On Twitter, Anne Thompson pointed to an L.A. Times article about Netflix preparing for possible new restrictions by studios that keep rental outlets from being able to rent new DVD releases until several weeks after they go on sale. The studios, of course, hope to boost DVD sales.
But Netflix is okay with this:
While such a system might somewhat depress the revenue of Netflix and its competitors, it would probably result in reduced costs as well, as studios would have to lower the wholesale cost of DVDs for rental companies to get them on board.
Hastings said he would be fine with that scenario and already has plans for the money his company would save on DVD purchases.
“A short DVD sales window would benefit sales and therefore the health of the entire ecosystem,” he said. “Plus it would allow us to spend less on discs and more on streaming content.”
Netflix considers Internet streaming, which it offers via computers and a growing number of living room devices such as the Xbox 360, crucial to its future rentention and acquisition of subscribers. Last quarter, 43% of Netflix subscribers streamed at least one movie or television show online, up from 22% in the same period a year ago.
The biggest challenge for Netflix is acquiring content for its streaming service, which requires an entirely different set of business considerations than DVDs.
Hastings also told analysts that Netflix will soon announce a new partnership to stream movies through a consumer electronic device “that has a material installation base” by the end of the year. Likely candidates include the two major video game consoles that don’t currently offer it: Sony’s Playstation 3 and Nintendo’s Wii.
My husband and I were early adopters on the Roku box, which connects to Netflix as well as Amazon digital downloads (and even MLB, in beta – I’m still pulling for a Hulu connection). We don’t have our TV hooked up to cable or even network television, and we have an absurdly high number of DVDs in our Netflix subscription, but we still find ourselves watching a lot of streamed movies and television shows from Netflix. It’s utterly convenient, even though the user interface could use some serious work. We watch things we’d never think to put in our queue, which usually turns out to be delightful (although, at times, it is not – we unfortunately watched the original Poseidon Adventure earlier this week).
In any case, Netflix is wise to adapt quickly, and would be wise to push the Roku box through more advertising, especially with more people canceling their cable service. (Interestingly, there has been talk this week of a subscription model for Hulu, which nobody sees as a good thing except those who think they’ll make money from it. I would pay – if they got HBO on board.)