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During Netflix‘s recession-busting fourth-quarter earnings call last week, CEO Reed Hastings noted that “millions” of the company’s subscribers are using its “Watch Instantly” streaming service. The service, which opened up a year ago but kicked into high gear last fall with new content partnerships and roll- outs on multiple devices, is having a notable impact on Netflix’s business, according to Hastings, spawning a “substitution effect” in which subscribers are renting fewer DVDs. But changes aren’t only being made to Netflix’s business model — its very relationship with its subscribers is evolving, and presenting new opportunities.
I’ve been a Netflix subscriber off and on for the last eight years, and while I used to visit the site maybe once every week or so to clean up my queue and add a new release movie, I’m now going to it almost every other day.
This desire to return to Netflix.com so often is fueled, in part, by the novelty of the streaming service. The breadth of streaming content available is still pretty lacking so I’m constantly checking to see if anything worthwhile (especially to the HD section) has been added.
But it’s not just curiosity about new titles that brings me back, it’s also the instant gratification. Before, when I added a movie to my queue, I had to wait for the DVD to arrive in the mail — often resulting in a form of Netflix queue-nesia (the act of forgetting why I added, for example, The Bob Newhart Show, Season 1, months ago). Now if I find something I like in the streaming section (and that can be a big “if”) I can watch it right away.
So as a Netflix user, I’m visiting the site more often, and while there, I’m spending more time browsing. Apparently I’m not alone. While the Netflix rep with whom I spoke wouldn’t provide specifics, he did say the company had noticed an increase in the number of subscribers browsing through Netflix.com.
In addition to browsing, of course, users are staying put to watch content. Suddenly, Netflix.com is not just a stopover on your way to being entertained; it’s a destination, a place where you’ll spend hours at a time. And that opens up new doors for Netflix.
The low-hanging fruit in this new destination scenario is adding more social and community features to the site. Netflix currently offers member reviews and allows you to connect with friends to see what each other is watching, but they feel like add-ons at best. Now that people can launch movies from the site, it should really tap into its film-loving community.
Netflix should integrate with a service like Facebook to allow users to watch movies with a friend, or to offer screenings for which the director provides live running commentary (and you can ask questions). Perhaps the streaming would provide a new data point in Netflix’s quest to improve its recommendation system by looking at how long users watch a particular movie, and whether or not they abandon it at any point before it ends.
With all this new eyeball activity on the site, the greatest temptation for Netflix is undoubtedly to slap ads up everywhere. I hope it doesn’t, otherwise I’ll be changing my relationship with Netflix again — by ending it.
This article also appeared on BusinessWeek.com.