January 16, 2007

Netflix, I Was Just Kidding About Breaking Up With You

Michael Arrington

81 comments »

Last month I wrote a post called “Why I Am Breaking Up With Netflix” that outlined the reasons I was switching to BlockBuster’s Total Access after years as a loyal Netflix customer. BlockBuster’s new offering, which basically turns every mailed movie into a coupon for a free movie at any BlockBuster outlet, has been a huge success. BlockBuster now has 2.2 million members, adding 700,000 over the last two and a half months. In the arms race between the two companies, BlockBuster launched something Netflix has no answer to - intelligent integration between the website and BlockBuster’s thousands of retail outlets.

But now Netflix has fired back with a really excellent new service that could swing momentum back in their direction. This morning, a select number of Netflix’s 6 million subscribers will have access to a new Watch Now product that will stream television shows and movies to a Windows PC. The remaining members will be given access over the next six months. About 1,000 movies and tv shows will initially be available (including some hits - NBC’s “The Office” is included, for example). Studios contributing to Netflix’s new service include NBC Universal, Sony Pictures, MGM, 20th Century Fox, Paramount Pictures, Warner Brothers, Lionsgate and New Line Cinema.

The best part - it’s free.

Netflix is budgeting $40 million to cover licensing and overhead costs of the service over the next year, which will, by the way, wipe out most of their operating profit of $17 million or so per fiscal quarter. Unless of course this service results in millions of new subscribers.

The tv shows and movies will stream to a downloadable application, and viewing time will be limited based on what Netflix subscription plan the customer has. Subscribers to the $18/month plan, which is the most popular, will be able to watch up to 18 hours per month.

This will be significant competiton for the absolute avalanche of IPTV companies that have been announced lately. Expect YouTube, Joost and iTunes, Zudeo, CinemaNow, MovieLink and others, to all be competing for the same eyeballs with very different products.

Check CrunchGear for their take on the matter. See also HackingNetflix for a screencast demo of the product. Screen shots are below.



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Comments

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  1. Tyler

    Maybe this is a result of your post :P

  2. David Krug

    People obviously haven’t heard of bit torrent where TV is free.

    Or

    http://peekvid.com

    Google: TVU Player

  3. kelvin newman

    David you’d be surprised how many people havent heard of bit torrent or at least aren’t confident enough with PCs to dabble with it.

    A brave move on netflix part. Though don’t imagine it’ll be heading to the UK anytime soon!

  4. Adam benayoun

    nice post, even nicer title!
    And by the way, great to hear that netflix are figthing back

  5. Angel

    Nice move, Netflix!! Wish I was one of the select few.

  6. ventureblogalist

    Mike, do you know how much of the 40M is license costs?

    Did you get the email I sent you about TC8 NYC on LinkedIn? Shoot me an email robatdomain and I will resend.

  7. Eric

    More competiton - this good :)

  8. Adrian Keys

    Hey…I told you to give the “old broom” some time…dont be so hasty next time….a marriage is about rolling good and bad times…

  9. Nathan

    If only I had a PC.

  10. Patrick Aievoli

    what about Vongo and ClickStar? How are they doing? All TV will be like this soon. Monthly fee and you get to watch or download to DVR set top box. Apple TV is next can’t wait to see what that brings.

  11. Evan Roberts

    Netflix needs to partner with redbox in order to beat blockbuster. I just dont see many people sitting around their PCs to watch “Under the Tuscan Sun”

  12. cool

    nathan gtfo with your mac pos :D

  13. circuitloss

    Time to buy stock in NFLX.

  14. John

    This sounds like a DRM based application to me….please correct me if I’m wrong. If it is, then are you saying this type of DRM is good?

  15. Ryan

    Unless they can easily get it to my “cost me a month of salary” TV in our living room, this does me no good. If I could download the movie file so that I could burn a quick disc that might be worth something. Or perhaps this is the last piece of the Netflix/TiVo ondemand we’ve been waiting so long for.

  16. Fashion Industry Ceo

    I have yet to use netflix…might have to finally crack down and give it a try! :)

  17. Shelley

    No, this is a major rip-off.

    Lure people back from BlockBuster with the promise of something the majority of people won’t see until June. I expect Netflix to end up in state attorney general’s offices for these shenanigans.

  18. Jay Meattle

    I’ve been contemplating switching to Blockbuster myself (zero switch cost), just to give them a shot… in-store exchanges IS tempting.

    Blockbuster vs Netflix:
    http://snapshot.compete.com/ne.....m?int=1032

    (In December, Netflix was up 42% over 2005, while BBI was pretty much flat - I like their new TV ads, but they don’t seem to be driving traffic growth)

  19. Bill

    Quality is I’m sure what would kill it for me.

    I’m spoiled by DVD quality video to the point that my Directv signal looks poor. Viewing some 520×340 DivX video fullscreen on a monitor running 1280×1024 or higher isn’t going to quench my thirst for quality.

    Please tell me if I’m wrong, but I doubt you’re downloading the full quality 3G+ movie.

  20. RqTect

    Sarcastic remarks can be trouble on the WEB.

  21. helio9000

    The hours per month model is terrible. You have to juggle movies so you can watch the ones you want in the time alloted? That’s just laughably bad. Will it cut off if you are 10 minutes shy? Does watching the same movie twice count against you twice? I really can’t imagine people want to think of their entertainment this way but they are big enough to teach people new hoops to jump through. Vo

    >Apple TV is next can’t wait to see what that brings.

    So far…terrible picture quality.

  22. Jon Deutsch

    I wonder if there will be some synergy between NetFlix’s instant view feature and Windows / Vista Media Center? I’d like to see virtual channels nudged right up against traditional cable cannels in my guide! Or, at least, NetFlix videos assembled in some kind of ON DEMAND area.

    Comcast, Microsoft, Cox… are you thinking through this?

  23. rob

    Let’s get this straight…

    People are currently subscribing to both services to watch movies and shows, for the most part, on their TV.

    The rapid subscription rate of Blockbuster’s new service is very telling of what people think about Netflix and their Machiavellian tactics. Blockbuster’s service is just better.

    I’m not so sure that having the added ability to stream TV to your computer (only PC at that) outweighs better service and delivery. Perhaps in the future, but not now or anytime soon.

  24. circuitloss

    You people whining about “quality” just don’t get it at all. You don’t see that there’s a real market for this. Most people would rather watch the show they want, when they want, then spend $200 for the season on HD-DVD.

    Let’s say I want to see the latest episode of X. I could try and torrent X sure, and that usually works but if all I have to do is log into my netflix account and watch it, I’d do that in a heartbeat. I’d also be even more likely to watch shows that I wouldn’t both to rent otherwise.

    Not to mention the fact that it’s adding value to netflix uses, who get more options for content delivery for the same price they’ve always paid.

    People in their 20s, a major target market, don’t give a damn about quality, they already watch TV shows on google video and youtube. That’s who netflix is competing with — and they’re going to win.

  25. Bill

    Well, you’re right…I don’t get it. I don’t watch YouTube videos either. Why? Because again, the quality sucks. Not to mention the same for the bulk of the content.

    Also, with a 60″ television and a 19″ monitor, where do you think I want to watch tv? Hint: It ain’t the monitor.

    Right now, I watch a few minutes of something on HBO and if it looks good, I rent or buy the DVD for actual viewing.

    Downloading via torrent is just asking for trouble. I steer clear of that unless it’s 100% legal content like a Linux distro or something similar.

  26. Ed

    I agree with Evan Roberts (post #11). The idea on partnering with Redbox is great. Video download will be the way to go in the future, but it’s so much quicker to head out to a Redbox vs. downloading the movie. I prefer to not tie myself to a subscription and rent up to 10 movies ($10) at Redbox kiosks.

  27. Matt

    Wonder if we will see a Joost and Netflix mashup

  28. Esteban

    Dudes: you guys are like Mr. Crunch and Mr. Munch. Get a old xbox. Put xbox media center on it. hook it up to your tv. problem solved for like $100. xbmc has a better ui than tivo. i know, it makes no sense since it was designed by euro open source h4×0rs it should look like a dog turd running the motif widgets, but it’s actually good.

  29. Marti

    Anything that requires downloading is a problem for fully half of all Internet users, who, like me, do not have broadband. We are not on dialup by choice, but because it is not available. (Pity moans gladly accepted - lol) Satellite Internet is not much better than dialup, and exorbitantly expensive. We switched to Blockbuster Total Access from Netflix because we were still going to Blockbuster when the desire to rent a movie “on a whim” struck. And with such a massive investment, I’m not sure Netflix is a good stock buy or will be good for investors long-term.

  30. Anthony Ettinger

    Let me guess, it will be available as a download for Windows/Mac only.

  31. Krista Paul

    I just divorced Netflix and went to bed with Blockbuster. It looks like I should have signed a prenup….. good post and great title!

  32. Phil M.

    Time to sell my Netflix stock!!

  33. pallet jack

    Netflix pulled a good one; I just need to see a mass implementation of getting your laptop to the (common) TV set.

    - The setup would include a Piece for connection of laptop to TV SET; a remote for that piece.. and adequate software for viewing - all things, on your pc … Also on the piece would be - Wireless keyboard with built in mouse. (roller ball)

    - Basically Use your WI-FI , and laptop to surf the net from your couch. Also now use your netflix to watch a downloaded movie on your SET, or Your fav youTube vid. -

    Basically build this unit, it comes free with a 1yr commitment to netflix 18$ account; get customers hooked…. Think (cellphones) -

    - Richard Bowles

  34. Kieran

    Netflix’s move to offer movies on your PC is great for those who actually do that. The majority of Netflix users are not so technologically advanced and this benefit isn’t as appealing as you might think. However the idea of returning your movies to a blockbuster store down the street hits right at home for us lazy Americans - nothing beats convenience.

  35. Dan

    I wonder if AppleTV (Mac & PC compatible) has just become Pallet Jack’s all-in-one device…. rolled into a cool iPhone shortly! :-)

    Welcome to the future. Apple just announced it last week. :-)

  36. Steve

    @Bill:

    “Also, with a 60″ television and a 19″ monitor, where do you think I want to watch tv? Hint: It ain’t the monitor. Right now, I watch a few minutes of something on HBO and if it looks good, I rent or buy the DVD for actual viewing.”

    A bit off topic, but I’m confused…unless you mean HD-DVD, I’m not sure why you would choose to skip watching something on HBO (they do have HD, you know) to watch it on a lo-res old-school DVD…especially if you have a 60″ TV?

    I find HBO-HD to be of excellent quality and obviously much improved over normal DVD. Now their delay in airing movie titles is a whole other story, of course.

    That being said, I am intrigued and happy to hear this from Netflix, but put me in the ‘more resolution please’ camp. I’ll gladly view them via Win Media Center on my 42″ LCD once they reach actual HD resolutions.

  37. sam

    hi…

    until netflix/blockbuster, etc… can actually download/blow a full cd/dvd that i can then use to create a dvd/cd that i can watch on any of my displays, then who really cares…

    the service that actually implements this strategy, and then makes the distribution platform/payment platform available to anyone who needs it, will displace a portion of akamai, and seriously threaten the netflix/blockbuster model for customers with high-speed connectivity.

    peace..

  38. Vadim

    Mac users are neglected again?

  39. Stephen Francis Brady

    Everyone wants to make money on the internet - everyone is trying so hard they’re losing the plot, game and their mind. I’m one of them, I lost two of those mentioned, but before lose my mind I’m giving up with the internet. However before I disconnect and go of line for good I want to show you a site that is not in the game to make money - http://www.stepuptoamillion.com does not profit and will raise roughly $4 Million in just 21 steps.

    In just 21 steps and before 7th July 2007 this website will roughly make $4 Million (£2 Million) and it’s all going. $1.9 Million (£1 Million) of the total will go to one of the 21 advertisers/sponsors involved on live TV and the other $1.9 Million (£1 Million) goes to help with the fight against Extreme Poverty.

    Starting at just £1 for the first space, the prices get crazy as they double up each time a space sells - And since the site does not profit it’s already halfway to the top of the 21 step ladder. The price of some of the space is so crazy it’s going to generate a lot of media/public interest for the 21 involved with the site and I predict - It will be the website of 2007.

  40. Bill

    @Steve

    I don’t have HD HBO from DTV, primarily because my modded DTivos are standard def. That’s why I typically will find something I like on there, then rent/buy the DVD for actual viewing if I really like it.

    Now granted, I’m not the only tv viewer in my household. The wife and kids watch more than I do for sure. They also aren’t as picky about the quality as I am.

    I’m really ready for all tv content to be in HD quality, but that’s still going to be a while.

    For my choice of content - DVD (720×480) and DTV (don’t remember resolution, but it’s much lower than DVD) DVD looks by far the best. When I see less attractive (for me anyway) options such as viewable only on a PC, requiring yet another 3rd party app to be installed, and quality that’s approximately equal to my DTV signal (or worse) I question why I’d ever want/use it.

  41. Patricia

    Ah! It probably was because of the earlier article to some degree. That’s really great though - I went to an event last year at Netflix, on video, that they held and they talked about things like this - very cool to see them kicking it up and staying competitive.

    they’re probably very glad to have you back :)

  42. Matt

    Mike you said the other day that The Venice Project (Joost) wont fly because it needs a download …

    http://www.techcrunch.com/2007.....n-mozilla/

    Netflix requires you to use IE ,WMP ,WM-DRM and a you have to DOWNLOAD a plugin to acess the svideo treams ,this service is even more locked down than Joost.

    Will this fly with you ????

  43. Webomatica

    Minor gripes: doesnt’ work on Mac yet, and the allotted time per month is a little skimpy. Better would be, for every movie you rent in a month you get two hours.

    But this is totally a step in the right direction. And you can’t beat free. I personally don’t care if the quality isn’t that great if you’re watching a free movie and one that is a rental. It seriously doesn’t matter if “White Chicks” is in DVD quality.

  44. Chris Dodge

    It’s a bit amazing (and disconcerting) to see such brands willing to completely subsidize the viewing of online content. It’s such an expensive proposition, I wonder how they are justifying it in business terms.

  45. engtech

    How long will the magic last, though?

    Sure, you’ve had a good relationship over the years. Maybe she’s wearing makeup again, putting on something nice, and putting in some effort.

    But like you said yourself, there’s a lot of other fish in the sea. Maybe they don’t have the same history, or already know all the things you like….

  46. Natasha

    Together with their online ‘free tv’ offering, Netflix may have to add some kind of an advertising-based business model in addition to the existing subscription based model . Some of their subscribers might be even willing to share their interests for more targeted marketing.

    With as low margin as business is, with BlockBuster having their forces backed by stores, and with availability of free tv without any pay subscription, it is a tough call for Netflix to keep sustaining just based on subscriptions.

    Most of those who wanted to have movies delivered to their homes probably have already subscribed. It does not appear realistic to expect millions new (paying) subscribers to join ‘because of free tv online’. Consistent stable broadband connection is still an issue in many parts of the country and streaming movies still can be very cumbersome.

    So far, Netflix has been a very smart appealing company, good luck to them in their fight.

  47. Eric Cranston

    @David

    Some of us like to do things legally. Also for some reason people have a hard time with Bit Torrent. I don’t know why, I try to explain it nice and slow but they get lost.

  48. Dan

    Blockbuster had a great idea with the free in-store rentals. Too bad they are closing all of the Blockbusters in NYC.

  49. stanmiller

    This should be a huge success! Long term, it’s not about watching from your PC or laptop (although you can do that too) it’s about streaming to your HDTV. PC’s are becoming standard components of the home entertainment system and digital links now connect them direct to your TV.

    For me, I still like the brick Blockbuster model because I’m all about convenience and the randomness of picking up a movie as a second or third choice. With all these “ranking” and “you may also like this” systems serving as navigational guides, those unique ‘discovery’ events, like finding a new film are something that’s missing in our entertainment programming.

    -Stan

  50. lemon obrien

    this is cool; I have the $18 a month plan; I guess I can watch movies I’d normally avoid…so, this also makes it ok to watch on the TV. Good job.

  51. Neal

    My favorite sites for TV shows for free are:

    peekvid.com
    http://www.alluc.org

    You can read the answer at http://www.answeru.com/questio.....nd-movies-

  52. Billy

    This is a great idea new service by Netflix. It sounds like the ideal situation, though, would be to have the convenience of a local shop to get movies from and be able to stream selected television shows. I think this is a feature Blockbuster could potentially add. It will be interesting to see how this plays out.

  53. Pritchard

    Damn Netflix!!

    I had gone 6 months without them. Now, just as I’m thinking wistfully about them, they yank me back with this announcement (and hoping I’ll be **selected**)

    As the line between TV & movies erodes, they’d be smart to offer video podcasts like 1trackmind to expand their universe even more.

  54. james

    All you boneheads arguing over quality.

    Did it ever occur to the quality-freaks and the convenience-freaks that there is room in this world for both.

    It’s always a bad idea to extrapolate yourself to some mythical “typical user”.

  55. josh

    that took you less time to retract the support of the blockbuster model than I expected! :-)

    The advantage that you perceived blockbuster was offering was based on the assumption that their stores offer greater convenience for immediate swap. Problem is that they can’t afford to keep those stores open and they are in tough straits. It’s just a pumpfake offering and not a model that they can continue offering meaningfully - as they shut more stores they won’t be able to offer much there AND they won’t be able to sustain netflix type warehouse barebones virtual store pricing with blockbuster storefront real estate cost structures.

    netflix isn’t the end of the road by any means and they are under threat for sure but heck if they don’t have my vote for defining a new category and getting blockbuster and others to sing their tune!

    also, their stock made me a lot of money when it was running last year so I have a warm fuzzy place in my heart for them beyond movies. :-)

    thanks for posting this new change. I will check it out this weekend!

  56. anthropocentric

    This is really neat.

    Blockbuster is leveraging their strength: their bricks and mortar stores.

    Netflix is leveraging their strength: an online experience.

    My guess is the winner will do both - consolidation?

  57. Meredith

    Dude! My eyebrows went up SO HIGH when I saw this. I hope I am one of the 6 million, I want to try this ASAP. Way cool.

  58. Rey Bango

    haha. MA you lost faith in NetFlix but you came around! Never lose the faith my man. Those boys are good. :o)

  59. allen

    Here is what I want from a download service. 1) enough cache so that I don’t get pauses or a stops in the middle of the movie. Having the entire movie would be best. 2) ability to pause and rewind the movie
    3) play the movie on my TV.

    So does does Netflix have cache or pause? If you have Windows Media does it play on a TV?

  60. Joe Clark

    Captioning, anyone?

  61. Rodger

    Every option does have a different appeal - there is no ‘one size fits all’. Downloads are just too tough right now because watching a movie on your big screen in your living room quickly and easily is simply the highest priority for most people.

    I agree that this is a savvy move that has the potential to further shake up the market. As mentioned here and in several comments, it could prove difficult to make the economic model work given the long-term licensing costs.

    iLetYou (http://www.iletyou.com), a new online rental community for DVDs and games, puts forth our belief in the power of flexible and multiple rental options, selection, value and personal store service.

  62. Rocky Agrawal

    There are a number of companies that are in a better position than Netflix to bring movies to the TV: Apple (with Apple TV), Moviebeam, Tivo and all the cable companies.

    Apple will likely get a substantial number of people to buy their box, but it’s harder to get people to spend $10-$13 to buy a movie than $2-$5 to rent one. MovieBeam has a lot of issues. Tivo is probably one of the best positioned companies to provide such a service, but so far hasn’t announced any plans.

    The 1,000-lb gorillas are the cable companies.

    Some more thoughts here:
    http://redesign.wordpress.com/.....streaming/

  63. Damon Billian

    Isn’t BB part of Viacom –which would be part of such sites like MTV and VH1? Couldn’t BB start offering exclusive content and/or do the same with a large number of catalog movies?

    I still think that the convergence of internet & retail stores will be hard to overcome long-term.

  64. Damon Billian

    Note: It appears that Viacom is no longer part of BB, so I do apoligize if my post is not relevant;-)

  65. Darrel

    I’m really stumped as to the appeal of the BlockBuster deal. The reason we switched to netflix was due to BlockBuster’s really crappy stores. The last few times we tried renting from Blockbuster, we ended up walking out empty handed as their selection was just plain crap.

    I dunno…being able to return a movie at blockbuster SOUNDS like a good deal, but I find just sticking my DVD in my mailbox so much easier.

    @eric:

    “Some of us like to do things legally.”

    Is bittorrenting a show any different than taping your show on one of them VCRs we’ve been using for the past 25 years?

    VCRs in many ways were less restrictive than much of what we have to day in terms of DVRs and IPTV DRM and the like.

    With a VCR, I could record ANYTHING (no ‘flags’ to worry about). My FFWD button was never disabled. The tape would play anwwhere I had a VCRs. Even at my friends house! It never had to ‘call home’ to report things to the big eye in the sky.

    Too bad the tapes were so damn big and bulky, though…

  66. Rocky Agrawal

    Blockbuster TotalAccess would be much more compelling if you could mail the DVDs you get from the store back. Two trips to watch a two hour movie is too much.

    Anyone see the Comcast commercial where there are two kids sitting on the porch (one a couple of years older)? The older kid says to the younger, “Back in my day, we had to get in the car and drive miles to a ‘video store’ and wait in line to watch a movie.” It’s really cute. Haven’t been able to find it online though.

  67. MacMad

    “stream television shows and movies to a Windows PC.”

    Yes, yes… I know that Windows is the far more ubiquitous, albeit far inferior, OS, but when will companies learn to release for both Windows and OSX?

    I’ve never met anyone “in love” with a Windows desktop but the Mac cult is alive and well and growing. Please, NetFlix, learn to cultivate loyalty a la Apple and please the sophisticated among us…

  68. Fud

    Ever hear of the SlingCatcher, it’s the opposite of the SlingBox and would be perfect this.

    “The SlingCatcher is a set-top box that will let users project Web content to a TV screen, either wired or wirelessly, through an application called SlingProjector. Navigation can be done with either the included remote or through a PC. ”

    Crave: The Gadget Blog

  69. Andy

    Netflix is definitely getting some of its lead of Blockbuster back with streaming videos, but BBI has closed the gap. There is a post on the Compete.com blog that shows how Blockbuster caught up with Total Access in Q4… http://blog.compete.com/2007/0.....al-access/

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