Why is netflix so eager to de-emphasize the DVD business?

[Tom_Tildrum]

Here is an interesting blog post from last year discussing the pressures on Netflix. It wants to get out of the DVD business because that’s expensive to operate, but it cannot assemble enough digital rights for its streaming service because there are too many competitors competing for those rights.

[1224rattusrattus]

@Ravenman

I think everyone understands why consumers like it: more selection. The reason people are “laughing” (certainly not the term I would use) at the service is that it is not an efficient business model.

Twenty five years ago, Blockbuster was a fantastic business model because almost anyone could pop down to the store and rent hundreds of movies.

Fifteen years ago, Netflix came around and was a fantastic business model because anyone could get tens of thousands of movies, and instead of maintaining maybe 20 or 50 Blockbuster stores in one metropolitan area, Netflix just needed one warehouse. With that, Blockbuster’s wonderful business model became crap.

Now, Netflix would ideally like to close 60 warehouses in the US in order to stream everything it can through the Internet. We aren’t there yet, but it is pretty clear that at some point, the idea of maintaining five dozen warehouses around the US is going to seem as absurd as Blockbuster having a store on every major street corner.

This all makes perfect sense, however how many years will it take before streaming has the selection DVD rental has? And remember DVD by post was a massive stepchange over the likes of Blockbuster because of it’s massive choice of titles. Now if streaming ends up killing DVD by post we’ll be back to the patchy selection that we had with bricks & mortar stores- that’s a retrogressive step.

[MichaelEmouse]

In my mind and on my phone
We can’t rewind we’ve gone too far
Broadband came and broke your heart
Put the blame on DVR

Ok, ok, I’ll get off your lawn.

[Voyager]

@Tom_Tildrum

Here is an interesting blog post from last year discussing the pressures on Netflix. It wants to get out of the DVD business because that’s expensive to operate, but it cannot assemble enough digital rights for its streaming service because there are too many competitors competing for those rights.

Not to mention content providers now also doing streaming. If HBO wants to make money on-line, why let Netflix customers stream their shows, instead of forcing those customers to the HBO service?

[runningdude]

@Joey_P

I’ll take your word for it that it’s hard to sign up for. I’ll also take Netflix’s word for it that what is allowed to be streamed (as opposed to rented via disc) it up to the studio. Maybe they’re trying to put more pressure on the studio to allow more movies to be streamed. Maybe they’re hoping to be able to go back to the studio and show them how many less DVD’s are being rented and how many more movies are being streamed in an effort to force them to allow more of their movies onto the streaming side.

It is extremely easy to offer just about “every” DVD, as it is a one way transaction. Netflix simply must purchase the DVD, and may rent it out as necessary. While many companies will offer a bulk discount to Netflix, they have no obligation to do so, and little incentive, as it represents a one time sale, save periodic replacements of damaged inventory.

Streaming rights are more difficult. Abstractly, a single copy of the file lives on Netflix’s servers, and any number of people can open and watch it. Under the DVD model, this is equivalent to a single $40 purchase that would earns Netflix potentially millions in subscriptions (as opposed to $40,000 in individual DVD purchases).

Studios obviously want more than “40 bucks” one off. Netflix does not want to pay more than “40 bucks”. There is thus a draw. It cost Netflix lots of money to buy DVD’s and BlueRay Disks. Studios want to sell individual copies.

Netflix wants to kill the disk player, so that digital becomes the norm. Consumers will be happier to buy a subscription at the monthly cost of a single movie, digital or disk, for unlimited content. Digital distribution is further difficult for studios due to piracy, so Netflix wants to offer a “safe”, though cheap for them, stream of revenue in exchange for streaming rights.

Netflix DVD business undermines its long term strategy by propping up the purchasing model over the subscription model that the studios favor. Thus Netflix wants to kill it! Yet it does not want to alienate its current customers; when it announced it would spin off the DVD business as “Quickster”, customers left in droves. It then reverse course, and has chosen a long term siege over a short term air raid to do the dirty deed.

[ftg]

The media companies have always been behind the curve on new stuff. They hated TV at first, but once TV started paying real money for old movies and shorts that were costing the studios money to store, they changed their mind.

The also hated VCRs and fought madly against them. By the 1990s, video sales and rentals overtook tickets in income for studios. They love DVDs now.

Same way with mp3s online, etc.

They will catch on about streaming.

But it is astonishing how crappy Netflix’s streaming catalog is compared to their DVD catalog even now.

Netflix sees the future. Even the top Comcast people know that streaming is going to be the way of watching stuff in just 5 years. If you don’t have your stuff available for streaming, you’re not going to make money.