How NetFlix's Woes Affect Subscribers
The Friendly Red Mailer
Just When Things We're Going So Well
NetFlix jumped the gun. The ability to downstream movies for free was a nice bonus for subscribers. The selection of films offered for downstreaming wasn't tremendous, but a subscriber could find himself/herself watching some interesting material that they wouldn't have seen otherwise (e.g., "Spartacus, Blood and Sand").
As a free bonus, the downstreaming feature was a terrific idea. Charging for it wasn't.
Here are a few errors the company made (in no particular order):
- Before NetFlix decided to charge for downstreaming, they really needed to have a much larger library of movies from which to choose.
- The quality of their downstreams wasn't consistent.
- Often, a subscriber couldn't select subtitles.
- The subscriber could never count on the reliability of a Net connection. There are a lot of weak links in the chain -- the condition of a subscriber's PC, the condition of his/her modem and its connection the nearest server, the condition of the local server, the status of the NetFlix site, etc.
If economically feasible, NetFlix should have waited a few years until these drawbacks were resolved. Yes, the studios had NetFlix hamstrung, and this limitation worked against the consumer as well.
Movies are made to be watched. If the studios expect an unwarranted amount of compensation for viewing their product, no one wins. RedBox is only able to offer the newest releases, and people miss out on thousands of other film experiences by going only to the dollar+ box.
Hopefully, Blockbuster can hang on (even though they charge more per DVD rental) because the "brick and mortar" retail outlets offered a pleasing movie/TV atmosphere. There was something quaint (if old-fashioned) in the idea of browsing the aisles, gazing at cover jackets, trying to find something that matched a renter's mood. Sure, driving back to the store to drop off videos (and then DVDs) has always been a pain, but no worse than using a public book library.
NetFlix took a bigger hit in subscriber losses than anticipated. They accelerated this momentum by advising its subscribers that the company planned to spin off its DVD rental business from the downstreaming service. With additional subscriber losses, they made a quick about-face.
Naturally, NetFlix's stock dropped and they lost their license to feature films offered by Starz (like "Spartacus, Blood and Sand).
So, now the company is attempting to draw in a new audience by making fresh licensing agreements. Dissatisfied customers are unlikely to return. The downstreaming service will remain a separate cost from the DVD mail-out rentals. NetFlix (and others) see the future in the downstreaming business -- not the expensive DVD mail-out rental side of its operations.
Even a casual subscriber will notice that NetFlix no longer invests much in its DVD operations. I have around 30 movies on their "Wait List," which NetFlix will probably never buy. It also appears that NetFlix is not bothering to replace its older DVDs, should they become lost, stolen or inoperable. Whether the renter likes it or not they are being steadily pushed into the downstreaming camp -- even though the company offers slim pickings.
This push toward a technology that is far from perfected is dangerous for NetFlix. Not everyone has broadband or cable. Not everyone wants to buy an additional box to view NetFlix's downstream offerings. Newer TVs have this capability built in, but how many households can afford to ditch their existing widescreen set for the sake of downstreaming mostly "B" grade films?
NetFlix wants to be at the front of the technological curve, which is understandable; however, if they move too fast they will simply put themselves out of range to its subscribers.