For a somewhat experienced market research analyst, it’s always a danger to build an opinion based on a small sample size. When that small sample size includes yourself and a few family members, now you are talking risky. That said, when Netflix announced a price change that separates its streaming and DVD-by-mail service, my visceral reaction (echoed by my family) is to hit the delete button. Netflix’s combo service paired two halves into a whole—a streaming service with somewhat second tier-content (second run movies, the first few seasons of popular TV shows and the occasional indie gem) and postage paid first-run DVDs on a LIFO (last in, first out, for you accounting fans) basis. Neither service is all that compelling on its own, but together for $7.99 or even $8.99 it seemed a good alternative when “nothing good was on TV.” And then there’s the ubiquity. We could find Netflix on our Roku box, Xbox 360, iPhone, iPad and even on our Google TV. Does the “everywhere you turn it’s there” sense of convenience outweigh its new service package? ‘Fraid not.
Was Netlfix’s change (met with discontent by investors and many subscribers) music to Amazon’s ears? If rumors of a pending Amazon tablet are true (and given the Asian manufacturing pipeline is not known for secrecy), then Netflix will face some major competitive challenges especially after a slowdown in subscribers in Q2 and an expected continuation of the same in Q3. With a device in place—especially one that may come in priced well below the iPad—Amazon will have content (among its recent deals is one with CBS), devices (Amazon Prime and VOD are both on Roku and other boxes) and a global audience/database of customers who are prime (pun intended) to buy more Amazon goodies. With profits from its other businesses (cloud, for example) Amazon could afford to sell its tablet at a loss to build marketshare for its tablet and content services.
Netflix is determined to retain its place as the number one Over the Top content service. There are some who believe Netflix’s decoupling of its streaming and DVD services was a doomsday plan to eventually shut down its DVD service which costs more to operate that its streaming business. Netlfix is determined to upgrade its content library signing deals with Miramax and Dreamworks. Netflix also has an enviable position in the key distribution endpoints—HDTVS. The service is bundled into internet-connected TV from Vizio, Samsung, Sony and others. That position may be somewhat precarious when competitors (or the manufacturers themselves) come up with similar streaming content services. Walmart (the leading retailer of TVs) is likely to be a power there with its Vudu service and its announcement of a new streaming service.
One area Netflix should target is original content. One of the hottest made-for-multiplatform content producers is Vuguru, producers of “Back on Topps” and “Prom Queen.” The company’s most recent show, “The Booth at the End” is available on Hulu and causing a stir among TV watchers. There’s plenty of new original content in the pipeline; Netlfix would be wise to focus a bit more on new shows looking for a home rather than somewhat stale material looking to squeeze a few more dollars out of a protracted viewing life cycle.