In a move that may make already-wary pay-TV operators a bit more wary still, Netflix is continuing to shift its strategy away from the online DVD rental business and toward the streaming of movies and television shows through connected devices, with the announcement on Monday that subscribers would no longer be allowed to manage their online queue through “streaming devices." If you want to order up a good old-fashioned mail-order DVD, it’s going to have to happen through the Netflix website, and nothing but the site.
Netflix says that the majority of its 16 million subscribers stream content today instead of opting for the physical comfort of holding a scratchable, loseable DVD in their hands. So, it’s simply making some changes to accommodate the consumption trend.
“We’re doing this so we can concentrate on offering you the titles that are available to watch instantly. Wrote Jamie O’Dell, director of product management at Netflix, in a by-now well-publicized blog posting. “Further, providing the option to add a DVD to your queue from a streaming device complicates the instant watching experience and ties up resources that are better used to improve the overall streaming functionality." Not to mention, we suspect, lowering shipping overhead and inventory requirements.
For operators, the move should be a signal that Netflix is willing and able to wade even more into their video-on-demand territory. With cable companies in the United States, and Comcast in particular, losing video subscribers for an unheard-of two quarters in a row (the last quarter seeing the largest subscriber drain ever for the sector), talk of video cord-cutting is heavy in the air. While the economy is a favorite scapegoat, some suspect, though there’s no way to prove it – that subscribers are cancelling their expensive cable and satellite subscriptions in favor of cheap online alternatives, including Netflix, Amazon.com and Hulu.com, et al.
Even if Netflix is not actually as much of the subscriber drain as some suspect, the ongoing in-home preference for on-demand viewing is poised to make Netflix a much bigger problem than it has been. The ace in the hole for cable has always been the live content – which no online service can compete with, really. But VOD has become an important revenue stream as advertising dollars flatten and consumers move away from linear programming. Cable VOD offerings tend to be somewhat limited, plus content-licensing snafus have been hampering the rollouts of TV Everywhere initiatives that would let subscribers access content anytime and anywhere. Netflix meanwhile has more than 50 streaming device options, getting operators’ attention in a big way by becoming integrated in connected TVs, gaming consoles like the PS3, Xbox 360, Wii and more, plus Blu-ray players, DVRs, set-top boxes and mobiles.
This isn’t Netflix’s first move to “encourage" users to turn to streaming: Last fall Netflix dropped pricing so that a streaming-only plan will now run a cheapo $7.99 per month; meanwhile, the online packaged media rental plan went up a buck.
While some consumers seem displeased with the move, leaving a rash of angry blog comments at the Netflix site, the move simply makes it tough to have a choice. And Netflix clearly seems to think it knows where the future lies. Traditional broadcast operators might want to think twice before discounting the upstart to their business; this is, after all, the scrappy player that took down the once-mighty Blockbuster in a victory akin to barbarians taking down the Roman Empire – forever changing American home movie-viewing habits forever.
