Online Home Video Delivery – Who Will Win? Part 4 – Netflix

By David Walker | January 30th, 2008

No matter what technologies come along, our fascination with television shows and movies is virtually endless. Whether it’s the acting, stories or visual eye candy that grabs us, there’s no denying that we’re as fascinated with video as we’ve ever been. As we enter 2008, the ability to get to that video is becomingly increasingly easier. Several key players are entering the online video delivery marketplace and though choice is growing, it’s going to be important that consumers pick the provider that suits them best and that has the best long-term potential to get them the content they crave. Over the next few days, we’ll be taking a look at the major players, what their capabilities are and ultimately, who we think has the best shot of winning in this space. Today, we take a look at Netflix.

What They Have
When Netflix started rolling out streaming video to subscribers last year, people immediately began speculating about the potential of this service. That potential is becoming clearer with each move. First, Netflix announced a partnership with LG to produce a set-top box that can stream Netflix video content without the need for a PC. They then followed up with the announcement that video streaming to the PC would now be unlimited. Currently, about 6000 movies, tv shows and other content is available for streaming with that number set to grow in the coming months and years.

Advantages
Clearly, Netflix has a huge advantage in their pricing model. Rather than paying for each movie or tv show you download, the Netflix model appears to be an All-You-Can-Eat model that lets you consume as much as you can for a set monthly rate. If the model stays the same as it exists right now, the combination of getting physical media in the mail and being able to stream content on demand is incredibly enticing and may be the exact combination users are looking for.

Additionally, the deal with LG is expected to be just the first of many, with the idea of integrating streaming capabilities into DVD players also popping up. If the cost can be kept low, these products would be extremely compelling. One can easily see a new “logo” appearing on DVD boxes saying something like “Netflix Stream Ready.”

Disadvantages
What’s less clear about Netflix’s model is whether they intend on streaming new content and how much of their 90k title library will get the streaming treatment. Right now, the 6000 titles appear to be older (but decent) content.

Also, streaming is always going to be at a disadvantage to downloading. A file that is downloaded can be played repeatedly and started in various places in the video. Streams can be temperamental and are subject to the upload/download speeds on both ends. Quality can also suffer, although new technologies – like Microsoft’s Silverlight – appear to be closing that gap quickly.

Finally, although the announcement with LG is exciting, that is all it is – an announcement. There isn’t currently a set-top box available to stream content to your television. On top of that, the streaming is Windows only at the moment, with Mac support coming later this year.

Outlook
Netflix has a lot going for it. It has a brand that people recognize and respect and one that is immediately associated with video. Heck, the name screams online video delivery to the home. The partnership with LG (and others) will be key, though, and needs to happen soon in order to take advantage of the interest people have in this. Finally, Netflix will have to dramatically expand their offering of 6000 titles in order for this service to compare favorably with the other competitors in this space. The potential is certainly there – Netflix just needs to execute on some key initiatives to turn it into a legitimate enterprise.

Previous Articles:
Part 1: Apple
Part 2: Microsoft
Part 3: Sony