One of the main arguments made by Netflix (NASDAQ: NFLX) -- my views tend to align with the company's -- is that its business model will be obsolete in a few years: maybe 5, maybe 10, but definitely gone at some point.The company's only hope of providing long-term value is to use its brand and customer relationships to become a first-mover in the digital delivery of movies. The company is certainly pouring its resources into that battle but, as The Wall Street Journal recently noted, "the sheer cost of acquiring online-viewing content could crush Netflix's profit margins, unless the company sharply raises its subscription price, thereby reducing a key advantage over rivals."
Now CNBC reports that Netflix is considering offering subscription plans that would ditch the whole DVD-delivery business altogether. Under the present system, Netflix users can stream an unlimited amount of the company's online content as part of the subscription package. Letting people sign up for streaming videos without mail-order would mark a big departure. Currently the company is polling its customers to see if they would be interested in such a feature.
The drawback for now is that, as any Netflix subscriber will tell you, the titles available online are mostly old and/or obscure. Making Netflix's online library a major stand-alone attraction will take massive investment in a market that has a lot of other companies making similar investments, and it's unclear whether a victory in this market share battle will come at a cost too high to benefit shareholders. But either way, it's encouraging to see how aggressively Netflix is working to move beyond the DVD by mail business.
The drawback for now is that, as any Netflix subscriber will tell you, the titles available online are mostly old and/or obscure. Making Netflix's online library a major stand-alone attraction will take massive investment in a market that has a lot of other companies making similar investments, and it's unclear whether a victory in this market share battle will come at a cost too high to benefit shareholders. But either way, it's encouraging to see how aggressively Netflix is working to move beyond the DVD by mail business.
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Reader Comments (Page 1 of 1)
2-25-2009 @ 2:24PM
Brad Barber said...
Not to mention the cost of streaming so many movies. I don't even know if Netflix can keep up with the bandwidth that will be needed to provide so many movies to users.
VUDU found an interesting way to do this with a P2P type system, and it seems to be working for them.
It will be interesting to see if Netflix tries to jump into the P2P delivery game and borrow from VUDU's technology.