx »

jmduke wrote: post #4

I have both Amazon Video (through Prime) and Netflix. I use Netflix infinitely more because of my Apple TV; the streaming-to-TV ease of use is the simplest I've found, and cheap (since my and my housemates all split the already-small Netflix bill.) If Amazon had a stronger solution to this use case, I'd be much more inclined to use it. But even if the content is great (and it is -- Amazon Video has a lot of stuff Net…

You can use Amazon Video with Google TV.

Re: Netflix Is Bluffing

#38

Post by saurik »

Timothee wrote: post #31
saurik wrote: post #17

I often find myself using Netflix to watch a movie, decide I want to see more titles by that director or starring that same lead actor, find out I can't stream that movie and would need to wait for a mailing, and then task switch to iTunes for a rental. I would be perfectly happy giving Netflix that money; if nothing else, they deserve the iTunes affiliate cut for making me want to buy something at that moment. I rea…

I was recently thinking of how much money I've spent on iTunes in the past two years (since we've "cut the cable") and a lot of our purchases were from TV series seasons that we bought after we watched the first seasons on Netflix and wanted to catch up with the latest. (Breaking Bad, Sons of Anarchy, Dexter, etc.) Yes, they would deserve a cut on most of our iTunes purchases, but for one thing, I don't know what tha…

Yeah, as I said, I can appreciate the problem you describe in your last few sentences: it is a conflict of interest, and it undermines their existing market. However, right now, they already can't get licensing deals for a lot of the newest content, so it really is kind of a crummy position for them. :(

As for the 5%: that's actually a lot of money to buffet their streaming service: a Netflix subscription is $8.00/mo, but they only make $3.50/user/Q[1], or $1.16/mo (so a 15% margin). If I buy a TV show season a month, or rent a few movies, that doubles the amount of money they make off me. (In fact, I probably do both.)

[1] http://seekingalpha.com/article/912051-netflix-don-t-buy-int...

However, while researching that, I discovered the reason why my plan is actually stupid: they make comparatively good money off of their DVD business, at $2.90/mo.

It is then probably the case, for all users (even "whales" like me) that if they can get me to use their DVD service (which they do heavily integrate into their website) that is better for them than if they can get me to use their DVD service it will do better than getting an iTunes affiliate revenue.

Oh, wait, ok, but now I'm confusing myself with my own "if nothing else": what I was actually originally thinking is that Netflix could replace iTunes rentals, offering some content for free and some for pay. That is the business model that the-second-coming-of-Napster had: flat fee for most things, but per incident out of pocket for some items.

From what I understand (it probably isn't important enough for me to pull a reference on it, but I give talks on "the business models of Apple" and have done it before), Apple charges the same 30% processing fee for music downloads that they went with on their App Store, which probably leaves them with 10% after fees and costs, which then is in the competition range for the DVD service.

(I actually find the DVD model weird, as it seems like a short-term solution...either DRM is going to win or it is going to fail, but either way everything is going digital: in another 5-10 years, I find it difficult to believe--but am probably wrong anyway--that the notion of "borrowing a DVD" won't have been entirely replaced by "renting a download".)

Again, though: it is a nasty precedent to set that would lead to a very tempting conflict of interest, so they probably just need to "not go there". It isn't like the-second-coming-of-Napster did very well ;P.

Re: Netflix Is Bluffing

#39

Post by etherael »

I think there should be a rule against people knee deep in big, lumbering entrenched monolithic industries making light of the threats they face from smaller, more nimble competition that they don't understand. It's a pattern so frequently repeated that it's probably worth just getting a nice general rule in there against doing so.

But then again, people love to say I told you so, so there's that. .

Re: Netflix Is Bluffing

#40

Post by duaneb »

Is he really using market cap to determine success?

EDIT: I'm not really commenting on the rest of the article, but public perception (which is really what market cap is) has traditionally been a poor indicator of success. Even just recently, look at ZNGA, GRPN, AAPL ('97 or so). Amazon has 25x the market cap and operated on a 274M loss this quarter. Netflix only lost 8 million.

Of course, Amazon is interesting because- much like netflix- they are operating under the assumption that profitability will come in the long term. I find it quite interesting that investors trust Amazon (who is much older and proven) over Netflix.

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