Because Blu-Ray will "obviously" be replaced rapidly by streaming only...

[wormraper]

Originally Posted by Truewitt

What basis do you have for these statements? I'm not saying Netflix won't be fine, but they will only be fine if people are willing to basically pay cable TV rates for Netflix. They can't survive as the low-cost alternative they are now.

bingo, their costs are going up astronomically for the streaming side. it's not long before they start charging cable TV prices by force of necessity

[img eL]

As more & more people use streaming services there will be massive traffic jams with the current broadband infrastructure, that's why broadband companies are going to data caps more & more. Even with most current broadband infrastructure upgrades will not be able to handle the traffic.

[Tok]

Not saying that Netflix shouldn't have started the streaming side of the business, but the point of the article is that Netflix is abandoning its core business model much too soon. You don't have to be a rocket scientist to figure out moving your core customers to basic all you can eat(view) low cost option is bad for long term business.

As others have said, if Netflix wants to remain a player the days of that low cost buffet will be coming to an end.

[Taikero]

Originally Posted by img eL

As more & more people use streaming services there will be massive traffic jams with the current broadband infrastructure, that's why broadband companies are going to data caps more & more. Even with most current broadband infrastructure upgrades will not be able to handle the traffic.

Netflix is combating this by putting servers in ISP data centers through their Open Connect initiative: https://signup.netflix.com/entrytrap

While ISPs aren't keeping up with bandwidth demands for streaming in general, Netflix has a vested interest in making sure their video data gets out cheaply and quickly.

[Tok]

Originally Posted by Taikero

Netflix is combating this by putting servers in ISP data centers through their Open Connect initiative: https://signup.netflix.com/entrytrap

While ISPs aren't keeping up with bandwidth demands for streaming in general, Netflix has a vested interest in making sure their video data gets out cheaply and quickly.

Don't think that the Open Connect initiative is a freebie for Netflix.

[octagon]

Originally Posted by pagemaster

Netflix did the right thing to get into the streaming part of the business, that will be the future. Going forward, Netflix will be fine.

Streaming of some variation or another has a bright future ahead but I'm not so sure that's true for NetFlix specifically. They saw an opportunity and capitalized on it brilliantly but when all is said and done they don't really bring all that much to the table.

At some point content providers on one end and service providers on the other are going to look at each other and ask what this particular middleman is doing to earn his cut.

[KRW1]

The trouble ahead for Netflix, caps and capacity asides, is that the next few years is going to be a free-for-all when it comes to streaming services and everyone and their dog is going to be launching 'channels'.

In the UK, we're being treated to this sort of thing, below. A streaming site run by a supermarket for free. The content looks pretty awful, I don't imagine the quality is going to be anything to write home about, but it's free and it'll be 'good enough' for a lot of people to say, "hey, why are we paying £6 a month when we can get this now for free". So they're not only competing with the cable companies, they're competing with anyone who can run a basic streaming service.

Look at it. This is the future. Imagine Jersey Shore being ground into a human face forever and ever. Lowest common denominator stuff and all brought to you be personalised advertising.

http://www.clubcardtv.com/signup?ReturnUrl=%2f

I don't think I'll sell my blurays just yet.

[Taikero]

Originally Posted by CraigW

Don't think that the Open Connect initiative is a freebie for Netflix.

It's an investment is what it is. Those servers, once placed, can actually be used for just about anything Netflix wants to leverage them for. It's not just limited to Open Connect for subscriber-only content. What if it was used for pay-per-view events, for instance, or other important media serving?

Originally Posted by octagon

At some point content providers on one end and service providers on the other are going to look at each other and ask what this particular middleman is doing to earn his cut.

Having previously worked as one of those middle men, I can tell you that those middle men do a lot of work, handling rights negotiations, bandwidth, marketing to customers, content management and consolidation, content recommendations to customers, quality of service...the list goes on, but I will tell you that in today's dysfunctional market those middle men are desperately needed for digital media services because content providers would never centralize on their own like Netflix or iTunes or Amazon can.

[Anthony P]

Originally Posted by Taikero

As long as Netflix remains profitable, I wouldn't actually count on that.

http://www.cnbc.com/id/100401289

At least, according to this article, the business is doing just fine as of January, and inking a deal with Disney as they have can only ensure a strong customer base, if only for the Disney content for customers' children.

but they are not really profitable, the streaming portion lost many millions (39.379M last year and that does not include interest) luckily disk is in the black for them (i.e. making money). The only reason it appears to be "profitable" is that they borrowed a lot of money to pay for stuff (200M Dec 2011 that got added to the 200M from before in order to pay for streaming contracts), but eventually they will need to pay it down.

[Taikero]

Originally Posted by Anthony P

but they are not really profitable, the streaming portion lost many millions (39.379M last year and that does not include interest) luckily disk is in the black for them (i.e. making money). The only reason it appears to be "profitable" is that they borrowed a lot of money to pay for stuff (200M Dec 2011 that got added to the 200M from before in order to pay for streaming contracts), but eventually they will need to pay it down.

I couldn't find anything about the streaming business being unprofitable.

Yes, the margin of profit is much less for streaming (11%) than their DVD business (52%), but that just means per subscriber they make less cash. As they obtain more subscribers (which comes with great content like Disney, making Netflix almost mandatory for families), they make more overall profit from that 11% margin (and they say they can grow the margin by 1% per year, of course up to some ceiling probably near 20-25%).

That $200 million may have hurt them for a year, maybe even two, but those contracts last many years (The Disney one isn't even in full swing until 2016). $200 million invested now to make $2 billion later? That's the sort of planning that good businesses do.

[Tok]

Originally Posted by Taikero

I couldn't find anything about the streaming business being unprofitable.

Yes, the margin of profit is much less for streaming (11%) than their DVD business (52%), but that just means per subscriber they make less cash. As they obtain more subscribers (which comes with great content like Disney, making Netflix almost mandatory for families), they make more overall profit from that 11% margin (and they say they can grow the margin by 1% per year, of course up to some ceiling probably near 20-25%).

That $200 million may have hurt them for a year, maybe even two, but those contracts last many years (The Disney one isn't even in full swing until 2016). $200 million invested now to make $2 billion later? That's the sort of planning that good businesses do.

I'll believe that ROI when I see it. The fact is that for Netflix to justify where the stock is currently valued they have to be profiting $30/subscription. The reality is they are profiting about $2.50/subscription.

Netflix won't be able to continue to bid on A-list content at the current subscription rates. IOW, I see significant price increases in the future and tiered plans. $7.99 gets you all the old TV and Bollywood garbage you can stream. $34.99 gets you 50-hr of A-list content per month.

[Monkey]

Netflix content was considerably better over a year ago. I still have the basic package but 90% is for use with my kids.

[blonde_devil]

how can you be profitable until you get some big name movies and studios behind you and how can you do that until you put in a few years of just getting by? netflix has shown it can survive and is something people want. now is the time that they are going to start making money because who is going to back something that might fail in a year? look at HD-DVD - there are tons of movies that were missing because the studios weren't 100% behind it. imagine what would have happened if Paramount put out the Star Trek and Indiana Jones movies on HD-DVD when it came out? but because it was new and there was a similar technology competing against it, the studios didn't jump all over it - they were looking to see what would last. same here with Netflix - they are getting the content people want and it will only grow. i still see technology being the thing that hinders it.

[KRW1]

Netflix has some major competion though, it's not a format, its a TV channel. It lost all that Starz content last year because they wanted to do their own streaming thing. Not such a big deal, but now they're competing against each other for other studios output. Netflix has Disney and Starz has Sony until 2021.

http://www.hollywoodreporter.com/new...lm-deal-420320

If you want a streaming library that has everything, you're going to have to subscribe to everything and as streaming becomes more and more popular, this sort of thing is only going to get worse.

[Anthony P]

Originally Posted by Taikero

I couldn't find anything about the streaming business being unprofitable.

Yes, the margin of profit is much less for streaming (11%) than their DVD business (52%), but that just means per subscriber they make less cash. As they obtain more subscribers (which comes with great content like Disney, making Netflix almost mandatory for families), they make more overall profit from that 11% margin (and they say they can grow the margin by 1% per year, of course up to some ceiling probably near 20-25%).

Google Netflix quarterly report and then open the Q4 2012 excel file, then segment information tab line 36 Contribution profit (loss) for total streaming it is a loss of 39,379k

That $200 million may have hurt them for a year, maybe even two, but those contracts last many years (The Disney one isn't even in full swing until 2016). $200 million invested now to make $2 billion later? That's the sort of planning that good businesses do.

no, that was the last 200M they borrowed (Dec of last year),there was already 200M earlier on the balance sheet from previous years.

As for the contracts, do you really think there is a one time fee and so now they own all the films? They borrowed the money in 2011 in order to have the cash to pay the bills since they lose money. Now don't get e wrong, it is a good idea to have a much larger loan at much netter interest rate and couver the obvious future short falls, The issue is that at this point all they are doing is paying the interest on the loan and the loan is used to pay for bread and butter that is getting more expensive while the money they make from their toasted bread is not growing.

[Anthony P]

Originally Posted by blonde_devil

how can you be profitable until you get some big name movies and studios behind you and how can you do that until you put in a few years of just getting by? netflix has shown it can survive and is something people want. now is the time that they are going to start making money because who is going to back something that might fail in a year? look at HD-DVD - there are tons of movies that were missing because the studios weren't 100% behind it. imagine what would have happened if Paramount put out the Star Trek and Indiana Jones movies on HD-DVD when it came out? but because it was new and there was a similar technology competing against it, the studios didn't jump all over it - they were looking to see what would last. same here with Netflix - they are getting the content people want and it will only grow. i still see technology being the thing that hinders it.

you are missing the point big name movies and studios cost a lot of money, if Netflix pays big money for the content it makes it hard for them to rent it out for cheap.

And your HD-DVD analogy does not work since HD-DVD had the big new releases from the studios that supported it, the other studios released their big titles on BD. As for ST and IJ, nothing would have happened any differently (except for possibly some HD-DVD fanboys spending a bit more money) and you are mixing up sales and rentals. With rental a catalogue title is a catalogue title so there is no difference but with sales people that want a title faster are willing to pay more while people that are willing to wait are only willing to pay less. If a studio releases 100 titles the same day there is no one that will buy all 100 of them (even if they are the best films out there) so the guy might buy a handful but by the time he decides to buy some of the other titles on the list he will pay less for them, that is why it makes more sense to take a year to release all 100 than to release them all at once and wait for next year to release the next batch.

[arrow61095]

Originally Posted by Monkey

Netflix content was considerably better over a year ago. I still have the basic package but 90% is for use with my kids.

I agree --- Netflix's library that they offer went downhill. I actually cancelled service last September after subscribing for several years. I might pick it up again for a couple months in the summer when tv is on re-runs to see if anything new/good was added back on.

[pagemaster]

Originally Posted by octagon

Streaming of some variation or another has a bright future ahead but I'm not so sure that's true for NetFlix specifically. They saw an opportunity and capitalized on it brilliantly but when all is said and done they don't really bring all that much to the table.

At some point content providers on one end and service providers on the other are going to look at each other and ask what this particular middleman is doing to earn his cut.

Streaming doesn't have a future ahead, it IS the future. Studios are already pushing streaming with early release windows, The Hobbit, Argo, Anna Karenina are just a few of the movies that received a release on iTunes a week before Bluray.

Good luck trying to find physical media at redbox when the movie is released, Skyfall just came out on redbox, Argo still is coming soon.

I just recently rented Life of Pi on iTunes, I actually really wanted to try out a redbox but the film is being released on redbox in April. As for iTunes, the movie was absolutely outstanding!

The future is streaming, there is no doubt about it, no questioning it.

[octagon]

Funny you should mention Skyfall. I just watched it two nights ago.

I had to walk down to the mailbox in my lobby in the afternoon and then to the mailbox on the corner the following day.

It was pretty rough.

[pagemaster]

Originally Posted by octagon

Funny you should mention Skyfall. I just watched it two nights ago.

I had to walk down to the mailbox in my lobby in the afternoon and then to the mailbox on the corner the following day.

It was pretty rough.

Skyfall was release on blu ray in February.

You are just watching it now?