Netflix Blows It All Up

by on November 23, 2010 · 4 comments

So now you can pay Netflix $7.99 a month and stream all the video you want? Damn cool if you ask me!

What does the Netflix decision mean for consumers—two words: More choice! This is what functional markets deliver. There was a time when if you missed an episode of your favorite show, that was it. You might have gotten lucky and caught it on its single rerun, but that was hit or miss. These days, I can watch The Office at 8 p.m. on Thursday nights. Or I can record on my DVR and watch it later that night. Or I can watch it the next day on my PC by visiting nbc.com. Or I can watch it on-demand from my cable box. Or I can wait a few months and watch it on DVD. Or, soon, via Netflix stream.

I can’t help but wonder if this makes moot all the handwringing about the FCC’s desire to place conditions on the online services a merged Comcast-NBC Universal can offer. Come on, Netflix has blown up the whole cable TV model.

Remember when everyone from Congress down to city utility commissions were demanding the cable industry create “a la carte” pricing plans, allowing subscribers to pick the channels they wanted and pay only for those. Netflix, as the ultimate video-on-demand service, has come close to doing so, absent any government mandate.

I don’t consider myself a TV junkie, but I’ll allow that I watch my fair share. Yet except for sports and news, I rarely watch regular programming at the time it airs. I timeshift nearly everything with my DVR.

In the past couple of years, I find myself doing a more dramatic form timeshifting. Thanks to DVDs, I can wait a year or two for a series to really prove itself before committing the time to watch. My wife and I came to “The Office” and “Burn Notice” late, catching up on past seasons on disk before (recording and) watching shows as they regularly air now.

Do I still pay for cable? Sure. But I dropped premium services such as HBO because I know I can eventually get “The Pacific” and “Big Love” on DVD. If Netflix pulls Web streaming off to the extent it hopes, all I may need is basic cable.

Naturally, Netflix’s streaming service is disruptive enough to stir up the usual “concern” in legislative circles as to whether something or other about it is unfair. You can bet someone’s going to accuse Netflix of trying to monopolize streaming licenses, just like you can bet that Congress or one of the federal watchdog agencies is going to insist Web streaming constitutes an individual market, and is not one of many business models for entertainment distribution. The Federal Trade Commission exhibited this mentality when it blocked the merger between Blockbuster and Hollywood Video. It ignored the measurable threat Netflix posed to both companies’ survival and persisted in seeing brick-and-mortar video rental as its own sector, distinctly separate from video rental via the mail. Although the FTC desired to preserve consumer choice, both companies ended up in bankruptcy.

That’s why the best thing regulators can do now is let this play out.

The big question is whether Netflix will be able to stock enough streaming titles to encourage people to use their service instead of DVD or on-demand cable. Cable companies have the right to protect their investment in programming. They should not be forced to yield licenses or programming exclusivity to Netflix. Similarly, the government should not prevent Netflix from seeking competitive advantageous content agreements with studios and distributors. Regulators should also avoid the temptation to “encourage competition,” namely by propping up failing business models to protect favored companies and segments. They’re big boys now. Let ‘em play.

  • Michael Yuri

    Uh — I think you’re a little confused about what just happened.

    For several years Netflix has been offering a one disk plan that includes unlimited streaming for $7.99. What they just announced was a rate increase to $9.99 on the one-disk plan, and a new streaming-only plan for $7.99. In other words, instead of the old $7.99 one-disk plan, you can pay the same and get less (streaming only) or pay more ($9.99) for the same.

    Somehow, Netflix managed to successfully spin a price hike as a new product offering.

  • Steve Titch

    Yes, the unlimited streaming option has been available for some time, but that was positioned as a “bonus” for mail subscribers: There’s more to this than a price hike. Netflix seems to be committing to a strategy where they will offer more titles via streaming. As I mentioned in the blog, the devil will be in how many titles they can serve up and how soon after theatrical release or airdate they will be available. One can see the possibility of Netflix getting out of mail delivery down the road. Indeed, the price hike, though nominal, may serve to push more subscribers into the Web delivery.

  • Jardinero1

    The netflix streaming library is largely absent recent blockbuster movies. This had the un-intended consequence of diverting me into their huge library of streaming documentary, arthouse, independent and foreign films(mostly low budget, I add). A steady diet of such fare has made me appreciate what a lot of oversold crap most of the blockbusters are. I can barely sit through most blockbusters now. Thankyou Netflix for freeing me from the cesspool of Hollywood blockbusters.

  • http://twitter.com/Geistbear Thomas Vincent

    I agree with Michael about a price hike spun as a new product. At my house we are getting hit with a $5 increase for the additional streaming which based on the older computers we own, we can’t even use. So we will reduce our existing membership to a lower priced plan and may go find a third party device to use for streaming, we will have to pay an extra $60 for device, but Netflix will lose some of our dollars. If our reaction is typical they may see some major losses coming. In a down economy hiking the prices around the holiday season is a good excuse for budget tightening.

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