Trouble for Netflix streaming?

[Name Lips]

http://www.koat.com/technology/28506257/detail.html


Trouble Ahead For Netflix's Streaming Content Costs

Streaming Content Licensing Costs To Rise From $180 Million In 2010 To $1.98 Billion In 2012

NEW YORK (CNNMoney) -- In the not so distant past, Netflix was known mainly for its red envelopes. The DVD-rental-by-mail service was the company's core, and streaming video was a side perk for subscribers.

Fast forward to 2011, and online movies and TV couldn't be hotter. Google, Amazon, Hulu and others have jumped into the fray -- putting studios in the power position. They want to be paid more for the content they're providing.

That spells trouble for Netflix's streaming content costs.

"Netflix has another year or two on most of these contracts, and then the game completely changes," says Michael Pachter, analyst at Wedbush Securities.

Pachter predicts Netflix's streaming content licensing costs will rise from $180 million in 2010 to a whopping $1.98 billion in 2012.

When streaming video was new, Netflix was able to secure contracts with the likes of Warner Bros. Studios and MTV to license big TV and film catalogues for about $5 million to $10 million per year. This time around, Pachter says, those costs could increase more than tenfold.

"The content owners realize they can't give Netflix all the leverage," he says. "Netflix had the power when they were the only bidder. But you don't have as much leverage when you suddenly have competition."

Netflix subscribers got a taste of the studios' new hardball approach last month, when hundreds of Sony movies -- including high-profile titles like "The Social Network" and "Salt" -- abruptly vanished from Netflix's "watch now" catalog.

In a blog post, Netflix pinned the blame on a "temporary contract issue" between Sony and Starz, a pay cable network that licenses Sony's movie catalog. Back in 2008, Netflix struck a four-year deal with Starz that gave it streaming access to Starz' offerings.

But Starz' deal with Sony included a cap on the number of subscribers who can watch Sony movies online, a source told the LA Times. Once Netflix' audience exceeded the cap, the contract was null. Starz' catalog of Disney movies available for online streaming is on the verge of triggering a similar contractual cap, the newspaper reported.

In a letter to shareholders earlier this year, Netflix called the Starz arrangement "one of our most important deals," because it's one of the few that gives Netflix access to relatively recent films. The deal runs through early 2012, but the Sony/Starz standoff could accelerate the renewal talks.

"Studios are starting to put their foot down," says ThinkEquity senior analyst Atul Bagga. "They weren't paying attention to streaming at all, but now they see an opportunity to monetize. And they're going to take it."

That's a big threat to Netflix. On the other hand, the company has the money and motivation to spend more to keep its rapidly growing subscriber base happy.

"The cost of content is going to go up, no doubt about it," Bagga says. "It's going to come down to who has the ability and the willingness to write big checks. Netflix is probably the one to do it."

Netflix had a $161 million profit last year on sales of $2.2 billion, and it ended last quarter with $342 million in cash on hand.

But Netflix's rivals have much larger bigger wallets. At the end of the first quarter, Amazon had almost $7 billion in cash, and Google had a whopping $37 billion.

In another bit of uncertainty, Netflix's most direct competitor, Hulu, is on the block. Walt Disney Co. Chief Executive Robert Iger said at a conference last week that Hulu's owners -- who include Disney -- are "committed to selling" it. The list of interested potential buyers includes Google, Microsoft, Amazon, Yahoo and nearly every other tech giant, plus telecoms like AT&T and Verizon. Landing Hulu would give any of them a strong beachhead for challenging Netflix.

Right now, no one else has cracked the code. Netflix's global subscriber base grew almost 70% over the past year, to 23.6 million users. In contrast, Google's movie offerings on YouTube and Amazon's streaming catalog are still new and fairly paltry compared with Netflix's arsenal.

"Netflix is the first and the biggest," Bagga says. "In a broad sense, the rivals aren't competing with each other. Everyone is competing with Netflix."

But if this turns into a clash of titans, Netflix is still a small player battling much larger and richer giants.

"Netflix is merely a conduit," Pachter says. "Of all the people who want to be in the business -- Google, Amazon -- they're smaller by far. The big boys will take share of subscribers, or bid up the cost of content. Either way, Netflix loses."
$8/month for unlimited streaming is an awesome deal. It's probably worth considerably more. I'd be sad, though, if it ends up costing more than I can afford.

[Droid101]

http://www.koat.com/technology/28506257/detail.html


$8/month for unlimited streaming is an awesome deal. It's probably worth considerably more. I'd be sad, though, if it ends up costing more than I can afford.

Chances are, it'll just turn into a cable TV-like "tiered" system.

You can pay $8 bucks a month for all the indie and crap movies. Or, $12 bucks a month for the middle-of-the-road movies. Or, the premium movies for $25 or more per month.

That's my guess, anyway.

[Name Lips]

Well, they'd probably use the terms "new releases" and "classics" but yeah I get a feeling you're probably right.

I have noticed movies appearing and disappearing. The kids were watching wizard of oz, for instance, all the time. And then it just went away. Lots of other movies and series have left, come back, and left again. Guess there's a lot of behind the scenes politics going on.

[cyphersmith]

Well, they'd probably use the terms "new releases" and "classics" but yeah I get a feeling you're probably right.

I have noticed movies appearing and disappearing. The kids were watching wizard of oz, for instance, all the time. And then it just went away. Lots of other movies and series have left, come back, and left again. Guess there's a lot of behind the scenes politics going on.

There is a lot of behind the scenes politics going on. I used to work for Netflix in Instant Watch support. The MPAA didn't trust Netflix to prevent pirating then, and I don't know that that has changed. Aside from infrastructure problems with the internet itself, this is why many things are not yet available in HD. There are solutions that the MPAA may allow, but nobody has really implemented them yet. My guess is that Netflix doesn't really have the funds to completely redesign their player for PCs yet again. I don't know that it would be necessary to make these changes to STBs, since they're not used to pirate movies, but it might be required to make it compatible with the PC version.

[Lady Fury]

I'm pretty pissed about this. I've had Netflix for awhile now and I get the 1 DVD at a time plus streaming. I just got the email a few minutes ago.



Dear Lady Fury,

We are separating unlimited DVDs by mail and unlimited streaming into two separate plans to better reflect the costs of each. Now our members have a choice: a streaming only plan, a DVD only plan, or both.

Your current $9.99 a month membership for unlimited streaming and unlimited DVDs will be split into 2 distinct plans:

Plan 1: Unlimited Streaming (no DVDs) for $7.99 a month
Plan 2: Unlimited DVDs, 1 out at-a-time (no streaming) for $7.99 a month

Your price for getting both of these plans will be $15.98 a month ($7.99 + $7.99). You don't need to do anything to continue your memberships for both unlimited streaming and unlimited DVDs.

These prices will start for charges on or after September 1, 2011.

You can easily change or cancel your unlimited streaming plan, unlimited DVD plan, or both, by going to the Plan Change page in Your Account.

We realize you have many choices for home entertainment, and we thank you for your business. As always, if you have questions, please feel free to call us at 1-888-357-1516.

–The Netflix Team


I so want to write them back and tell them how awful it is to treat existing customers like this. I can understand if they want to do this for new customers but the old should be grandfathered in.

I'll do Red Box and just keep the streaming after the price change take place. My kids watch the streaming shows a lot and it's nice to have that option.

[DarwinOfMind]

I understand how it feels for the price of things to go up, but I mean seriously Netflix streaming is the best deal in the industry, we all knew they were giving it away far too cheap.

I personally didn't expect it to last... it's not that that bad of an increase...

I don't expect the gas station to give me $2 a gallon gas just because I'm an old customer...

[Black Angel]

You would think getting both packages would allow you some sort of discount (obviously not as cheap as you are getting it now, but still, some reduction). It seems silly not to try to encourage people to keep both by bundling the costs.

[Schizm]

hm. I haven't had an email stating that yet. bugger, because it'll be 17.98 for me... since they have a 2 dollar surcharge for blue ray availability.

[cnath.rm]

And didn't they raise the prices back in Dec/Jan? I'd have hoped for some kind of bundling price break as well.

I'll do Red Box and just keep the streaming after the price change take place. My kids watch the streaming shows a lot and it's nice to have that option.Red Box doesn't have a lot of the older stuff on dvd that doesn't stream, otherwise I'd be looking that direction as well, not sure what I'll do in Sept.

[Space Cadet B^3]

As popular as streaming is, I'm not surprised. I'll keep my 1 dvd and streaming package.

[Droid101]

Red Box is a joke. I'm not going to drive to a store to see if maybe they have a movie I want. I can download any movie in existance.

Anyway, they ARE grandfathering people in until September. So at that point all the complainers can decide what is worth it.

[Harry]

Red Box is a joke. I'm not going to drive to a store to see if maybe they have a movie I want. I can download any movie in existance...

Redbox annoys the hell out of me. They are cropping up faster than Korean nail salons. Everywhere, almost like public mailboxes used to be. And to someone who rents as rarely as I do now - during my first hip replacement, I watched four or five movies a day for months, and burned out, and I rent roughly one movie every six months or year now - it seems to make sense. I simply never plan ahead on deciding to watch a movie. It's a spur-of-the-moment thing always. But when I hit a Redbox, they never have any movie I want to watch. The releases I would like to see are never there, and well, the selection sucks in the first place. So - I think I've rented maybe three movies from a Redbox total, on two occasions. The other times, I went to a damned store and just bought the freaking movie.

As for Netflick streaming, while my TV is small, it is my TV. It's much more pleasant to watch on it than my PC. Same goes for downloading movies from elsewhere. Not something I want to do. And no, I'm not going to set up a wireless network to broadcast movies from my PC to my den for the one movie I might possibly rent, or not, between now and Christmas.

Man, I used to watch dozens of movies a month even before my surgeries. For years. I was a total movie geek. I guess I saw all the ones I'll want for a very long time. New releases, they still suit me - if I can see them in the theater.

[Ancalagon]

Of course, Netflix is a good way to *fight* piracy. When it's going to be a 50$ a month service, piracy will shoot back up.

[DarwinOfMind]

I don't think they want to offer a bundle to encourage people to not drop the dvd by mail, because from what I heard the postage is still a big expence to them and even with this streaming cost raise they'd love to get people to drop dvd by mail.


Actually I'm sure they'd love everyone to be me, pay for the dvd by mail, and keep one disc sitting on the top of the entertainment center for 6 months...
gotta watch that sometime, streaming is just so convenent.

[cyphersmith]

Redbox annoys the hell out of me. They are cropping up faster than Korean nail salons. Everywhere, almost like public mailboxes used to be. And to someone who rents as rarely as I do now - during my first hip replacement, I watched four or five movies a day for months, and burned out, and I rent roughly one movie every six months or year now - it seems to make sense. I simply never plan ahead on deciding to watch a movie. It's a spur-of-the-moment thing always. But when I hit a Redbox, they never have any movie I want to watch. The releases I would like to see are never there, and well, the selection sucks in the first place. So - I think I've rented maybe three movies from a Redbox total, on two occasions. The other times, I went to a damned store and just bought the freaking movie.

As for Netflick streaming, while my TV is small, it is my TV. It's much more pleasant to watch on it than my PC. Same goes for downloading movies from elsewhere. Not something I want to do. And no, I'm not going to set up a wireless network to broadcast movies from my PC to my den for the one movie I might possibly rent, or not, between now and Christmas.

Man, I used to watch dozens of movies a month even before my surgeries. For years. I was a total movie geek. I guess I saw all the ones I'll want for a very long time. New releases, they still suit me - if I can see them in the theater.

Man, you know that many Blu-ray players have the capability of doing Netflix streaming, don't you? And they're not expensive anymore. You can get them for less than $100.

[Harry]

Man, you know that many Blu-ray players have the capability of doing Netflix streaming, don't you? And they're not expensive anymore. You can get them for less than $100.

If there were a place where I could still rent video tapes, I would. I've still got my VCR and it works as well as it did when my grandma bought it for herself, to tape General Hospital. It passed to me when she died, about 15 years ago, to replace my newfangled player which didn't last long.

I like to think about spreading costs out. I bought some magazines last week. One was 2 and a half bucks, one was 3-something, one was 9. My friends wonder why I pay so much for British mags, well, the way I figure I spent 5 bucks per mag. I bought a model kit earlier this year and bought it for easily ten bucks more than it was worth. A few months later, I bought another of the same model at half-price. In my mind, they both average out to less than retail. If I bought a new BluRay device to play streaming movies or even RedBox rentals, that would mean I'd be spending roughly 51 bucks for each of my rentals in the next year.

<--- yes, my brain works funny. Haven't you noticed by now?

[Name Lips]

We already had a Wii, so it was just extra nice when Netflix added the ability to wirelessly stream through it.

Netflix is fulfilling my TV fantasy -- the ability to supplant cable TV by allowing the user to watch whatever they want, whenever they want, with no pay-per-view idiocy. It won't be long, in my prediction, before movies and "TV" serials start coming out exclusively on Netflix.

At some point it really is all about what the consumers want. And now we've had a taste of cheap convenient at-will moviegoing. There's really no going back now that we know it's possible. If Netflix starts charging too much, then people will flock to whatever service pops up to compete with them. The genie is out of the bottle, as it were.

[cyphersmith]

We already had a Wii, so it was just extra nice when Netflix added the ability to wirelessly stream through it.

Netflix is fulfilling my TV fantasy -- the ability to supplant cable TV by allowing the user to watch whatever they want, whenever they want, with no pay-per-view idiocy. It won't be long, in my prediction, before movies and "TV" serials start coming out exclusively on Netflix.

At some point it really is all about what the consumers want. And now we've had a taste of cheap convenient at-will moviegoing. There's really no going back now that we know it's possible. If Netflix starts charging too much, then people will flock to whatever service pops up to compete with them. The genie is out of the bottle, as it were.

For movies and TV shows to come out exclusively on Netflix, they need to have a way to pay for themselves. Netflix isn't charging nearly enough for that to happen, and they don't have commercials. One of those two needs to change in order for what you're predicting to be viable.

[Droid101]

It won't be long, in my prediction, before movies and "TV" serials start coming out exclusively on Netflix.


Netflix Exclusive TV show:
http://www.highdefdigest.com/blog/netflix-original-series/

Netflix is in talks to gain exclusive distribution rights to a new series directed by David Fincher and starring Kevin Spacey. This could be the big push the company needs to reach the next level – or the straw that finally breaks the camel’s back.



There’s no question about the success of the Netflix streaming service. The company’s march towards digital distribution has allowed it to eclipse nearly every competitor including Hulu, Vudu, Blockbuster, and even its own disc-by-mail service.

Successful though it may be, Netflix has a target on its back. Movie studios, cable providers and even content providers are gunning for the company. The next step for Netflix could either be a great move forward or that final act that makes studios stop playing nice.

That step is the acquisition of exclusive rights to ‘House of Cards’, a show based on the British series of the same name. It’s a political drama that draws heavily from both ‘MacBeth’ and ‘Richard III’. The original has been hailed as one of the best British TV shows of all time.

The U.S. version of the show will star Kevin Spacey. This also marks the television directorial debut of David Fincher. Considering the popularity of Spacey and reputation of Fincher – who just gained a great deal of praise for ‘The Social Network‘ – this show is bound to be a hit no matter where it is.

According to the Wall Street Journal, Netflix has outbid HBO, AMC and others with a promise of $100 million for 26 episodes. The bid is under serious consideration. At this point, the pairing seems likely.

Under the terms of the deal, Netflix would have rights to air the series before anyone else via the Netflix streaming service. The production company, Media Rights Capital, would hold the rights for later broadcast or DVD and Blu-ray sales.

The thought of a Netflix original series is intriguing, especially with big names like Fincher and Spacey in the mix. It’s a bold experiment on both ends, and could be the start of something really big for Netflix.

[Ergeheilalt]

For movies and TV shows to come out exclusively on Netflix, they need to have a way to pay for themselves. Netflix isn't charging nearly enough for that to happen, and they don't have commercials. One of those two needs to change in order for what you're predicting to be viable.

Or product placement deals.

[AZRogue]

I don't think they want to offer a bundle to encourage people to not drop the dvd by mail, because from what I heard the postage is still a big expence to them and even with this streaming cost raise they'd love to get people to drop dvd by mail.


Actually I'm sure they'd love everyone to be me, pay for the dvd by mail, and keep one disc sitting on the top of the entertainment center for 6 months...
gotta watch that sometime, streaming is just so convenent.

I'm the same way. I have two movies, with the Blu Ray option, and they're just sitting on my Playstation. Red and the Social Network.

Anyway, Netflix can go fuck themselves. They just recently raised prices and I'm not in the mood to go along with this one. I don't use their mail service often enough, really, to justify the increase and I am constantly annoyed by their streaming service.

I can't tell you how often I log on to Netflix and then search for a movie to stream only to find out it doesn't stream. Or that it did but doesn't anymore, like Sparticus. I wanted to re-watch the first series but it was no longer available to stream and was DvD only. I never find anything I want to watch.

To be honest, since I spend more time near my PC with my medium sized flat screen (I put the 42' lcd next to my PC when I bought my new living room tv) that has my xbox (the playstation is hooked up to the big tv in the living room) I find myself more often than not just streaming through xbox. Really, I only watch one or two movies this way a month. I much prefer the convenience of knowing I can watch it when I want right then. I hate waiting for DvDs in the mail and I hate that their streaming selection seems designed to not have what i'm looking for.

I'm just a part of the Market correcting itself.

[Janos]

We switched to pure On-Demand with Netflix a year ago and haven't looked back. Between that and Amazon On-Demand straight to our TiVo we've got almost all movies covered. Netflix is good for obscure stuff, Amazon for blockbuster stuff.

[Hatter]

Redbox is great way to get mugged or murdered around here. They are prime victim spots: poorly lit, no surveillance, people showing up alone at 3am with their cars, a cop was shot in the back of the head renting a movie here a couple years ago.

[DarwinOfMind]

Image I found...

http://2.bp.blogspot.com/-nVFwC5CzBKk/Th4iRFJxWLI/AAAAAAAABWQ/p_VSiO20ElU/s400/NetflixPerspective.jpg

[Droid101]

Image I found...

http://2.bp.blogspot.com/-nVFwC5CzBKk/Th4iRFJxWLI/AAAAAAAABWQ/p_VSiO20ElU/s400/NetflixPerspective.jpg

Yep.

Basically, everyone is going to find something to complain about.

[Scutisorex Shrewlord]

Redbox is great way to get mugged or murdered around here. They are prime victim spots: poorly lit, no surveillance, people showing up alone at 3am with their cars, a cop was shot in the back of the head renting a movie here a couple years ago.

We have them inside McDonald's here, which I assume is safe, but gets a lot of traffic, so the selection is always depleted.

[shiningbrow]

We have the DVD plus streaming, but our tv setup is so antiquated that streaming requires us to unplug the dtv converter in order to plug in the Raku (or whatever that damned box is called) player for the netflix streaming. So we don't bother. We get a movie on dvd and it sits on the tv for at least a week. They have to be making money off of us. I just subscribed to the Sunday NY Times and am thinking about doing away with Netflix altogether. I spent so much time w/my head buried in books during grad school that I've got about 20 years of movies to catch up on, anyway. I can get them from the public library or via other sources. I'm sure if we upgraded the equipment this would facilitate Netflix, but why should we bother? Most of what we see is BBC or ITV programming anyhow, most of which is not available via US sources.

For a long time, we used the Netflix DVD mail option regularly and as they raised the price, we cut back, now we wonder if it's even worth paying for. Every month I think I'll cancel. Will probably do so in August.

[Northcott]

We cancelled cable months back, as telecom is given an unreasonable stranglehold on the Canadian public due to shitty legislation. Doling out a minimum of $45-$60/month for shitty basic cable packages that give you very limited selection is idiotic.

Netflix has a crappy selection compared to the American market. Much, much smaller, in fact. But I'll gladly give them $8/month... hell, even $10 or $15, than go back to cable. Even though they're 'tards, and do shit like post the Black Donnellys series and Justified with the episodes out of order.