What I’m paying attention to is the company’s still-small incursion into delivering video over the Internet. Until now, Netflix had a collection of about 10,000 older movies and TV episodes. Last week it added a catalog of 2,500 movies (mainly one to five years old) from the Starz cable network.
There is an interesting back story to that deal.
Starz and Netflix have been the two most prominent rivals trying to sell subscription services with access to movies and TV shows. That is the rough online equivalent of a pay cable channel, like HBO or, of course, Starz. It’s different than the online pay-per-view model of Apple and Blockbuster’s MovieLink, which compete more with DVD rental shops.
He says that online distribution is the future. How we get from here to there is the question:
The key idea — and it is no surprise when you say it this way — is that businesses can only move toward the future if they satisfy their customers at every step along the way. People with lives to lead have little interest in playing with new technology until the bugs are worked out. That means products have to be really easy to use and not have weird disappointments.
That’s why Netflix has such an advantage over nearly any Internet video start-up. Its DVD business is comprehensive and satisfies customers. Customers see its current, half-baked online video service, as more of a free bonus than a disappointment. Over time, as it adds more content and improves the technology, Netflix can figure out if it needs to charge more for online video and whether it can offer an online-only service without DVDs by mail.
They get the online video to the TV set via Roku:
The company has a partial stake in Roku, a company that has made a small $99 box that lets you watch the Netflix online videos on your television set. The company won’t give out details but it says it is on track to sell hundreds of thousands of the devices this year.
With their stock down 17 percent this week, Netflix imposed a $1 per month Blu-ray surcharge for HD lovers (that’s actually a $1 discount for Netflix early adopters who were paying $2 for the privilege).
Hansel points out that the company has fended off many assaults from Blockbuster, and Netflix with 8.7 million subscribers and a scaled back expectation of only 1 million new subscribers a year, that’s “not shabby for any business.”