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Streaming video and Blu-ray help Netflix defy recession

Written by Rich Fiscus (Google+) @ 27 Jan 2009 2:49 User comments (15)

Streaming video and Blu-ray help Netflix defy recession About six months ago Roku introduced a set-top box which allowed Netflix subscribers to connect the video rental giant's Watch Instantly service to a TV. It was an immediate success and was followed by an ever expanding list of devices including Blu-ray players, game consoles, and even HDTVs. During the Netflix conference call on last quarter's earnings CEO, Reed Hastings, explained how these strategic partnerships have helped them beat their own growth estimates in spite of the poor economy.
"In hindsight, in Q4 we under-forecast our subscriber growth primarily because we underestimated the positive impact of the introduction of the multifunction CE devices from LG Electronics, Samsung, Microsoft, and TiVo that promote Netflix streaming" said Hastings. He added "The precise impact of the recession is unclear, but it's very clear that streaming is energizing our growth."

Hastings says Netflix is currently "in discussions with nearly every major CE [consumer electronics] manufacturer" in an effort to "broadly cover the Blu-ray category and the internet TV category over the next few years." However, if you're hoping for a PS3 client it's not coming any time soon. The deal with Microsoft for the Xbox 360 client is exclusive.

Not surpringly another factor in all this growth has been a willingness to invest in content. During the fourth quarter of last year Netflix "substantially increased" spending on streaming content and plans to do the same over the course of 2009. Among their goals for this year is to offer content from Starz with nearly all their rental plans.

Leveraging content from providers like Starz will be an important cog in the Netflix streaming machine going forward. In many ways the online video landscape is more akin to the cable television business than DVD rentals. While Netflix can offer the same titles on DVD as any other rental outlet, streaming content is often licensed exclusively to a single company.

Hastings was also optimistic about the role Blu-ray will play in the company's future. He said that around 700,000 Netflix subscribers were renting Blu-ray discs at the end of last year and consumer adoption of the format is "growing nicely." He believes the key to success lies in player prices, saying "if Blu-ray player prices continue to fall as expected, driven by next generation chip design, then wide adoption becomes increasingly likely and with it extended life of disc-based viewing."

One area Netflix isn't going to be getting into any time soon is Video On Demand (VOD). While Hastings acknowledges that many of their customers do have an interest in it, he prefers to stick to a subscription based service rather than a per-viewing or per-title model.

He is happy to see other companies like Amazon filling the VOD niche though. He addressed Roku's decision to add support for the Amazon service, characterizing it as a net benefit for his company. He pointed out that Netflix doesn't really have a product that competes with Amazon Video On Demand, which consists largely of new releases. And of course Netflix should benefit from the Amazon's promotion of devices compatible with both services.

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15 user comments

127.1.2009 8:25

If Reed Hastings were to go deaf, I bet Netflix instant streaming would gain support for closed captions quite quickly!

227.1.2009 11:06

Boo-Yaa! for Netflix.
I actually like my membership with Netflix...i can't say the same about my time with Blockbuster. They've made a great business model (with just one hiccup-throttling) and single handedly made it fun to rent movies again.
Blockbuster bullied it's customers and treated the customer like garbage, all while shaking the loose change out of your pockets.

Also the exclusive deal with Xbox only further proves M$'s greed. First they give you a basic cheaply made (RROD) box, then they charge you (overcharge) for every single nook & cranny (Wireless Wi-Fi, bigger HDD,) and on top of it they hit you with paying for their online service (Xbox Live!)

So now you have to pay for your Netflix account AND to access it you need to pay additionally for an Xbox Live! account. You pay twice for the service and STILL don't get HD or Blu-Ray quality!?
WTF?
Just another way to sucker people into paying for Xbox live. At least with the Sony the online is free so the netflix streaming service would be an attractive bonus.

Personally i'd rather rent Blu-Ray movies and watch them in full 1080p on my PS3 than pay twice to stream low rez, pixelated movies on my Xbox 360. So i think Sony has that advantage still anyway since you can download HD movies from their own Playstation Store video service, or watch BD movies rented tradtionally. It may not be "right now" streaming...but it's still better than the pixelated drivel that you get through Netflix's streaming service now anyhow.

This message has been edited since its posting. Latest edit was made on 27 Jan 2009 @ 11:12

327.1.2009 15:18

Originally posted by jookycola:
Personally i'd rather rent Blu-Ray movies and watch them in full 1080p on my PS3 than pay twice to stream low rez, pixelated movies on my Xbox 360. So i think Sony has that advantage still anyway since you can download HD movies from their own Playstation Store video service, or watch BD movies rented tradtionally. It may not be "right now" streaming...but it's still better than the pixelated drivel that you get through Netflix's streaming service now anyhow.
You do realize that the "pixelated drivel" is determined by pinging your machine to determine which "version" (read: quality) of the film will be streamed to your PC/Xbox... correct? With a speedy broadband connection, many of the films look as good or better than Xvid junk floating around the web, and absolutely makes YouTube look horrible by comparison.

Save the Sony/PS3/Blu-Ray charades. The numbers don't lie. Only 700,000 members were renting Blu-Ray movies on Netflix. That's about 10% of the members, which is a decent number that reflects the overall penetration of Blu to the masses.

Honestly, if given the choice between "unlimited" rentals or a $30 purchase, I'd go with Netflix as well. Afterall, where else are you going to find a large selection of Blu-Ray movies? Most rental chains have devoted a shelf, if that!

As for the Xbox Live perk, it's just that: an incentive for those who already pay for a premium service. You can still use the free XBL Silver account to rent movies, just like the PSN alternative. There's no need to bash MS or Netflix for something that will increase both of their bottom lines.

428.1.2009 2:50

i have had good & bad video quality with my 360 & Netflix! Most of the time it looks good, even the SD stuff! The HD stuff looks great! but i did have 1 occasion where the HD was playing it stopped & re "optimized" my video to look like crap! i started the movie again & it was fine! i have an HD t.v. HDMI from box to TV, 1080i (i know i wish it was 1080p) 6mbsec down from cable company. I think it is great I all ready have a live gold acct, & i all ready have the 2 @ a time netflix this streaming is just an added bonus & we find our selves watching what ever we can threw it! I am not sayign BR dosent look good it looks great! I have the HD-DVD drive & a few movies i will not be able to play anywhere else & i have friends with PS3's & we watch BR there & i agree it looks great but it comes down to ease of use & what is best for you! Do you carry around an MP3 player or a cd book full of cd's? same thing!

528.1.2009 3:40

To each their own
if you would rather pay double (Netflix & XBL) to stream (if you're lucky) an at best maximum 720p rez movie on the Xbox. (Xbox can only produce a 720p rez)
Rather than pay once (just the Nexflix account) see an amazingly clear 1080p picture from a Blu-Ray that's your choice. Personally i accept the 360's shortcomings and use it for what it's best at...playing games, it's strong suit. When i want games AND mutli-media i turn to the PS3, a better all-in-one entertainment box.

Sorry i love my 360 with a passion but i'd never defend it's shortcomings, just to do it. I'm not a fanboy like that, it is what it is. The streams may look good, at best VHS quality with a hint of upscale. But logically you can't argue that it looks as good as a BD disc in full 1080. PS3 haters be damned, people can argue the short comings of the sony unit all they want but you can't dismiss the units only true feather in it's cap...the BD player and full HD resolution.

628.1.2009 12:46

Originally posted by jookycola:
(Xbox can only produce a 720p rez)
Not true either. They updated this years ago, where you can get 1080p, particularly with the newer HDMI equipped consoles or the VGA cable in previous models. You can get 1080i as well as 720p with component cables too.

No doubt, Blu-Ray looks fantastic, but again, it's ease of use versus a trip to the store or rental chain.

Personally, I just want my game console to play games. I never have to worry about compatibility of videos, etc. with my media center rig hooked up to my HDTV, and I can still get 1080p quality videos off the net.

728.1.2009 12:59

Originally posted by SProdigy:
Originally posted by jookycola:
(Xbox can only produce a 720p rez)
Not true either. They updated this years ago, where you can get 1080p, particularly with the newer HDMI equipped consoles or the VGA cable in previous models. You can get 1080i as well as 720p with component cables too.

No doubt, Blu-Ray looks fantastic, but again, it's ease of use versus a trip to the store or rental chain.

Personally, I just want my game console to play games. I never have to worry about compatibility of videos, etc. with my media center rig hooked up to my HDTV, and I can still get 1080p quality videos off the net.

His full sentence explains he meant that for Netflix HD resolutions being natively 720 (albeit compressed) as they are upscaled to 1080 and are not native in 1080.

Quote:
an at best maximum 720p rez movie on the Xbox. (Xbox can only produce a 720p rez)

This message has been edited since its posting. Latest edit was made on 28 Jan 2009 @ 13:01

828.1.2009 13:21

I just dropped Netflix for Blockbuster because of the quantity of new BD titles. I never could get any new movies I wanted to watch. I've been with Blockbuster for about a month now and get every new BD in my Queue. I've very happy so far.

928.1.2009 15:42

Originally posted by Oner:
His full sentence explains he meant that for Netflix HD resolutions being natively 720 (albeit compressed) as they are upscaled to 1080 and are not native in 1080.
Well, I stand corrected!

Gotta wonder if the "Blu Crew" gets steamed about 720p from the cable/satellite networks! I for one just wished I could get at least 720p HD from some of my local OTA networks! (Off topic, but it still gets under my skin!)

1028.1.2009 19:43

Originally posted by SProdigy:
Gotta wonder if the "Blu Crew" gets steamed about 720p from the cable/satellite networks!
My expectations from sat/cable are different from my expectations from BD/HD DVD.

1128.1.2009 20:59

Originally posted by error5:
Originally posted by SProdigy:
Gotta wonder if the "Blu Crew" gets steamed about 720p from the cable/satellite networks!
My expectations from sat/cable are different from my expectations from BD/HD DVD.
Eh, but just like audiophiles that balk at MP3, AAC and the iPod, there will always be those that are comparing streaming Netflix to Blu-Ray, which just isn't fair.

As you said, my expectations ARE different between the mediums and I'm not in a constant state of seeking perfection from my audio/video equipment, though I'm far from going back to watching VHS!

1229.1.2009 8:43

Originally posted by SProdigy:
Eh, but just like audiophiles that balk at MP3, AAC and the iPod, there will always be those that are comparing streaming Netflix to Blu-Ray, which just isn't fair.
Fair or not, they're just stating the obvious.

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Bowers & Wilkins 802D L-R/HTM 1D Center/SCMS Surrounds/JL Audio Fathom f113 x 2

1329.1.2009 17:04
atomicxl
Inactive

I loooooooooooooove Netflix. I've had the same 3 DVDs at my house for almost 4 months now, but i've been streaming up a storm. Netflix and Hulu are the future here today.

I haven't watched TV in YEARS but Netflix and Hulu have me watching TV shows on a regular basis. I can stream anime in DVD quality and TV shows in good enough quality over Netflix. I can stream TV shows over hulu in quality thats better than watching SD stretched to fit my HDTV.

1429.1.2009 18:28

Quote:
Originally posted by SProdigy:
Gotta wonder if the "Blu Crew" gets steamed about 720p from the cable/satellite networks!
My expectations from sat/cable are different from my expectations from BD/HD DVD.

Same here, but i love my HD on demand. And HD Lakers games. :)

I don't get steamed because i still watch SD DVD's on my PS3 and 360 all the time. And still love the picture, as a matter of fact i watch alot of .AVI & MPEG-4 files on my PS3..you want to talk about horrid resolution?

As a child brought up in the VHS days, SD DVD is still the best possible picture you can get at the best price point. I love Netflix for that one reason. I will never buy a Blu-ray disc, I will NEVER pay $30 for a movie on BD ever! I love, love, love movies, but there is not a movie ever made i'd be willing to spend $25-$30 to own. Netflix allows me to watch all the blu-ray i want for a fair price without getting robbed by greedy studios.

1530.1.2009 9:53

Originally posted by jookycola:
As a child brought up in the VHS days, SD DVD is still the best possible picture you can get at the best price point. I love Netflix for that one reason. I will never buy a Blu-ray disc, I will NEVER pay $30 for a movie on BD ever! I love, love, love movies, but there is not a movie ever made i'd be willing to spend $25-$30 to own. Netflix allows me to watch all the blu-ray i want for a fair price without getting robbed by greedy studios.
Totally agree. Too bad I can't go out and replace all of my DVD equipment with Blu equipment for the same price point. Until then, DVD it is, upconverted or not!

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