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Why Netflix is splitting itself in two
Topic Started: Sep 21 2011, 06:01 PM (1,497 Views)
musicasacra
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HOLY CARP!!!
http://theoatmeal.com/comics/netflix
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ivorythumper
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This has to be one of the dumbest corporate decisions ever -- up there with the Time/ Warner AOL merge or the Huffpo acquisition.
The dogma lives loudly within me.
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George K
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A guide to GKSR: Click

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- Mik, 6/14/08


Nothing is as effective as homeopathy.

I'd rather listen to an hour of Abba than an hour of The Beatles.
- Klaus, 4/29/18
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kenny
HOLY CARP!!!
I think they'll spin off the DVD part once it gets settled.
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ivorythumper
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kenny
Sep 21 2011, 06:07 PM
I think they'll spin off the DVD part once it gets settled.
Probably -- DVDs are on the way out, and Apple is going heavy into cloud streaming looking to dominate the market. Not a good time to start alienating your clientele.
The dogma lives loudly within me.
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kenny
HOLY CARP!!!
Will Steve Jobs be streaming films from the clouds up in Heaven?
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Larry
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It will be years before you see DVDs disappear from the scene. Also, I don't know if some of you are aware of this, but about half of the movies that are released on DVD are not available through Netflix until 28 days after release.

There are still enough people who, for several different reasons, still want DVDs. Their place in the market is not going to fade away any time soon.

Of the Pokatwat Tribe

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ivorythumper
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Larry
Sep 21 2011, 07:49 PM
It will be years before you see DVDs disappear from the scene. Also, I don't know if some of you are aware of this, but about half of the movies that are released on DVD are not available through Netflix until 28 days after release.

There are still enough people who, for several different reasons, still want DVDs. Their place in the market is not going to fade away any time soon.

Apple is negotiating with major studios for streaming rights.

I get that a lot of porn DVD users still want hard copies. But it would be easier for them if they didn't have to slink into the back of the video store, and just stream it. :whome:
The dogma lives loudly within me.
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The 89th Key
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Until streaming can give me blu-ray quality (or even DVD-quality) on a consistent basis, I'll only use it for watching TV series and the occasional movie I don't really care about.

FWIW, I think streaming's quality is fantastic, but I prefer the very best for movies I care about. I didn't buy a nice HDTV and surround sound package, only to stream a movie via the web.
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ivorythumper
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The 89th Key
Sep 21 2011, 07:53 PM
Until streaming can give me blu-ray quality (or even DVD-quality) on a consistent basis, I'll only use it for watching TV series and the occasional movie I don't really care about.

FWIW, I think streaming's quality is fantastic, but I prefer the very best for movies I care about. I didn't buy a nice HDTV and surround sound package, only to stream a movie via the web.
There are still people who like vinyl, and reject the loss from digital, but my guess is the market is in more compression with an acceptable level of loss to deliver a decent product economically.
The dogma lives loudly within me.
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1hp
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Netflix doesn't (or didn't last time I checked) stream in HD. With good compression, you are still looking at 20+Mbps.

Funny how someone brings up Apple and the cloud. Far as I knew Apple was not a cloud supporter. This was Google's domain, though MS was making noises about it. Google has the experience supporting the internet in a big way, not Apple. Apple is about hardware and operating systems - people are not going to spend $2,000 for a Mac that doesn't need any capability as all the apps are in the cloud. From one perspective one could consider that Apple is trying to transition - pushing iphones and tablets - but that would mean Mac support would start to disappear - are you ready for that? This is part of the argument we non Apple types have had for a long time - most Mac users do not use the real power of a Mac, and just use it largely for web browsing and email, with maybe a Word doc thrown in. An expensive product if that's all you really do with it.
There are 10 kinds of people in this world, those that understand binary and................
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Larry
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Quote:
 
Apple is negotiating with major studios for streaming rights.


That's just fine, but they will not be able to negotiate any better deal than Netflix already has, and the major studios just finished a 3 year court battle which they won stopping Netflix from putting their product in their machines or streaming it until 28 days after street date. Apple is not going to be able to get them to give up that hard fought court victory.



Of the Pokatwat Tribe

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ivorythumper
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1hp, I got that from my BIL, who is an IT head for the US division of an international corp. He said something about Apple buying some massive storage facility and making inroads in the entertainment industry with rights agreements (e.g., he said you can't any longer rent TV shows on iTunes, only buy them, which seems to be a first step in shifting the market). It's all scuttlebutt, and way out of my area, so take it with a grain of salt but keep your eyes open.
The dogma lives loudly within me.
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ivorythumper
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Larry
Sep 21 2011, 09:03 PM
Quote:
 
Apple is negotiating with major studios for streaming rights.


That's just fine, but they will not be able to negotiate any better deal than Netflix already has, and the major studios just finished a 3 year court battle which they won stopping Netflix from putting their product in their machines or streaming it until 28 days after street date. Apple is not going to be able to get them to give up that hard fought court victory.



Maybe, maybe not. Apple seems to be able to do a lot of things no one thought possible.
The dogma lives loudly within me.
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Larry
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Mmmmmmm, pie!
Quote:
 
Maybe, maybe not. Apple seems to be able to do a lot of things no one thought possible.


Bear in mind that I am in the video rental business, and have access to trade information that isn't publicly reported. Apple is not going to convince the studios that fought Netflix over release dates to just walk away from that.
Of the Pokatwat Tribe

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Axtremus
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HOLY CARP!!!
1hp
Sep 21 2011, 08:57 PM
This is part of the argument we non Apple types have had for a long time - most Mac users do not use the real power of a Mac, and just use it largely for web browsing and email, with maybe a Word doc thrown in. An expensive product if that's all you really do with it.
What do you think is the "real power" of the Mac?

As a long-time Mac user (who also uses Windows), executing simple, every day tasks like web browsing and e-mail and Word doc. is simply more enjoyable on a Mac than on Windows. That, to me, is the "real power" of the Mac, I find it worth every penny.

As for "expensive product if that's all you really do with it," I know many people who can barely play beginner/intermediate level repertoire sink disproportionately large amount of money into those so-called "high-end" "hand-made" pianos. They seem to think it's worth it (and at least would like to think so). They are also people who drive loaded SUVs that, most of the time, transport only themselves and their Starbuck lattes, and people who drive expensive sports cars and never go beyond 85 miles/hour. They seem to think it's worth it, too.

I think I am perfectly justified to spend more on my Macs, but those other folks are just wasteful with their fancy pianos and big/fast cars. :D
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ivorythumper
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Larry
Sep 21 2011, 09:13 PM
Quote:
 
Maybe, maybe not. Apple seems to be able to do a lot of things no one thought possible.


Bear in mind that I am in the video rental business, and have access to trade information that isn't publicly reported. Apple is not going to convince the studios that fought Netflix over release dates to just walk away from that.
I get that. I have no horse in this race-- I am only interested in seeing shifts in the market as technology and business plans evolve.

I can certainly envision a business plan where studios find it in their interests to align with Apple or some other streaming vendor. The court case presumably gives them a better bargaining position -- that is all it is really about, protection of rights to covert to cash flow. I doubt that anyone is standing on any principle other than "what makes me the most money?".
The dogma lives loudly within me.
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kenny
HOLY CARP!!!
Each of us gets to buy what we choose.
Everyone is happy.
It's nice.
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Larry
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Quote:
 
I can certainly envision a business plan where studios find it in their interests to align with Apple or some other streaming vendor. The court case presumably gives them a better bargaining position -- that is all it is really about, protection of rights to covert to cash flow. I doubt that anyone is standing on any principle other than "what makes me the most money?".



Of course they're not. But DVD rentals are a big income generator, and according to industry reports will be so for a long time to come. The studios have no desire whatsoever to see their income from DVD sales and rentals screwed over by a few companies streaming content.

Of the Pokatwat Tribe

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ivorythumper
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Larry
Sep 21 2011, 10:23 PM
Quote:
 
I can certainly envision a business plan where studios find it in their interests to align with Apple or some other streaming vendor. The court case presumably gives them a better bargaining position -- that is all it is really about, protection of rights to covert to cash flow. I doubt that anyone is standing on any principle other than "what makes me the most money?".



Of course they're not. But DVD rentals are a big income generator, and according to industry reports will be so for a long time to come. The studios have no desire whatsoever to see their income from DVD sales and rentals screwed over by a few companies streaming content.

It all has to do with market share -- the more streaming becomes more efficient and higher quality, and the more people get internet access, the more they will move from hard media. The older the equipment gets, the less likely people will replace it. I suspect that is why Dish bought Blockbuster for $320MM-- nothing about bricks and mortar and all about the streaming system. How long is the question, and how long is a long time in this industry?

How have blu-ray sales/ rental demand been? Wasn't that where the industry bet over HD-DVD? Do you deal more in BluRay than conventional DVDs?
The dogma lives loudly within me.
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Aqua Letifer
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ZOOOOOM!
Random aside, for some international perspective:

One of the things I really like about my area in Sydney is that it emulates perfectly many things I remember from my childhood. In many respects it's as if I'm living once again in 1988. The television has rabbit ears, I primarily use a land line and if I want to watch a movie, I go to the video store.

And I'm not talking about Blockbuster, folks. I'm talking about those small hole-in-the-wall video stores off the main drag called Nu-Reel, Abe's Videos or some equivalent.

The one I use operates just like the one across town from me growing up: they have the empty DVD case in front to let you know the movie, and all the available copies they have are placed behind it in generic jewel cases. Signs that say "Horror," "Comedy," etc. were made with sharpie and neon particleboard. They even sell used paperbacks in the front; whole shelves of yellowed Danielle Steel romance rags that sell for three bucks apiece. Do they have a Pac-Man/Galaga machine in the rear? Oh yes they do! Sadly it no longer works. :( :(

When I mention these things to other people, they immediately assume I'm poking fun but really I'm not.

I liked the video store back home. The physical act of driving to the store gave you and whoever you were with time to bullsh!t. (That may seem like a frivolous thing but just wait until everything's available for immediate delivery and see how much you miss it.) Also, arguing over which movie to pick up is just as important as watching the movie itself and you know what, a harshly-lit store with paper-thin carpeting and bad music playing over the loudspeakers is ten times the better venue than your living room, which you're soon going to spend a couple hours in anyway to watch the movie.

Bring back the video stores.
I cite irreconcilable differences.
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Larry
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Conventional DVDs still account for the bulk of the business. Blu Ray is moving up slowly. If you had twenty Netflix's and Apples, you still wouldn't knock much of a dent in current DVD sales and rentals. HD will eventually be the standard, but that only serves to continue making DVDs viable over streaming.

Here's what happened.

Redbox came along and started placing huge orders for DVDs. Greed set in at the studios, the thinking was that Redbox would add sales volume above and beyond brick and mortar stores. What happened was instead of adding to sales volume, it simply shifted from thousands of small accounts to one huge account. Any sales volume in DVDs that redbox gave the studios was lost as independents went out of business. The end result was sales volume only grew slightly, but it was gutting their dealer network.

So, several of the studios set out to correct their error. They set a "window" of 4 weeks before the big boys could buy their product. This isn't a new thing, it used to be that rentailers had a 4 week window to rent in before the DVD hit the stores for sale. Redbox sued, and they lost. Redbox sued again, and they lost - but this time they pissed off even more studios, and the number of studios that put a 4 week window on their product increased, and they also applied this rule to Netflix.

Netflix cannot (or at least does not) stream in HD. I don't think they ever will, because of bandwidth issues - which is yet another problem streamers are faced with, the growing concern about bandwidth usage.

Next, there are a lot more people than you may realize who simply do not want to use Netflix, for one reason or another. There are lots and lots of people who do not have credit cards to charge their bill on, and the number of people who do not have credit cards is growing, due to the economy.

So any attraction Apple and Netflix and Blockbuster's online business may bring to the table, they *still* are too small, and too limited, to cause the studios to write off the DVD, and the income they get from the resellers and rentailers. As Blu Ray demand grows, it simply serves to further weaken the Netflix argument.

DVD rentals are still surprisingly strong. But the key now is what would be called "value added" business. I do a "pizza and a movie" model. We have a full blown hand made pizza business in the store, and with each pizza you get two free movie rentals. Let's see Redbox, Netflix, and Apple do that.......
Of the Pokatwat Tribe

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Aqua Letifer
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ZOOOOOM!
Larry
Sep 21 2011, 11:15 PM
DVD rentals are still surprisingly strong. But the key now is what would be called "value added" business. I do a "pizza and a movie" model. We have a full blown hand made pizza business in the store, and with each pizza you get two free movie rentals. Let's see Redbox, Netflix, and Apple do that.......
:mellow:

That sounds pretty awesome, ackshully.
I cite irreconcilable differences.
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ivorythumper
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I like your business model, Larry, and I appreciate Aqua's reflections on the video store. You will know when it is time to sell, of that I am sure.
The dogma lives loudly within me.
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KlavierBauer
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HOLY CARP!!!
Lot of misinformation here.

First - DVDs as a medium are dying, and the medium itself will be dead within a few years, aside from the very small % of people still wanting physical copies. Everyone with broadband connections will be able to stream everything onDemand, and DVD as a format (or BluRay for that matter) will be all but dead.
Second - Netflix has TONS of HD content - Virtually everything I stream from Netflix is in HD. Rarely do I come across a movie, or TV series streaming at SD, or even DVD level resolution.

Lastly, what Netflix has done makes the most sense from a business perspective. They've handled it horribly - granted - but what they've done is necessary, and wholly appropriate.

I work daily with streaming rights in the digital music world. The same rules apply for us that apply for digital streaming of visual/movie content. When you purchase streaming rights, you purchase for your entire audience - not only people streaming. In the broadcast industry, this means that you purchase streaming rights for your entire audience, even if they aren't streaming from your website. In Netflix's case, it means that streaming rights prices are based upon their entire clientele. They have millions of subscribers who are DVD subscribers with a Streaming add-on. This means that streaming rights prices are based on lots of people who may, or may not be streaming. Clearing up this discrepancy saves Netflix a ton of money, and as a result means that the streaming subscribers will gain more content. When Netflix can bargain rights packages with accurate numbers, they'll have more leverage against the studios for new releases, and wider selection.
DVD as a physical medium will go the way of the do-do in several years' time, and so beginning to depart from it now is a smart move on their part. Streaming is their future profit model, and they know this. DVDs won't drop significantly in price, and will only cost more to ship/handle, while streaming costs will go down as more people stream, and more content becomes available. Adding games to the Quwikster model is also brilliant, as it sets up a turn-key solution (possibly) for someone already in the gaming business who might want to carry movies as well (gamefly?).
It necessarily separates streaming customers from DVD customers, and allows Netflix to keep DVD customers happy by continuing to provide a useful service to them, while catering to the vast majority of customers who will prefer streaming. As a ancillary benefit, we'll see much wider selection (I hope), and more HD content.

Finally - credit cards aren't necessary to rent netflix.

While I'm sure lots of people will continue renting DVDs for the foreseeable future, it is by % a very small number. Netflix has a corner on the market right now, and nobody is in any sort of position to match their streaming capability, or customer reach right now (they reach every Wii, PS3, and Xbox customer automatically, not to mention everyone with a computer). While there will always be holdouts who demand to keep obsolete formats like VHS (and soon to be DVD), the reality is that physical media like DVD or BluRay won't be in use much longer, and the smart companies will see the trend of onDemand and will begin moving in that direction.

All are free to disagree of course - but the framework for this method of content delivery has been in the works for years. This trend isn't new - it's just becoming obvious now. This *is* the way things are moving, and will continue to move. Companies like Netflix who openly move in this direction will best serve their customers, and will retain the largest market share.

For $8/month I watch TV and Movies in HD - hardly ever SD content. For about $15/month I can get Netflix and Hulu Plus. Between the two I can watch tons of movies, all current TV shows, and thousands of older movies/TV shows, including the Criterion collection.
Throw in another $10/month for decent usenet access, and I've got anything I could hope to want to watch in 1080p for half of my DirecTV bill.
Seriously considering cutting the chord.
"I realize you want him to touch you all over and give you babies, but his handling of the PR side really did screw the pooch." - Ivory Thumper
"He said sleepily: "Don't worry mom, my dick is like hot logs in the morning." - Apple

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