I’ve had The 40-Year-Old Virgin at the top of my queue for over two months, during which time Netflix has failed to deliver. I’ve even resorted to cheap tricks in hopes of improving my situation. Either Netflix is throttling the movies I get or they just don’t have enough inventory. I’m not sure which is worse… penalizing an active customer or poor planning. And if it is poor planning, how come they haven’t seen the error of their ways and purchased more stock?

My fiancé thinks I’m throttling her movie selections in favor of mine. She wonders how it’s possible Battlestar Galactica DVDs continually arrive but her DVD selection never does. Seems a little suspicious, don’t you think? So I begged Netflix to restore harmony to my home and this was their response:
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Here we have yet another video distribution system that will fail (see MovieBeam ). MovieKlub will send you up to two DVDs a week for $24.99/month. So what’s the big deal? These movies can only be played 3 times… then you toss them out or return them for recycling. We’ve seen similar schemes in the past which expire discs by calling in or through degradation via exposure to air or laser… none have succeeded as business models. MovieKlub is scheduled to begin operations this summer.

No thank you — Netflix has got me covered until a better VOD/PPV experience arrives.

MovieKlub says: The Limited Play DVD disc has a coating composed of a dye capable of being irreversibly bleached by light absorption. In this DVD, the information encoding features are machine-readable prior to bleaching of the dye, which is activated by absorption of the laser light in the DVD player. The dye, once bleached, inhibits further reading of the information encoding features. Based on the application of the dye, the number of read/plays of the disc can be controlled and pre-determined. With the Limited Play DVD disc, however, upon sufficient exposure to the reading laser beam, the dye in the disc coating undergoes a change in the index of refraction, resulting in unrecoverable data.

(via Hacking Netflix)

MovieBeam, who just received a large cash infusion, is relaunching in 29 markets this year. In fact, my neighborhood already appears to be online. Basically you buy the Linksys MovieBeam set-top box, every week a few movies are downloaded via a digital over-the-air (OTA) signal, and then you choose which you want to rent. The movie rental includes a 24 hour viewing period and typical DVR controls. Initially, only Disney and Warner Brothers content will be offered.

If they weren’t upgrading the service to include HD movies, I’d say they’re doomed to fail with this pricing model. By offering HD, they may have a chance… though I wouldn’t bet on it. I believe most people will still prefer Netflix’s understandable low-tech methods and reasonable rates. Not to mention, anyone with a cable or satellite box has access to some sort of PPV or VOD without MovieBeam’s upfront hardware fee. Things could get interesting since Disney, the originator and a major investor, is leveraging their movie library by making flicks available to MovieBeam 30 days prior to when cable providers can offer them via VOD.

LA Times says: The service allows customers to rent movies from a library of 100 titles stored in a set-top box. As many as 10 new films, including some in high definition, are automatically delivered to the device each week via television airwaves. The MovieBeam box costs $199.99 after a $50 rebate and requires a one-time service activation fee of $30. Movie rental fees are $3.99 for new releases — $4.99 for films in high definition — and $1.99 for older titles.

Several weeks ago Thomas Hawk reported on a method to improve your odds when dealing with backordered Netflix movies. It goes like this… you only fill your queue with out-of-stock DVDs and presumably Netflix has no choice but to fulfill your request. Nice theory… but in reality we haven’t gotten a new movie in several days.

Like others, I’ve noticed a excessive amount of unavailable titles lately including March of the Penguins and Wallace & Grommit’s most recent exploits. I’ve been a customer since the late 90’s and can’t recall such a stock shortage. I would think with Netflix’s additional advertising revenue they’d have more inventory, not less. Then again, they could’ve picked up a ton of new subscribers with their recent commercials.

As with the original hack, The 40 Year Old Virgin was my test flick. It’s been in our queue nearly two months and was recently “upgraded” from Very Long Wait to Long Wait. So I began with an empty queue and added just that one movie. During that last several days we’ve received no email shipping alerts and no movies from Netflix — the order has remained unfilled.

This isn’t to say the original story is false… but you might consider this a warning that your mileage may vary. We’re ready to start receiving flicks again, so I’ve reconstituted our queue. I hope you appreciate the lengths I’ll go in the name of science.

If you recall, MovieBeam was a Disney service similar to Akimbo offering pay-per-view rentals of downloaded movies via leased set-top boxes. After testing the service in a few markets, Disney shut it down and later spun off the company. Most, including myself, figured it was gone for good despite comments that service would be relaunched at a later date. Now it appears there may still be some life in this company as they’ve received a major investment from Cisco.

Wouldn’t it be cool if the rumored Netflix VOD box and MovieBeam relaunch were one and the same… ah, to dream.

eWeek says: Cisco Systems Inc. said on Monday it has made an investment in MovieBeam Inc., the on-demand movie service that Walt Disney Co. spun off in January. Cisco, Disney and several venture capital firms including Intel Corp.’s Intel Capital, Mayfield Fund, Norwest Venture Partners and Vantage Point Venture Partners invested $48.5 million in MovieBeam, according to MovieBeam spokeswoman Michelle Cox.

Netflix has begun incorporating third-party advertising onto their envelopes. Beginning last week, DVDs to certain customers in certain geographic regions were targeted with a Memoirs of a Geisha ad and this week Aeon Flux arrived at my door step. Also this week, I participated in an online customer survey specific to that envelop flap.

I don’t know why I didn’t think of this. I don’t know why Netflix hasn’t incorporated full-flap advertising sooner. As stated below, perhaps they needed to reach a “critical mass” of customers before they could enlist big-league sponsors. Not all advertising is bad. In many cases it can offset fees… perhaps this new revenue stream accounts for Netflix lowering subscription rates.

Unlike other mailings I receive, the ad is nicely incorporated into the actual envelope instead of troubling me with additional inserts to trash. Presenting advertising without alienating customers is a bit like walking a tightrope. The current method strikes me as a win-win endeavor. However, the moment ads start appearing in my email or interfere with browsing the Netflix website I’ll feel differently.

Brandweek says: “Netflix ships one million DVDs a day,” said Netflix spokesperson Ken Ross. “Testing ad vehicles makes sense now that our subscriber base has reached real critical mass with 3.6 million customers currently and more than five million projected for next year.” Netflix said it plans to roll out more advertising and will consider selling various ad placements—on envelopes, on its Web site, in customer e-mails. The company expects to rotate creative on a weekly basis and in some cases feature multiple movie properties at the same time in a targeted manner.

A next generation DVD format war isn’t good for consumers or the industry. When I spoke with Steve Swasey, Director of Corporate Communications, in September he stated Netflix was concerned about a fragmented market and hoped for consolidation. Neflix CFO, Barry McCarthy, touched on this topic during an investor conference call yesterday. In addition to the typical positive company spin and business opportunities you hear in these presentations, McCarthy declared Blu-ray the winner of the next generation DVD war and speculated on high-def disc pricing. It’s yet to be seen whether or not their Blu-ray proclamation is premature.

(Tip and transcription via Davis Freeberg)

Netflix says: As many know there’s been a format war. Two formats have been proposed as a successor to DVD, one sponsored by Warner primarily and one sponsored by Sony. Warner is HD DVD and Sony is Blu-ray. I think it’s pretty clear that Blu-ray has won. Even Warner has agreed to license and to release technology to Blu-ray, only Universal hasn’t made a commitment at this point, so I think the format wars are a thing of the past and I think it’s going to be Blu-ray. I think the content will get priced at a 20% premium. I think it’s going to roll out slowly over time.

Netflix has run into the studio brick wall. At this point the studios have very little incentive to move their media via third-party download: DVD sales are a huge cash cow and they own existing services Movielink and CinemaNow. I imagine both Netflix’s rumored player and their partnership with TiVo are indefinitely on hold. At least Netflix is in good company - based on the missing movie downloads, we can assume Apple is experiencing similar frustrations.

Reuters says: Netflix Inc. will postpone a test launch of its online movie download service indefinitely because of problems obtaining licensing agreements from Hollywood studios, Chief Executive Reed Hastings told analysts on a conference call on Wednesday. Hastings said the company would continue enhancing its infrastructure and developing technology to deliver online movies so the service “will be ready to launch when the content climate begins to thaw.”

Update: You can find the conference call audio here. Be sure to listen in about 1:22:15 - when asked about TiVo they respond, “no work going on,” “no content,” and “no point.” Ouch! Well it’s safe to say this deal is dead. Once the studios join us in the digital revolution, they’ll beef up their own services and partner with large stable companies that have a proven track record (sounds like Apple).