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Summary:

How can Vdio possibly compete with Netflix and its 25 million subscribers? That’s a question we heard a lot when we broke the story about the new video service backed by Skype’s co-founder Janus Friis yesterday. The answer may have to do with timing and location.

vdio paprika

Netflix, Amazon, Hulu … and Vdio? Many of our readers were skeptical when we broke the story about Vdio, the new premium video service launched by Skype co-founder Janus Friis. Can a newcomer really compete with the big boys?

Will the company have enough money to get the content it needs to take on Netflix? Or has Netflix already sealed the deal with an unsurmountable lead of more than 25 million subscribers?

Those are all very good questions. Here are some of my thoughts on them:

  • Vdio is an international play, and that’s smart. Netflix has been aggressively expanding beyond the U.S., but most of its 25.5 million subscribers are still stateside. And most of Netflix’s deals are structured in a way that separates U.S. from foreign rights. So even if Netflix has tied up exclusive rights for shows like Mad Men in the U.S., it still has to compete for those very rights in other markets – and it may be unwilling to spend premium dollars for exclusivity in unproven markets.
  • Starting in Europe is even smarter. Netflix and especially Hulu have had a hard time sealing the deal in Europe, which is part of the reason they went to Canada and Latin America (Netflix) and Japan (Hulu) first. Vdio starting off in the U.K. is a strong move, and it comes at a time where more and more Britons are getting used to paying for online subscriptions, thanks to Spotify. Which brings me to another point:
  • With foreign markets, it’s all about timing. We have to wait for Netflix to post its Q3 results next week, but I’ve got a hunch that their growth in Latin America will be much slower than in Canada. Securing markets like Brazil and Mexico may be a good long-term bed for Netflix, but the company may have a tough time today selling subscriptions priced around $8 per month in countries where the average wage is still much lower than in the U.S. Europe on the other hand is ripe for a Netflix-like service, and Vdio may have a chance to claim a stake there before others pull up their tents.
  • Legacy is weight. Vdio is of course not the only one trying to compete with Netflix, and some of rivals are much bigger that the upstart that wasn’t even on anyone’s radar before this week. Think of Amazon for example, or Dish. However, Dish is also a great example of how things can go wrong when you’ve got a legacy business to preserve while trying to compete with the forces that threaten it. Dish was rumored to have a Netflix competitor in the works, but only unveiled yet another pay TV subscription enhancement when it finally took the wraps of its online video service a few weeks ago.
  • An exit may just be the beginning. It’s true, Netflix has likely a lot more money to spend on content than Vdio – even though Friis recently cashed out on Skype. However, who says that Vdio is built to become yet another publicly traded entity? It’s much more likely that the company will get acquired by a Google or Yahoo once it proves itself – and if the canceled Hulu sale has shown anything, then it’s that there are definitely many willing buyers for a video subscription service.

What do you think? Will Vdio be able to compete with Netflix? Let us know in the comments!

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  1. Let’s assume that Vdio is a UK play. In that case Vdio’s competitor is Love Film aka Amazon, or maybe even Glowria in France.

    But regardless who their competitor is, without the right kind of content it doesn’t really matter. A beautiful website or a great marketing hook won’t make a difference if they are showing titles that nobody wants to pay for. 

    There is a reason why Netflix was never really tempted to buy into an existing European video distribution entity and there have been many opprtunities. The synergies are not as big as they seem. The marketing/pricing models are more challenging due to the VAT  rates, Europeans are not that easy to persuade into in a subscription, and to keep them, as Americans and the content licensing world is more fragmented due to local taste and dubbing.

    Let’s first see what Vdio really has to offer.

    1. Agreed, we really have to see what Vdio offers before we can say if they could compete with Netflix. As of now, none of the subscription services are offering premium DVD content. Once that happens and the price is reasonable, that company will be the winner.

  2. I don’t believe Vdio has the capital to write the big deals for any territory.

  3. I’m in Canada, where Netflix is the only real option. I’d love to see some competition here.

    I think that Vdio doen’t need to offer more than Netflix to compete. It just needs something different. If each service offers a different set of content, I’d gladly subscribe to both. If Vdio slowly overlaps with Netflix’s content but also works better and avoids silly scandals (Qwikster), I’d cancel Netflix. So they have a chance for gradually taking over if they play their cards right.

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