Burning at Both Ends

Any­one who has read this blog in the past (thanks, Mom!) knows that I’m a fan of Net­flix as well as the Fox Net­work show Arrest­ed Devel­op­ment. Today, Net­flix announced that it is going to be bring­ing back Arrest­ed Devel­op­ment in 2012 exclu­sive­ly to their stream­ing video ser­vice; firm­ly plac­ing them in the cat­e­go­ry of a pre­mi­um cable chan­nel. I’m also a fan of Apple and Ama­zon, who along with Net­flix, are busi­ness­es which rep­re­sent the future of the enter­tain­ment indus­try and media con­sump­tion, though in sig­nif­i­cant­ly dif­fer­ent ways.

Jon Gru­ber stat­ed the oth­er day that he did­n’t think Net­flix was capa­ble of cre­at­ing hard­ware to sup­port an “end-to-end solu­tion.” I don’t dis­agree that there’s essen­tial­ly no chance Net­flix will move beyond the app busi­ness and into actu­al hard­ware1. But I dis­agree with the notion that Apple and Ama­zon are pro­vid­ing end-to-end solu­tions. In fact, what Apple and Ama­zon are real­ly pro­vid­ing are mid­dle-to-one-end solu­tions. That is, they take con­tent licensed from a stu­dio and serve it over their sys­tems to their hard­ware2. Net­flix, how­ev­er, is mov­ing to the oth­er end by cre­at­ing con­tent to serve on their sys­tems to some­one else’s hard­ware plat­form via an app. In doing so, they get a wider installed base with no hard­ware invest­ment (which no one oth­er than Apple has real­ly yet to crack; though the Kin­dle Fire from Ama­zon is just a week old).

Net­flix has dab­bled with being a stu­dio in the past, or at least a financier of inde­pen­dent film. Their fold­ed Red Enve­lope Enter­tain­ment—which backed some real­ly great indie films—was a wor­thy try, but com­pet­ed against some of their bread & but­ter con­tent providers. While that fact has­n’t changed much, the stakes have. When Net­flix made the deci­sion to close their Red Enve­lope Enter­tain­ment divi­sion, the Apple App Store had just launched and the iPad had­n’t even been announced yet. That land­scape has com­plete­ly changed, with pre­mi­um net­work HBO hav­ing a real­ly ter­rif­ic app now that lets sub­scribers watch their shows on demand. The abil­i­ty to watch Game of Thrones any­time, any­where has sure­ly helped HBO’s sub­scriber num­bers and I think this is what Net­flix must have it’s eye on.

The price of Net­flix’s stream­ing ser­vice puts in the range with HBO and now Net­flix has the killer con­tent which will com­pel fans to sign up if they weren’t already sub­scribers. Thus they stand a chance to gain sub­scribers at the expense of pre­mi­um cable providers like HBO, espe­cial­ly among the grow­ing num­ber of cable-cut­ters (you don’t need a cable sub­scrip­tion to watch Net­flix shows; you do for HBO’s).

So, which is a bet­ter busi­ness to be in between hard­ware and con­tent pro­duc­er? I hon­est­ly don’t know, but giv­en the night­mare of con­tent licens­es all these tech com­pa­nies are hav­ing to nav­i­gate, I have a good feel­ing that pro­duc­ing pre­mi­um con­tent might be more as appeal­ing as get­ting into the hard­ware game. Though the mar­kets for iPads is essen­tial­ly the same age as the mar­ket for stream­ing video apps on such devices, the play­ing field among stu­dios looks a lot more leve than hav­ing to tak­en on a jug­ger­naut like Apple’s iOS devices from scratch.

You’re move, Ama­zon.

  1. This is the com­pa­ny that is rac­ing to dump phys­i­cal media, for one thing! []
  2. Note that, in the case of Ama­zon’s print pub­lish­ing, they are con­sum­ing the entire busi­ness between author an read­er. Now that is as much an end-to-end solu­tion as one could have, short of pro­vid­ing advances to authors. []

Netflix Splitting the Business

I have to admit, I was a bit sur­prised to read Neflix split­ting off their DVD mail busi­ness into a new com­pa­ny. Not sur­prised, though, to see that Net­flix has essen­tial­ly gone com­plete­ly to stream­ing, as I men­tioned that ear­li­er this year. I’m pret­ty sure that’s been obvi­ous for years now.

I was con­fused about the name Qwik­ster, though. Not that Reed Hast­ings reads my tweets, but was Mail­flix (or DVD­flix, Dis­cflix, etc.) already tak­en? Why not go with the obvi­ous and descrip­tive instead of a name that just implies some­thing is going to be quick? Net­flix mail­ings are fast—quick, even—but that name just seems like unnec­es­sary non­sense1.

Despite all of the out­rage over the price hikes and con­fu­sion (on the part of some, any­way; most like­ly just the press) over stream­ing ser­vices vs. discs, one has to appre­ci­ate Reed Hast­ing’s clar­i­ty of approach here. They are being very clear as to where they think the future lies. Of course, they must now nav­i­gate the fig­u­ra­tive mine­field of licens­ing to get con­tent into stream­ing. No one (not even Apple or Ama­zon, by my obser­va­tion) has done as good a job at this so far as Net­flix. How­ev­er, with the recent Starz announce­ment2, this does look like a mas­sive moun­tain to climb. The suc­cess of Qwik­ster will depend less on licens­ing (who cares about the one-month peri­od between DVD release and Net­flix avail­abil­i­ty?) and more on adding val­ue to the aging mail ser­vice.

One such val­ue of addi­tion­al inter­est, Qwik­ster will be adding game discs to their mail order ser­vice. Good­bye, Game­fly? We actu­al­ly sus­pend­ed our Game­fly account near­ly three years ago. Great ser­vice, real­ly, but we just nev­er had the time to play the games. I’m not sure that we have loads more time now, but hav­ing the option to occa­sion­al­ly get games (for an addi­tion­al fee, I sus­pect) on an exist­ing account has more appeal than thaw­ing out an account else­where.

Update: Great post by Dan From­mer with some great points to remem­ber, par­tic­u­lar­ly as to why avoid­ing DVD or Mail in the name Qwik­ster may have been a good idea for a pos­si­bly shift­ing busi­ness. (via Dar­ing Fire­ball)

  1. Then again, their hasti­ly put togeth­er page hold­er looks like non­sense. Who designed that table? M.C. Esch­er? []
  2. Which appar­ent­ly had every­thing to do with Starz see­ing the busi­ness in terms of out­dat­ed cable mod­el and Net­flix pre­fer­ring the sim­plic­i­ty of their busi­ness. []

IPMT — IP Movie Theater

From Wired.com’s review of the Roku set-top box for stream­ing Net­flix films:

[The] Roku Net­flix Set Top Box is Just Shy of Total­ly Amaz­ing… The score below is bal­anced between the ease of use and qual­i­ty of the hard­ware, and the dearth of con­tent avail­able. If every piece of media in the Net­flix cat­a­log were stream­able, this would be a 10 for sure.

They do men­tion a few oth­er draw­backs (not the least of which is that it is not ter­ri­bly attrac­tive). How­ev­er, it’s a good price point for exist­ing Net­flix users. I’ve noticed that Net­flix is adding quite a bit to their “Watch Now” sec­tion, though I rarely use it as you can­not direct­ly watch any­thing on a Mac. I’m not ready to get rid of DVD’s just yet, but I do think we just got one step clos­er to the goal of real IPTV. As far as the Roku goes, it looks like it’s get­ting pos­i­tive reviews across the board.