Forget TV Everywhere, How About Netflix Everywhere?

40 Comments

It seems Netflix has already reached a tipping point in the consumer electronics market, as it signed up five more CE manufacturers to enable its streaming services on their devices. Panasonic, Sanyo, Sharp, Toshiba and Funai (the CE maker behind the Philips, Magnavox, Sylvania and Emerson brands in the US) have all agreed to add the Netflix “Watch Instantly” streaming service to some of their Internet-connected HDTVs and Blu-ray players.

Netflix streaming has become nearly ubiquitous on consumer electronics devices in the past few years; the service was already available on a number of devices, including the Roku Player; Microsoft Xbox 360 and Sony PlayStation 3 gaming consoles; Blu-ray players from Insignia, LG, Samsung and Sony; Internet-connected TVs from Insignia, LG, Samsung, Sony and VIZIO, and TiVo DVRs. Altogether, Netflix expects to have its streaming service on more than 100 different CE devices this year.

The company has been heavily pushing its streaming service, as opposed to its DVD-by-mail offering. Last month, for example, the company made the tab for its “Watch Instantly” streaming service the first thing users see when they log on to Netflix.com, as opposed to the DVD section users previously saw. Being on more CE devices means even more potential customers streaming video as opposed to waiting for DVDs to show up by mail. According to a recent study, 62 percent of Netflix subscribers had tried out the “Watch Instantly” service, and more than half — 54 percent — stream Netflix titles at least once a month.

That’s good news from a financial point of view, as streaming video comes with a much lower delivery cost than shipping discs. According to Netflix CEO Reed Hastings at NewTeeVee Live, the company spends about $600 million a year on postage for its mail-order business, but the cost of streaming a video title is much cheaper than delivering a DVD by mail — about 5 cents a gig for bandwidth — or about a nickel per movie.

40 Comments

Dave

Be nice for Netflix to try their hand outside the US before they get put in the same sentence as the word “everywhere.”

jamie

I am sure Netflix execs have done more number crunching than any of us here in their ROI reports, and I’m sure the streaming revenue model will work for them.

True they will need to adapt with some creative deals (like the recent Warner Bros deal) however I’m sure they will continue to come up with creative ways to get more titles to instant que in a win win for them and the studios.

wrtmania

So, I’m happy for Netflix that there are plenty of opportunities for folx to stream their offerings, but how many of you are just too annoyed at the constant popunder ads for Netflix EVER to use their services? I finally got so tired of seeing them pop under a couple of sites I use from time-to-time that I cancelled my subscription.

ConnectionVPN

And could you ask Netflix about their promised Internet-only offer ?
It would be great for those of us not in the US (even if we’d probably have to use a VPN to access it ;)…

Zach

I love me some streaming, just like the next guy, but there’s something to be said about having a disc in hand so my ISP’s lousy service can’t ruin date night.

That’s right, Comcast, I’m talking about you.

Steven

Netflix streaming needs closed captioning before I can give up on disks.

timekeeper

Only a nickle per gig, you say? Problem with moving to digital is that a viewer could watch 2-3 shows a night. With DVDs Netflix can throttle how many DVDs you can watch in a given time just by delaying the shipment by a day or two.

I agree that digital delivery is the way to go but there are some more numbers to be crunched here before it is declared the winner.

Ryan Lawler

Well, at the cost of a nickel per title, a user would have to watch something like 180 movies a month to make up for his $9 subscription fee. Of course, that doesn’t account the cost of acquiring streaming content or storing it, etc. But the beauty of delivery via IP is that the more it streams, the lower its per-unit delivery costs are.

Forget about shipping costs for a second, and think about everything else that goes into Netflix’s DVD mailing system; it has to acquire discs, store them, employ people to sort through them, etc. The costs of running its storage and shipping warehouses has to be huge. But once Netflix has acquired a title its costs of storage are minimal — no more holding multiple copies in separate shipping places around the country!

I’m not saying that it doesn’t have its own costs, but the digital streaming business model is a lot more efficient.

timekeeper

I believe their DVD acquisition costs are ~$5/disk.

Storage costs of a DVD in terms of ($/sq ft) are low too.

Given the amount of disks they can churn through, on a per title basis, labor costs are low.

We can pick apart the DVD rental business on a micro level and find marginal efficiencies at many points but, on a macro level just look at the profit they have been generating on a DVD only business model. They are a well oiled machine in the DVD business. The digital business is still new to them and I guarantee they have not found many efficiencies yet.

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