Netflix had another good quarter, is considering a streaming only subscriptions in the U.S., has seen tremendous growth in streaming, and has upgraded its product so customers streaming to their TVs via Wii and PS3 game consoles no longer require a disk. Netflix is looking to spend even more money on content available for streaming. On a price/value basis I am extremely happy with the product. For the most part it has already won the streaming wars with me.
While I can (and sometimes do) stream stuff directly from my desktop computer to my TV (also via PS3) or iPhone (through an app called StreamToMe), most of my streaming is Netflix and I almost never use Netflix streaming on a computer anymore. For now, that probably puts me in the minority as only about one in five homes is streaming anything to their TVs via a game console. But the next wave of new televisions will include much more Internet connectivity and applications like Netflix built-in.
Meanwhile Hulu is struggling to sign up new customers for its for-fee subscription service Hulu Plus and is considering a price cut. ABC, CBS and NBC have blocked their internet content from being available on Google TV. This has some in an outrage, but this is no different than the Boxee situation a while back. The networks want to preserve existing revenue streams, and get paid more by the cable companies (ironically, considering the current standoff with Cablevision, Fox has not yet pulled its content from Google TV). But Netflix will still be available on Google TV and the networks and studios who put content on Netflix know how they will be paid.
Mark Cuban has been giving Netflix a lot of thought recently and posted about it yesterday.
All you internet pundits want the broadcast networks to give the content away for free. THAT IS STUPID. Get Netflix to pay you on a per subscriber basis on a par with what your other TV providers pay you. Netflix becomes a competitive TV provider. BRILLIANT. You get paid. You reach Google TV users and non Google TV users.
Of course you basically cede to Netflix control of the streaming content world. You give their streaming only subscriptions a unique value beyond old shows and movies. Goodbye Hulu as well.
Of course once they get the broadcast nets, how long until they add the cable nets like ESPN, Disney, etc., etc. ?
You should read Mark's post, but what he's suggesting here is a bit different than what Netflix currently offers. I definitely am not in agreement with Internet pundits who feel entitled to get the content for free, but Mark is really suggesting that Netflix license current content, too. That gets a little trickier since networks won't be quick to cannibalize their advertising revenue. With forthcoming (April 2011) changes to Nielsen measurement that will include online viewing in its commercial ratings for viewing within 3 days so long as it has the the same commercials that aired on TV, it's not completely unthinkable that the networks would be willing to negotiate to put the content on Netflix without commercials after 3 days.
Currently Netflix has 16.9 million subscribers (though some of them are in Canada) and there are about 116 million TV households in the US according to Nielsen. Netflix reports a full two-thirds of its subscribers used its instant streaming service for at least 15 minutes in November.
The tightrope walk for the networks is that if a lot more people start using Netflix the networks will have ultimately traded TV advertising dollars for digital streaming dimes and quarters (better than pennies, for sure, but not as good as dollars). I think it will be a while (5+ years) before half the USA is capable of easily streaming video to their TVs, but if Netflix is willing to pay ABC, CBS, etc. $.25/mo. or more per subscriber I could see the networks dabbling with putting their content on Netflix very soon after it airs. That's something that would make a lot of Internet TV loving geeks happy.