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billbenson
09-21-2011, 01:25 AM
The article in the link below states that Netflix CEO Reed Hastings has said all along that the DVD rental business NetFlix provides will eventually die for other technologies like streaming and others that may not be know today. He sites examples of Blockbuster and Borders of companies that hung on to old technoloties and methods to long. In a business environment we have to be prepared for change and be able to react to it.

The recent discussion of the yellow pages comes to mind. While it still works, if the companies relying on the yellow pages and having results today don't adapt to other marketing methods as they appear going into the future, they may get caught with their pants down and running uphill.

This is not a post about Netflix or the Yellow Pages. Rather, in these times when things are changing so fast and radically you better keep on top of the technologies and methods or you risk loosing your business going into the future.

Why Netflix Is Smarter Than Its Customers - Yahoo! Finance (http://finance.yahoo.com/news/Why-Netflix-Is-Smarter-Than-usnews-584478147.html?x=0)

vangogh
09-21-2011, 01:42 AM
Interesting article Bill. I've been following the story, first when Netflix raised prices, and now with the new separation of the streaming and dvd sides of the business. I think streaming is clearly the future. At the same time many people still prefer to get the dvds in the mail. Maybe, like the article says, this is too soon for what Netflix seems to be doing.

Long term though, it makes sense. Assuming the streaming catalog was the same as the dvd catalog it's hard to see why anyone capable of getting streaming would choose the dvd option. Of course not everyone is capable. You need enough bandwidth and also a device able to stream Netflix. I don't think it will be long before most people have both though.

One of the things I've read Hastings said is that less than 10% of Netflix customers use both streaming and dvds. In other words it's less than 10% of all their customers who are affected by any of this. For example I have a streaming account only. The price is the same today as it was before the increase and moving the dvd queue to a new domain doesn't affect me at all. DVD only customers pay nothing extra and will now access their queue through a different domain, a minor change at best. It's only the less than 10% who have to pay more and are inconvenienced by any of this. Those are likely the people now complaining.

The real question is can Netflix increase its streaming catalog. I'm more concerned that they're losing the Starz account in a few months. If they can't replace the movies from Starz they don't have much. I'm hoping the changes they're making are leading to more streaming options, but we'll see. Also while Netflix is having missteps, Amazon has launched their own streaming service and Apple seems capable of doing something similar through iTunes. Either company could easily replace Netflix as the first choice for most.

billbenson
09-21-2011, 12:01 PM
The other thing is with Netflix contracts with other movie providers anticipated to be in the billions, not the $50 M that they had been paying, consumers are in for a big shock. If that happens, both dvd and streaming prices will go through the roof. And that is something that can happen overnight. Consumers could bail big time at that time, but then they are stuck with what is on Cable TV?

KristineS
09-21-2011, 01:10 PM
I've been watching the whole Netflix thing as well, because it's kind of fascinating to see how much outrage people have about this change. I wish people would expend as much passion on things that could really make a difference.

In any case, while Hastings may be right in splitting the services, it was handled very badly from a customer service standpoint. Netflix is not the only game in town, and they needed to consider that before changing something that wasn't currently broken. I think you have to take both issues into account. You have to balance keeping your company current with the impact that changes will have on your customers, and also what your customers' understanding of how things work currently is. In this case, I think Netflix overestimated how much their customers understood about the current and future business climates, and vastly underestimated how much the change would matter. That may be what ends up biting them in the ass.

vangogh
09-21-2011, 01:23 PM
it was handled very badly from a customer service standpoint.

Agreed. I think that's the biggest lesson Netflix needs to learn. They haven't been doing a good job delivering the message, unless the point of the message was to get some people to drop the service, which is actually possible. A lot of what's going on can easily be interpreted as Netflix trying to kill off the dvd side of things to give them more leverage with the studios over the streaming side.


If that happens, both dvd and streaming prices will go through the roof.

I doubt that would happen. There's a limit to how much people will pay and regardless of how much the studios want to charge for the licensing there's only so much Netflix can ever charge. My guess is they'd either have to work at getting the licensing cost down or accept a certain loss in order to grow their customer base. Then with a larger customer base they wouldn't need to charge as much.

billbenson
09-21-2011, 01:53 PM
Well, they can't really kill the dvd when it has a much larger selection than streaming. Although you could be right in that there is something behind the scenes here.

When you think about it, the cable companies are in a much better position to provide the video you want. They already have movies on demand. They also pretty much have fiber to the curb and in some test markets they have fiber to the home. People are also used to having a higher price point with them. They just need to provide a full selection of movies and some better DVR's I'd see them as a much greater risk than Amazon etc.

KristineS
09-21-2011, 05:09 PM
You do have a point about the cable companies, except for one thing Bill, cable is expensive. I'm seriously thinking about dropping my cable right now because I can get the majority of what I want to see through Hulu or Amazon and even on the network websites for less money than what I'm currently paying per month for cable. I'd still need my Internet connection, but I'd probably end up paying less for the television viewing I would do. I know a lot of people who are moving from cable to services like Amazon, viewing television on iTunes etc. It ends up being cheaper for a lot of people.

vangogh
09-21-2011, 05:23 PM
they can't really kill the dvd when it has a much larger selection than streaming.

I think the idea is that as long as the dvd part of the business is there they have no leverage with the studios to increase the selection of the streaming side. The reason more movies aren't available for streaming has nothing to do with technology at this point. It's all about the deals they can work out with the studios. The studios prefer dvds and don't have the incentive to offer better deals for streaming. I think Netflix is trying to force their hand a little.

Cable is definitely expensive. I traded in $30 a month of movie channels I hardly ever watched to an $8 a month Netflix account I sometimes watch. The problem with cable is you really don't get to choose what movies are on. You either have to pay extra for the pay per view (still on the cable company's schedule) or use your dvr after going through the monthly schedule.

Ideally a service like Netflix will let us search for a movie or tv show we want at any time and watch. Right now the selection isn't there, but I would think in time it will be.

The other part of cable is that you pay for a lot of channels you don't want in order to get the one or two channels you do want. The model is changing to one where we each choose and pay for the channels we want and nothing more.

billbenson
09-21-2011, 07:51 PM
The problem with cable is you really don't get to choose what movies are on.

My point is that they can. They already provide internet. There is absolutely no reason they can't stream the videos instead of having you go to another source such as Netflix. Some different mux's at the cable company and a different DVR and its a done deal.

vangogh
09-21-2011, 11:43 PM
I find it unlikely they would do that since it's so anti their current business model. They've been able to offer people video on demand for $10 a month for a long time, but they've never done it. I think it's more likely they'll try to put the squeeze on the movie studios to keep them from licensing more content. The other problem the cable companies face is most people aren't happy with them. People want to leave the cable companies and seem eager for other options.

I agree with you that the cable companies can offer a similar kind of streaming service, but until they absolutely have to I can't see them doing it.