Netflix and the Movie Makers

Three years ago we received a six month gift subscription to Netflix as a Christmas gift. We didn’t make full use of it for a while – watching a full length movie each night just took too much time – but then we discovered the joys of watching TV shows via Netflix. Top quality programs such as The Wire, Deadwood, Friday Night Lights, Rescue Me and many others were soon a nightly occurrence. Because the episodes were only an hour long, it was easy to fit one in each evening. To me, watching a television series after the fact has great advantages that make are well worth the wait: no commercials, cliff-hanger episodes on consecutive evenings rather than a week or more apart, watching when it’s convenient for you and not when TV programmers say you can watch it, and many more. With three DVDs in our rotation, a red envelope in the US mail delivery system worked quite well.

Recently it became evident that Netflix was changing its model of delivering content. By streaming programs live via the home’s internet connection directly to the television, Netflix would save an enormous amount on postage. Not having a Wii or an XBox or a Blu-Ray, I purchased a Roku box for $50. This device sits ontop of the TV and attaches to your home internet service wirelessly. Soon you’re viewing TV shows and movie on your TV via Netflix whenever you want, not having to wait for the red envelope to arrive. While not everything is “on demand” this way, much is. It’s great.

But now the content producers – the television networks, movie studios and the cable TV providers that charge mightily to deliver that content to your home TV – have targeted Netflix with economic destruction. In today’s New York Times, the chief of Time Warner, when asked about the growing dominance of Netflix, disparagingly said “It’s a little bit like, is the Albanian army going to take over the world? I don’t think so.” And so now when contracts for the provision of content come up for renewal, Time Warner and the like will be seeking exponential increases of the original prices they agreed to pay Netflix.

These guys never learn. First it was the music recording industry ignoring the potential of online music sharing and downloading to protect their cash-cow CDs; then it was the newspaper industry wedded to its print product and the enormous profits it produced while disparaging the potential of the internet for online delivery of news. And now you have the movie and TV studios slamming Netflix because that company has figured out how to make the leap from pricey DVD sales/rentals to more affordable instant downloads via the internet.

Each of these media industries had a core product that was hugely profitable. Technology, however, created new delivery systems for those products – music, newspapers and movies – that were far cheaper and much more desirable by consumers. Although these new delivery systems were better for the customer, they yielded far less profits for the established industries. Rather than embrace the change, downsize their operations where needed and find new revenue streams from innovation, the established media companies sought to kill the new technology in its cradle, not because the new systems harmed consumers – they were clearly beneficial – but because the new technologies harmed corporate profits. If the lessons of the music and newspaper industries’ fights against new technology is any indication of the outcome of this latest battle, Netflix has nothing to worry about.

2 Responses to Netflix and the Movie Makers

  1. Shawn says:

    Do not doubt that comcast will soon start to charge by the amount downloaded as more and more people move to tv over the internet (hulu, netflix, etc).

    I’ve always thought that as long as there is only one wire connecting your home to the service, it should be regulated as a utility (see, I can agree to a government role in some cases!)

    I’m already at the point that I canceled my home landline because of comcast costs.. next will come television as I find myself watching tv by dvd much mroe often then over the wire.

  2. Greg Page says:

    Two more great things about Netflix On Demand, and other such services described above:

    (1) Cuts out the return hassle. Works especially well for the busy, the lazy, and the scatter-brained (and if you’re all three at once, you know how something seemingly simple like returning a video can become an albatross around your neck).

    (2) With a beret tip towards the late and great George Carlin, it makes for less *stuff.* I have Netflix On Demand and have seen its quality and its catalog improve by leaps and bounds over the years. The result? I don’t buy DVDs any more. Besides the cost-saving and the benefits described above, it also just means less clutter in the house…less stuff to rearrange, less stuff to pick up, less stuff in general. Again, manna from heaven for those of us not preternaturally disposed to neatness.