Netflix made a big splash today with their announcement of a $100 set top box, built by a California startup called Roku, that streams free movies (for Netflix subscribers) to the living room.
Good for them. Instead of wading into a losing battle over cheap downloads and rentals (see Vudu, BlockBuster, AppleTV, Google, etc., which charge for each movie), they jump right to free. They know what the consumer wants.
Of course, the service isn’t really free. Users have to buy the $100 box, and continue to keep a Netflix subscription active ($18/month). There are 10,000 movies available on on the box, which is significantly less than the 100,000 or so titles on Netflix’s DVD mailing service (and it’s old titles, not new releases). But it’s also an order of magnitude more titles than are currently available on demand via Comcast, my cable provider. And just like Comcast and the other cable guys adopted Tivo’s DVR functionality into their boxes before Tivo could do much damage, look for them to eventually copy Netflix, too, and offer a much wider variety of on demand content.
Netflix is taking a big financial hit with this service, which originally launched via PC viewing only and has since expanded. Last year they said they were putting $40 million/year towards licensing and overhead costs.
But really, what choice do they have? BlockBuster is gnawing away at one side of their business (physical DVDs), while online services (and don’t forget BitTorrent) come at them from the other end. And now the cable companies will be focused on them, too.
It’s a wonder Netflix continues to flourish in such a hyper competitive market. They now have over 8 million subscribers, 21% more than a year ago, and 32% gross margins on their core business. Those margins have decreased somewhat, what subscriber acquisition costs have also dropped from $47 to just $30 per new member. But as long as they continue to give consumers what they want, they’re at least in the game.
Look for more devices with Netflix built in, including one from LG, later this year.
Woah, this is really cool. Can’t wait until they add their whole library to something like this!
We will see much more of this in the years to come. Some will be desperate moves others will be things we didn’t know we needed
Not sure about Roku being a start-up?
According to their website (and my memory) they’ve been around since 2002. Nice to see that these things are happening over the pond, just have to wait for them to be picked up over here now (UK).
It’s taken years for LoveFilm (UK version of Netflix) to implement DVD queues
they key would be to tie up with as many DVD manufacturing companies as possible and insert their on demand mod into it. hook up your dvd to broadband pipe, subscribe to netflix via CC and you’re all set. thats how this vertical should pan out….. dvd players with download feature + netflix software + backend db of movies. no need for touch screen. use the tv and remote to enter CC numbers. subscribe to netflix or another provider via tv and broadband plug
Why was my comment removed? Because I wasn’t 100% positive about this product? Sheesh, picky picky.
booo, it’s not HD.
It uses Netflix’s Watch Now service, which is not ONLY older movies. Granted, a higher percentage of them are, just because those are the deals Netflix has struck so far. But there are still a good chunk of newer releases, especially on the independent side. Several of the Mumblecore movies are available, plus anything distributed by Red Envelope. And the selection is actually quite strong on television shows.
Still pulling for the Xbox360 as one of their as-yet-unnamed hardware partners!
This will be great.Getting movies to your house for $14 a month.
I subscribe to Netflix and I’ll probably buy a box, but I have to point out that this is just another figment of their DRM delusions: Secure their place in the market by tying it to hardware. Take a look at the Watch Now requirements to see where their head is at. (DRM version 5145)…
http://www.netf...reqs&msg=51
VCR-quality movies for $25 per month. It even fits in the space you VCR used to be!
Thanks, I’ll pass.
Heads up, Netflix: We only watch HD now.
You only need the $8.99/month plan to get the unlimited online viewing, not $18/month.
I take issue with this. I am a Netflix subscriber and I have a media center PC hooked up to an LCD via HDMI. When I tried to watch a streaming movie via Netflix it gave me a DRM error. After further research I find out that the DRM protection disallows streaming via the PC using an HDMI connection (VGA only). And now they release a box for an extra $100 that uses HDMI connection.
And I thought streaming was supposed to be “free” for all subscribers.
Interesting analysis:
“Netflix made a big splash today… Good for them… Of course, the service isn’t really free… Netflix is taking a big financial hit with this service… But really, what choice do they have?”
Doesn’t sound like it’s too good for them at all.
I didnt realize that they locked out HDMI – thats poor. But I do like their On Demand service. I use it a lot and the video quality is a lot better than any other streaming service. Hulu and Joost included.
The problem is the limited understanding of technology by the studios not the DRM placed their by Netflix – I can assure you that Netflix would rather not have any DRM.
I just started using the Netflix player this past weekend, and now this will make things even better because it can be on my TV. Now if it only had a browser for Hulu.com.
Interesting, and definitely not expensive, unfortunately just like with most services as a European it’s absolutely worthless to me.
The best “alternative” available currently is paying like 3~5 USD per movie on demand here… an unfortunate world we live in. It’d be nice to see the more attractive offers like this go beyond US borders.
This would be a great option for me but unfortunately the crappy looking video means that if I was to buy it I wouldn’t be hooking it up to the HDTV in my living room, it just would look terrible. If I was to buy this I would hook it up to my old tube TV in my bedroom, that would make looking at the poor video quality a little bit more tolerable.
Netflix needs to learn a little more about networks (WAN limited bandwidth that the masses) and issues with bandwidth irregularity which could cause tremendous annoyance when the streaming bandwidth at home is impacted.
Streaming on movies on a box that one has to buy and then have their home routers (mostly wireless) drop connections due to network collision….
I don’t want to be too critical of them but guys please get a clue about the usability of this product. Try them out at one of your own employees home and then go back to the drawing board for a redesign effort right from the point of scrappy the streaming model itself.
SG
It’s not surprising why Netflix continues to flourish; it’s quite simply because they have an incredibly good service that works well. They have more titles than Blockbuster, and watching via Netflix Instant Watch is great.
Don’t know if I’ll ever get the set top box (most likely not) but i do love Netflix.
HD format is important, but it also means more bandwidth for the screen pixels or lower quality. It is watchable now but any reduction in quality is not tolerable. When the US dumps analog for digital, HD format for all broadcast will make sense. You also need less bandwidth to transmit lower quality which allows for reliable streaming. NetFlix is not an ISP – faster throughput is something NetFlix will have to figure out later.
Netflix streaming video… you can only watch one person. You can’t even bring families, friends to squeeze tiny screen with popcornless entertainment.
It’s very very very slow DVD delivery even if you order any membership plans. Later, you write message to Netflix. Next thing you get letter saying something like we have problem with high gas prices. It’s f*cking lie. They tried to avoid something… That’s it.
I’m waiting for another startup to kill NETFLIX. I want DVD delivery 10x faster than competitor. I want free streaming box like Directv.
I need another destoryer rivals. I like startup rivals.
Someday, I wish Microsoft make Microsoft TV with better and low cost monthly plan. With Microsoft TV — i like to see nice UI and accessible millions of movies. More better than any competitors. Plus, I want FACEBOOK add ons.
I’m happy microsoft make millions on X-box and GTA4. I’m looking for Microsoft to kill Netflix concept.
I love the idea, but there is a problem: A product like this is usually picked up by “early adopters” only, simply for the fact that a lot of people still use their local video rental chain, or pay-per-view through their local cable provider.
And from an early adopter standpoint, this unit is pretty bad. No one will want VHS quality from something like this, and even DVD quality is in my opinion sub-par.
It’s better to save the $99/bucks and use that money to rent from Netflix the old fashioned way – through the mail. That’s the equivalent to 5 months of rental service at $20/mo (estimation). So you could get 15-20+ movie rentals for the price of the box alone, including Blu-ray.
Another thing worth mentioning is that Verizon Fios is now offering high definition video on demand and expect Comcast/Cox to follow suit. This Netflix service will not last…
I think Netflix has been playing this the right way the whole time. Introducing an inexpensive bridge to the TV will make sense to a lot of subscribers, and they will continue to market it at their 8MM users… Netflix has mostly always done right by its customers and will continue to do so. I am even paying less now than I was a year ago for better service and more ways to consume content.
Hulu is going to take away business over time, but bandwidth is only going down, and I think Netflix is in as good a position as anyone right now, with so much change in the market.
The movie studios need to start streaming all of their movies online for the same price that a movie is sold for in theaters, from the same day the movie is in theaters.
Why would I want to go to a movie theater when the home movie experience is so much better with large screens, surround sound, and not going the trouble to go to a crowded movie theater somewhere.
They would also get to keep much more of the revenue if they bypass the movie theaters.
Here’s a good question, will Comcast be booting Netflix customers off their service? As we enter the post PC era, some of these devices will put huge amounts of bandwidth in the hands of millions of people. Or, will this raise the bar for what Comcast considers to be a pest consumer?
Look for the ISP arguments to start up again fresh about who is carrying who’s customers if this gets popular. Afterall, like Google, Netflix can not be allowed to profit off of the innovation of the ISPs without paying at least a minimal 33 percent profit to the ISPs.
Since this is all low quality content, can’t they utilize a P2P arrangement on these boxes using an encrypted .torrent type system? Build it and they will come, but some of those who come you won’t want showing up most likely.
You guys need to get together. in “I Am Failing To Get Excited About Napster’s 6 Million Songs ” you complain that music needs to become free, then in the very next post you seem ok with a $100 entry fee and an $18 monthly fee to view a movie that I could purchase a DVD for $18 and have it, without recurring cost, forever. I realize I can view 425 movies a month (31 days at 1.75 hrs each) for the same $18 but that is not the point.
Why should movies cost $18 a month and music be free? Do you guys talk?
Of course TechCrunch writers don’t talk, they are all bots.
If any Netflixers (including you, Mike) are wondering just how much each movie on Netflix is actually costing you, check out FeedFlix. FeedFlix can help you figure out stats like this as well as how many movies you are watching and returning each week or how long you tend to keep a movie before returning it and so on. The stats are illustrated with easy graphs to help visualize your rental activity. FeedFlix is free – give it a go. I think you’ll love it.
Netflix “Play Now” feature is generally low quality and worse than hulu b/c of truncated screen size. No where near VHS quality even with high speed cable connection. Between films quality varies also. If the film has subtitles you can forget watching it – on the TV or computer. If the set top box has similar resolution, it’s a pass. Need to get DVD quality to the home to start. Work on HD later.
Mike,
We’re all going to have our opinions on this stuff, and I agree with most of your post, but the assertion blockbuster is gnawing away is off. The financials tell a totally different story.
Blockbuster largely stepped back from Total Access in recent months. After spending heavily, the costs were outweighing the gains and they refocused to deal with in store issues. That was last summer/fall. It’s still there and a part of their plans but its not the major focus it was.
I’m guessing your focus is probably too broad, and time committments too large, to read the 10K’s and Q’s all the way through for these companies, but the data is there to show the early marketing push hurt both companies but that netflix (when measured by customer growth numbers and churn) not only survived, but relatively speaking, has thrived the past few quarters comparatively when it comes to the mail order business in which they both compete.
I’m not bullish on either company. They both have issues but coming from the perspective of financial news and not just tech its troubling to see facts off.
u pay $100 for box.. then monthly subscription.. WTF is free then? Mikey.. get some sleep
Michael,
Thanks for publishing a link to the product page. Netflix hasn’t updated their site (or hadn’t last time I checked) with any information and the other blogs that covered this release couldn’t be bothered to provide that link.
And following that link led me to the FAQ’s for the player where they claim it _is_ HD compatible… there just isn’t any HD content available from Netflix yet.
http://www.roku...sked-questions/
Hi there…Man i love reading your blog, interesting posts ! it was a great Thursday .
Great Idea and simple too but …..
Isn’t Comcast and cox cable internet service bandwidth throtting all long downloads due to supposed P2P bad boys Syndrome?
Does this fit into the same catagory? Long Movie files !
Comcast is already throttling my long database backup file transfers from work!
What is the difference ?
What is ZillionTV anyway? I know it has something to do with Netflix. Can anyone help me out?
Don’t make the mistake of buying a proprietary box. Simply connect your PC to your HDTV and then let competition in the free market work for you. Rent movies from Netflix, CinemaNow, MovieLink or Amazon.
It’s easy and affordable:
http://PCTVCables.com