AfterDawn: Tech news

Netflix criticized for streaming strategy as set-top boxes sell out

Written by Rich Fiscus (Google+) @ 03 Jun 2008 16:17 User comments (19)

Netflix criticized for streaming strategy as set-top boxes sell out After Netflix held their annual investor conference last week analysts began criticizing C.E.O. Reed Hastings' vision for the company's future. The criticism primarily centered around plans to spend as much as $70 million dollars this year to improve and market their streaming video service.
"I think the way to measure us is the number of millions of Netflix-ready devices installed in homes," Hastings told investors. "If that's a big number at the end of '09, then our strategic investment has greatly paid off. If it's a small number, you have every right to be whiny about management having wasted a lot of money."

He asked investors to be patient and allow the company to develop their new business model to replace their currently booming DVD rental operation within the next few years. A few days earlier, when meeting with analysts, Netflix CFO Barry McCarthy said of the strategy "if we fall on our face I have no doubt investors will vote us off the island."

At least one of analyst, Michael Pachter of Wedbush Morgan Securities, wasn't convinced. Pachter called the Netflix plan "crazy" and "not worth it." He added, "The math only makes sense as the number of users increases dramatically."

Netflix may not have dramatically increased the number of people using their Watch Instantly service yet but Hastings' prediction about the appeal of the set-top boxs, may prove to be dead on. In fact it looks like the boxes are selling faster than the company behind them, Roku, can supply them.

"Due to the tremendous coverage and initial success of this product we're now in a two-week back order situation," said Tim Twerdahl, Roku's Vce President of Consumer Products. "We have boats coming in weekly from China with additional products and we're doing everything we can to get them out."

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19 user comments

13.6.2008 16:25

Netflix gots some hopping mad inverstors. And they don't like the direction the captain is heading the Netflix ship.

23.6.2008 16:32

Quote:
The math only makes sense as the number of users increases dramatically."

Exactly. Why plan an iffy future?

33.6.2008 16:35

streaming is the smart move, netflix would be smart to get in fast before there is a ton of competition

43.6.2008 16:35

Originally posted by 7thsinger:
Quote:
The math only makes sense as the number of users increases dramatically."

Exactly. Why plan an iffy future?

Because everything looks rosy from an Ivory Tower.

"The flimsier the product,the higher the price"
Ferengi 82nd rule of aqusition


53.6.2008 18:09

Hahaha, just wait until Netflix and Comcast start throttling the downloads!!!

I left Netflix and have never looked back.

63.6.2008 20:20

Pretty clear that a war is brewing... TWC is beginning to cap broadband Internet usage -- one tier is as little as 5GB/mo. Can't do Netflix streaming on that... obviously the cable companies want control of media delivery... and Netflix is not going to have enough muscle to fight this... (at least not on their own)...

73.6.2008 20:29

It's going to come down to who has the most $$$$ to pay off legisluts and lobbysluts to do their bidding, supposedly in the people's best interests. I won't be surprised to find out the general public, peasants, are once again SOLD OUT!

83.6.2008 21:44

http://news.cnet.com/8301-10784_3-9958464-7.html

There's more proof that the Netflix Player is a hit.

Start-up Roku, the company behind the device that enables Netflix subscribers to watch movies streamed from the Internet to their TVs, has run out of inventory two weeks after launching.

"Due to the tremendous coverage and initial success of this product we're now in a two-week backorder situation," said Tim Twerdahl, Roku's vice president of consumer products. "We have boats coming in weekly from China with additional products, and we're doing everything we can to get them out."

The shortage comes after the device has received favorable reviews from The New York Times, CNET Reviews, Wired.com, and Gizmodo.

Consumer demand for movies distributed via the Web has been lukewarm up to now. Download services have been plagued by expensive set-top boxes, poor quality video or limited movie selection.

The box, which is is sold directly from Roku's site, has received accolades for being inexpensive ($99), easy to install, and for doing away with long download times.

The selection offered is mainly older titles, but it still offers more films than most competitors.

There have been some complaints from consumers of the video stalling. Twerdahl said this is often due to people watching on "marginal Internet connections." He said that Roku's customer service wants to hear about these issues.

Twerdahl would not reveal sales numbers. He said that the company was not overly conservative in its sales projections. On the contrary, he said, "We were very aggressive. Sales have outstripped our expectations."

He cautioned that customers who wait until the next shipment arrives before ordering may miss out. He said the number of orders are already gobbling up those boxes.

94.6.2008 1:02

All connections in the US are marginal!
This thing is going to bring the Internet to a screeching halt at a time when bandwidth's already being squeezed down by greedy ISPs.
Streaming is a worthless model!

104.6.2008 1:30

I for one would gladly pay top dollar for the ability to use this service. I like it even now with limited choice of movies. If this is not the future I do not know what is.

114.6.2008 6:22

Hello Streaming has been going on for awhile. Look at YouTube, news media portals. And this isn't the 1990's baud rate 56k modems era. Bandwidth isn't an issue on the network. Now if you have poor connectivity thats YOUR issue!!!! You can do something about it, upgrade!!!


Originally posted by mspurloc:
All connections in the US are marginal!
This thing is going to bring the Internet to a screeching halt at a time when bandwidth's already being squeezed down by greedy ISPs.
Streaming is a worthless model!

124.6.2008 14:40

You obviously don't know what you're talking about and have no understanding of how cable nodes work. And neither does Netflix, apparently.
No point in discussing it with you.
Enjoy the slowdown.


Quote:
Hello Streaming has been going on for awhile. Look at YouTube, news media portals. And this isn't the 1990's baud rate 56k modems era. Bandwidth isn't an issue on the network. Now if you have poor connectivity thats YOUR issue!!!! You can do something about it, upgrade!!!


Originally posted by mspurloc:
All connections in the US are marginal!
This thing is going to bring the Internet to a screeching halt at a time when bandwidth's already being squeezed down by greedy ISPs.
Streaming is a worthless model!

135.6.2008 17:08

Quote:
Hello Streaming has been going on for awhile. Look at YouTube, news media portals. And this isn't the 1990's baud rate 56k modems era. Bandwidth isn't an issue on the network. Now if you have poor connectivity thats YOUR issue!!!! You can do something about it, upgrade!!!


Originally posted by mspurloc:
All connections in the US are marginal!
This thing is going to bring the Internet to a screeching halt at a time when bandwidth's already being squeezed down by greedy ISPs.
Streaming is a worthless model!

Wonderful. Everytime I select a Netflix DVD, I check whether streaming is yet available for Macs. Guess I'll stop checking. No incentive now to let me stream movies to my Mac.

A 56K modem should be fast enough to stream any movie: I see the bandwidth needed is just about enough to prevent any of an mpeg4-compressed, copyrighted movie from having to be copied to a disk cache. Low-resolution YouTube movies are cached, and I view them just fine. The second comment above is right: this scheme doesn't solve problems, it creates them. My 1Mbps 'connectivity' is just fine for streaming iTunes, University, thank you.

Before you buy a Box

I'm used to watching TV on a tiny screen, near my chair. (Because the resolution is greater, the image looks better.) DVDs come from Netfix daily, and I enjoy the extras stuffed onto the disc. Still, it would be nice to indulge in instant gratification now & then. However, it would have to be DVD-quality, streamed to my computer: my video card scales the DVD's VGA resolution to my monitor's HDTV's resolution by interpolating pixels, making SD DVD look stunning! The Dolby stereo surrounds the room, using an Altec-Lansing speaker set found in a dumpster.

This stunning audio and video is impossible on a standard, analog television. A box won't help. When Netflix says 3Mbps for DVD resolution, remember that this resolution is less than your American, analog television's normal resolutions (NTSC). What 1.5Mbps streams, I can't imagine.

145.6.2008 22:33

It's appealing, it's smart, it's innovative, it's the perfect time, it's going to happen. Everyone will be streaming within 5 years. As it becomes mainstream, and it will, the bandwith problem will be resolved.

155.6.2008 23:01

We've all been streaming videos without copyrights for years, at any speed, without stressing the internet.

Measuring the success of Netflix by how many 3 Mbps boxes will be churning away next year on people's televisions (half of which are still analog) is likely not a pretty thought to ISPs. A court in California, I believe, held that a manufacturer of portable DVD players could rip commercial DVD and temporarily save them to an internal hard disk. One has to wonder why the 'box' manufacturer couldn't do this and accept internet connections at any speed.

166.6.2008 23:04

We just got our box and it is awesome.

177.6.2008 10:06

First off Bandwidth is always an issue anyone that thinks different is just ignorant. Servers have been shut down due to bandwidth attacks by hackers. For this reason communication companies must limit their bandwidth provided to a customer(s). This is a plain physics issue and just canít be argued period.

Dial-Up isnít good enough for streaming video youíll be pausing all of the time for the cache to catch up with your player and eventually your ISP will time you out as most Dial-up connections are limited to an amount of time they can be connected, no matter if they tell you it is unlimited or not! Even over a WiFi broadband connection streaming a movie from Netflix wasnít the best for the pausing encountered during viewing and that is a 54MB connection not 48Kbps.

As to copyrighted material streaming, you have to pay royalties to stream proprietary material or youíre violating the law and in possible trouble of a law suite and jail time. YouTube doesnít stream copyrighted material or if they do they are told to remove it when caught doing so.

MovieBeam had the right idea by using a Set-Top box that didnít use the internet for streaming HD movies they used an antenna in stead. Unfortunately they were not in business long before closing their doors.

MovieBeam Closure Info:
http://www.engadget.com/2007/12/05/movie...-december-15th/

If you still watch VHS movies then IP streaming might be for you otherwise I donít see the point for the most part. Quality is poor and the pausing is very annoying. It is nice however for previewing movies before renting or purchasing them. Also when out of town it can be nice to watch a movie in you hotel room with out paying the hotel $10+ for their crap. This is a very limited market I think and I can see why Netflix board of directors is questioning this approach, I sure would be.

MatrixStream is another company taking this approach only they provide HD quality movies. I havenít checked into their compression methods but Iím sure it is a form of MPEG4. How much they compress will be the issue on the quality, bit-rate, they will achieve.

MatrixStream Info:
http://www.matrixstream.com/

ISPís have always limited your connection speeds but as these other companies take away what the ISP thinks is their piece of pie they will limit us even more unless we buy their form of it. There isnít enough bandwidth for everyone to have VS, VoIP, and P2P connections full time the infrastructure just isnít there right now and it will be years and tons of monies invested before that reality happens. Again it is a physics problem which I donít expect everyone to understand.

187.6.2008 11:05

Again, driving your car on Memorial Day weekend is a problem in automotive engineering, which I dont' expect anyone else to understand.

1917.8.2008 16:54
duke8888
Inactive

Originally posted by ThePastor:
Hahaha, just wait until Netflix and Comcast start throttling the downloads!!!

I left Netflix and have never looked back.[/quote
WHat you say is so true, within the next two years the ISP will kill these types of services and start charging customers extra for vdieo downloads. Time Warner has been running a beta of their service in Texas were they limit customers download access of anytpe of material and video eats a big chunk of that.

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