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Is Netflix's DVD-rental business set for a downfall soon?

With NetFlix, Inc. (NASDAQ:NFLX) being the gold standard for in-home DVD rentals these days -- thanks to the vision of Reed Hastings years ago -- are there any upcoming bumps in the road that may lead to potential downfalls in Netflix's business? Things like, say.....DVD-quality downloads? My bet? Not at all, and it's all due to the experience of the movie, concert or special event that makes renting an "experience" more than just "content."

Seeking Alpha looks at this situation by looking at Netflix possibly getting into the video downloading arena soon. That may be, since a deal between DVR leader (and verb) TiVo and Netflix sure as heck points to this. But still, I have to ask, beyond the "do-it-yourself" crowd that can figure out how to get the content from the folder on a PC to the HDTV sitting in the living room, will most American families put up with such madness?

Heck no -- and that's why the iPod rules the digital music market, even with its restrictions on content. The entire ecosystem works so well -- from hardware to software to buying content -- that it's been the leader, the HUGE leader, for years now. And, there's no letup in sight.

There's still something about popping in a physical piece of plastic into that DVD player and navigating the menus that makes the experience enjoyable for most. I won't even get into the commentary streams and other goodies that accompany DVDs these days that really do add value to the experience.

DVD-quality downloads, for now, will find a niche audience. But unless the experience really gets to the point of being as easy to use as a DVD rental -- mainly, getting the content to the main TV in a few steps (not 20 steps with progressively-harder technical roadblocks) -- movie downloads are no threat to Netflix's core business, even if Netflix has that service available itself.

Are Apple, Wal-Mart and others killing the DVD?

The VHS tape had a pretty spectacular run -- over 20 years in the mainstream consumer electronics arena. With the advent of popular and cheap DVD players in the late 1990s, VHS started losing its appeal for most consumers. With $150 DVD recorders now in the mainstream, there is very little reason to own a VCR these days. But with the advent of digital files that just fly from Internet servers to iPods and other devices, are DVDs destined to live a shorter life than the VHS tape?

Although recent standards like HD-DVD and Blu-Ray will only find a niche audience most likely (DVDs look so good to the rest of us, you know), it's hard to imagine that a physical medium like the DVD will go away. DVD players are everywhere, and even recent moves from companies like Apple -- and even the agreement Apple has with Wal-Mart that will let Wal-Mart shoppers buy "digital movie tickets" that can be redeemed for online movie purchases and downloads -- won't cause DVD sales to just plummet overnight.

I agree with this article that states the need for a physical medium will almost always exist. The experience a DVD provides is first rate these days (except that too much non-control is given to the customer, argh), and duplicating that on a streaming platform of download does not exist. Sure, there will be large niche audiences that want to embrace non-DVD entertainment -- but for the rest of us who share DVDs, don't have a huge movie library on demand from our cable, Internet or satellite provider or course, the DVD and the DVD rental store still fit the bill quite nicely -- and will for quite a while.

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Last updated: November 11, 2009: 05:46 PM

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