It’s been an interesting week for Netflix. Beyond their befuddling division of labor and branding, surely motivated by business considerations unrelated to the customer experience, they’re also rethinking their stance on video on demand. In addition to their current slate of all-you-can eat video streaming, Netflix may also be open to the idea of renting individual titles. From Dan Frommer’s excerpt of a recent Netflix CFO David Wells presentation:
You know, traditionally what we said about VOD was it’s a low-margin business, we weren’t that interested in it because it sort of complicated the simplicity of the offering. I think in today’s sort of evolving and changing world, we’d look at a number of different options. In terms of making it convenient for folks to find that content rather than going to a competitor, to another site, we certainly would look at it.
By forking off their DVD service as Qwikster, with separate websites and billing, you’d assume Netflix no longer fears complicating things. And given the escalating costs of online rights in relation to Netflix’s flat rate streaming offering ($7.99/month), I suspect their current margins will shrink — reducing that point of comparison as well.
But even if we’re misreading those elements, Netflix could impact any licensing leverage they have by also undertaking individual rentals. Further, whereas many industry players don’t currently see Netflix as a direct competitor, there’s no way a cable box or the studios would allow a competing video on demand service… effectively killing those initiatives before they get off the ground.
Meanwhile, given the presumed loss of (SD) Starz current release content in just about 5 months, Netflix will further spotlight back catalog movies versus new Hollywood blockbusters. At the same time, Amazon offers both free instant streaming (to Prime subscribers) in addition to a large catalog of video on demand. Which is why they’re getting more of our money these days.