Posts tagged Netflix
The time to cut the cord on cable television has never been better. Between Netflix and Hulu Plus, consumers are treated to a variety of original programming financed and produced not by mega studios but by digital content companies that have little interest of seeding their content to cable channels. Netflix’s House of Cards has been a critical success and Hulu has some sleeper hits like Battleground.
With the investment in original content from its top competitors, Amazon will not be left behind.
Amazon today announced that it is picking up the pilot to Zombieland, a television series adaption from the movie staring Woody Harrelson, Emma Stone and Jesse Eisenberg. The move to pick up Zombieland is part of a larger original content play from Amazon as the company has promised to produce 13 series from a variety of pilots. Amazon is specifically focusing on comedy and children’s programming for its original content.
Zombieland and other pilots from Amazon will be featured on its Prime Instant Video streaming service. Amazon will pick the 13 series from its array of pilots based on user feedback.
The Zombieland series will be produced by the movie’s original creative team including writers Rhett Reese and Paul Wernick. The roles occupied by the likes of Harrelson and Stone have been recast to Kirk Ward and Maiara Walsh, respectively.
Zombies are all the rage right now. The Walking Dead is killing it on cable. The adaptation of Max Brook’s novel World War Z is coming to the big screen in June with Brad Pitt.
Content Marketing At Its Best
People started scratching their heads a few years ago when companies like Netflix and Hulu started bidding on original series from prominent production companies. Why would Netflix spend millions of dollars to obtain House of Cards? Or make one final season of Arrested Development? This was not the business model we had come to expect from these companies. Netflix traditionally licensed content from the archives of major studios for its streaming service, not created its own.
As the original programming has come to the screen, the play has made a lot more sense. House of Cards has a lot of people talking and the only way to see it is to have a Netflix streaming account. Users will have to get a Amazon Prime account to see the likes of Zombieland.
Essentially, these original programs are giant marketing ploys. When it comes down to it, the point of marketing is to get people talking about your product. When people talk about your product, there is a chance they will actually spend money to use it. House of Cards certainly has people talking. If Zombieland the series is as good as Zombieland the movie, Amazon could see an uptick in Prime customers.
HBO has been doing this for years, from Oz to the Sopranos to Game Of Thrones. The difference now is that you do not need a cable subscription to get great exclusive programming.
Great For Cord Cutters
For consumers, the original content wars are the best thing to happen to television since the cable wars erupted in the 1980s. For the first time, television watchers are able to get true a la carte viewing options, choosing from here or there for what they want to watch as opposed to choosing various “bundles” of channels from the cable companies.
Consumers that want to rid themselves of the monthly cable bill will have plenty of content to choose from and not just the shows that aired years before. In the end, everybody wins (except for, maybe, the cable companies).
Lead image courtesy Shutterstock.
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Netflix’s long-delayed integration with Facebook is here. This week, the company will roll out the option to customers in the U.S., where the archaic Video Privacy Act was recently amended to permit this type of feature. The integration is not as annoying as it could be, but I’m going to sit this one out.
First, the upside: It’s great that Netflix was able to get an outdated law changed to remove an illogical stumbling block to innovation. If only it was always so easy. And in theory, I see why showing me my friends’ recently-viewed movies could have some value. On a basic level, this feature makes sense.
Netflix also deserves some credit for limiting the integration so that it doesn’t barf my entire viewing history onto Facebook by default. I have to explicitly tell Netflix that I’d like to be that obnoxious. Instead, it uses Facebook’s social graph to help recommend shows and movies within Netflix itself.
But do we need more frictionless sharing?
Here’s something nobody ever says: “I really love the way I can see everything my friends are listening to on Spotify via Facebook.” They might say, “My friend posted a YouTube video of this awesome new song” or “I noticed everybody was posting about this new album, so I checked it out.” There are a few problems with this model.
I Don’t Want To Share Everything
Not every detail is worthy of sharing, because not every detail is important. If I watch five minutes of a movie to see if I like it, it shouldn’t get the same social vote as my all-time favorites.
Netflix has much more valuable data than simply “John Paul watched Arrested Development.” It knows about my historical viewing habits, informed in part by ratings and preferences I’ve explicitly declared. That’s much more insightful than whether or not I clicked the play button. Hopefully these signals will find their way into Netflix’s social integration in time (if they’re not lurking under the hood already).
Sometimes we like to indulge in things that we wouldn’t necessarily tell the world about, just like I might occasionally blast “This is How We Do It” by Montell Jordan on Spotify in the middle of my workday when nobody’s around. (Now you know). On Netflix, you’ll be able to opt out of sharing on a video-by-video basis, which is smart.
But I still think sharing should be an opt-in experience, not an opt-out one. Something should be important enough for me to *want* to share it and then willingly expend the effort required to do so. I shouldn’t have to stop before playing each video and think, “Wait, do I want to *not* share this?” If we have to think a thought like that, we’re probably sharing way too much.
I’m Not The Only One Who Uses My Netflix Account
Chances are, you’re not the only person watching TV shows and movies on your Netflix account. I know I’m not. If my roommate is binging on Keeping Up With the Kardashians, do you really want me to auto-recommend shows to you?
A roommate is one thing, but what about an entire family? As Techcrunch’s Sarah Perez writes, anybody who connected to her via Facebook and Netflix is going to see a lot of Dora the Explorer, Tinker Bell and Sesame Street, because that’s what her young daughter likes to watch. The more crowded your household is, the less useful this data becomes.
Thankfully, Netflix is working on personalized profiles to help solve this problem, but they’re not ready yet. Until that feature launches, this one is going to be decidedly imperfect.
I Already Know What My Friends Like, Because We Talk To Each Other
With or without Facebook, television and movies are already an inherently social type of content: We watch them with friends and family and we talk about them in social gatherings. I already know what my friends like, because we’re human beings who, despite heroin-grade addictions to technology, still talk to each other face-to-face.
Seriously, I feel like I have a pretty good idea of the shows and movies that people I know like, with or without an algorithm. It’s entirely possible Netflix could dig up some gem via Facebook’s social graph, but if it’s worth watching, I’m sure I’ll come across it eventually. Besides, I don’t know about your queue, but mine is perpetually overloaded.
Doesn’t Facebook Already Know Enough About Us?
Companies like Facebook already know so much about us. Do we really need to funnel more data about our lives onto their servers?
I realize this is just an inevitable feature of our digital world and that I should suck it up. And usually, I do. Google knows even more about me than Facebook. I willingly hand over all that data, but it’s getting to the point where if divulging a new set of data about myself to some company isn’t going to add a significant and obvious value to my life, I’m going to skip it.
Of course, I’m already surrendering this information to Netflix by using their service in the first place. But my relationship with them is clear: I pay $8 per month and I get to stream whatever content they’re offering. They use data about me to improve the experience, and I happily keep shelling out that money.
With Facebook, it’s less clear. I joined without much thought eight years ago, am vaguely addicted to it and constantly wonder how much value I’m really getting out of the service. It weirds me out sometimes. I think about quitting.
It’s also still forging its business model. It won’t rely on subscription fees, but instead will find a way to turn that data about me into dollars. That’s fine, in theory, but I don’t know exactly how they’ll do it or if I trust them in general.
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In the world of Netflix’s new “global” ISP speed index, which the streaming-video service announced Monday, the U.S. takes top honors for fastest connection thanks to Google Fiber, while speedy competitors like Sweden’s Ownit and Finland’s KYMP come in second and third.
Meanwhile, in the real world, the Netflix global index is really nothing of the sort. For one thing, Google Fiber, which offers service to a fraction of exactly one U.S. city, isn’t exactly representative of the nation’s Internet as a whole. For another, the Netflix index doesn’t even include powerhouses like Korea and Japan, which routinely kick ass in global Internet-speed comparisons.
Of course, Netflix doesn’t offer service in Asia, and that’s your first clue that its Internet speed index has been assembled for reasons that have little to do with straightforward comparisons of global Internet speeds.
Netflix itself is relatively open about this. It describes its data as a way to “give you monthly insight into which ISPs deliver the best Netflix experience.” And that’s your second clue as to what Netflix is really up to here.
Netflix has long been prodding ISPs to join its Open Connect content delivery system, which it describes as a dedicated, low-cost video-file distribution system. Many big ISPs in the U.S., however, have resisted Open Connect, even when Netflix began making streams of 3D and high-definition video available only to customers of Open Connect ISPs. Of course, many ISPs offer their own video-on-demand services that effectively compete with Netflix, too.
Coincidentally or not, broadband providers Google Fiber, Cablevision and Suddenlink, all three of which have signed on to Open Connect, happen to top Netflix’s U.S. Speed Index. So it’s not hard to imagine that Netflix’s newfound interest in providing consumer information about ISP speeds just might have something to do with pushing its content delivery network to as many companies as possible. Especially since Netflix has been known to enlist its customers to call their ISPs for this very purpose.
Without Fiber, The U.S. Is Near The Bottom
While the speeds posted on Netflix’s index are far lower than the ISPs themselves would normally claim, the streaming service explains it this way:
The average is well below the peak performance due to many factors including home Wi-Fi, the variety of devices our members use, and the variety of encodes we use to deliver the TV shows and movies we carry. Those factors cancel out when comparing across ISPs, so these relative rankings are a good indicator of the consistent performance typically experienced across all users on an ISP network.
While the U.S. does have a whopping ten ISPs that clear the 2 Mbps threshold, it still has seven providers that fall below that, with Clearwire at the bottom coming in 0.5 Mbps slower than Mexico’s Axtel, which clocked in at 1.30Mbps. With 17 ISPs on Netflix’s list (and a slew of smaller companies scattered all across the country), that gives us one of the most competitive ISP markets on the planet, making it a shame that we can’t all get the speeds of Google Fiber, or at least in the 2 Mbps range.
Take Google Fiber out of the equation, however, and average U.S. speeds drop to 1.8 Mbps from a reasonably strong 2.3 Mbps. That’s only 0.1 Mbps faster than Ireland, and 0.2 Mbps speedier than Mexico, which is last on the list. Finland and Sweden, by contrast, blow away the non-Fiber U.S. with respective speeds of 2.57 Mbps and 2.51 Mbps. Which gives you a sense of just how weak most U.S. ISPs are, even in a not-quite-global comparison.
Image courtesy of Shutterstock
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It passed the House, the Senate, and just before the new year, the President signed it into law. In a significant shift in video privacy – online video rental companies can now share information about the movies you rent or buy. As you might expect, things are about to get more social.
According to the new law, companies have to ask only once, and then can do whatever they want with your video data for the two full years. As per the change, Netflix will introduce new social features that basically link users’ Netflix and Facebook accounts and share their viewing history with friends. Netflix was previously unable to do this in the U.S. by the 25-year-old Video Privacy Protection Act (VPPA), which banned the sharing of personal data for anything but law enforcement purposes (even now, Hulu remains in court for previously sharing viewers’ info).
On the surface, sharing viewing history may not seem like a big deal, but the law undermines the privacy of Internet users, and takes away user control over significant amounts of potentially sensitive personal data.
Looking back, it’s ironic this new law even passed, as the VPPA was originally enacted in the 1980s in response to a local Washington newspaper publishing a list of Supreme Court nominee Robert Bork‘s rented videotapes during his nomination process. At that time, Congress was up in arms over this privacy breach, which helped scuttle Bork’s appointment and led to the phrase “borked” entering the language. But less than a month after Bork’s passing on December 19, 2012, it seems that Netflix investment of roughly half a million dollars in lobbying Congress to update the law was enough to do the trick.
The Privacy Issue
Almost one year ago to the day, Marc Rotenberg, the executive director and president of the Electronic Privacy Information Center (EPIC), testified in Congress against the bill, citing his organization’s interest in “supporting the rights of Internet users to control the disclosure of their data held by private companies.”
“The debate over online privacy and Netflix does not exist in a vacuum,” Rotenberg stated at the hearing. “It is becoming increasingly clear that only privacy laws actually safeguard the privacy rights of Internet users.”
In an interview with ReadWrite, Rotenberg said he urged the Senate Judiciary Committee to update the law with new safeguards. His warnings were not heeded. Senator Franken (D-Minn.) and Senator Feinstein (D-Calif.) made some improvements to the House bill but it was still a step backward for online privacy,” Rotenberg said.
So…is sharing bad for online privacy? The experts ReadWrite talked to seemed to think so.
Jules Polonetsky, the director and co-chair of the Future of Privacy Forum, said the the real issue is that people don’t know they’re sharing. When that sharing is done without user consent and system settings are unclear, it’s bad for the public. “This is about the sharing of your records of video rental history, as opposed to on a clear, permission basis, enabling people to key-in sharing mode,” he said. “Sharing should be in a clear opt-in basis.”
Polonetsky compares the risk to what social video sites Viddy and Socialcam did when they first launched, gaming the Facebook system so anyone playing those companies’ videos automatically alerted their Facebook friends to what they were watching. That accidental sharing is a major problem, Polonetsky warned.
“I saw a rabbi I know sharing a fairly raunchy video about girls on bikes, falling off bikes… a conservative, corporate lawyer sharing a somewhat offensive video, none of them clearly understanding that by clicking on some filthy link shared by their friends, to see what the attraction was, they’d be letting hundreds of their friends know and sullying their reputation.”
Rainey Reitman, the Electronic Frontier Foundation‘s activism director agreed. She said the move is bad for the public because unclear sharing undermines the “strong legal protections put in place to protect video watchers… A major concern is that individuals will enable the function and not realize that it is continuing to broadcast their video watching habits to social networks – for years.”
Selling Your Video History?
Another potential problem stemming from the law, Reitman said, is whether video companies will use that information as a commodity and sell it. “Once data is combined with our social media profiles, it can be part of the data used by the online advertising industry for advertising purposes and we’ll be forced to rely on the often confusing privacy settings on social networks to protect our video watching history.”
Polonetsky said that turning on this stream of sharing data on a service like Facebook would likely increase targeted ads. He added that although this change tot he law has been pushed by Netflix, not Facebook, social sharing is a huge business driver, and ultimately a win for that site.
“Generally [Facebook's] motto has been, we want a lot of data so advertisers can reach you,” he said. “Facebook can and will make available what you’re doing, what you’re watching, what you’re reading, to be used to tailor ads to you on Facebook – and increasingly off of Facebook.”
Not All Bad?
The new law is not all bad, said Polonetsky. When it comes to sharing information people do want known, like live Television, sports and films while they tweet or post, it can be a boon for both users and entertainment companies. But it’s only positive if people have an on-off switch, and awareness of what they’re sharing.
“If you can actually draw together the eyes now watching this video, this game, and comment, I think there’s a real positive,” he said. Still, he warned that the way the new systems get set up will be critical to the law’s long term effects. Again, the key is that people have to know the settings in order for the sharing to benefit them and not inadvertently spread information they’d rather keep to themselves. “It’s got to be cut in a way that very affirmatively makes clear that you are in sharing mode so there’s no cause for accidents. That’s UI design.”
Polonetsky isn’t the only one sees the glass half full. Privacy expert and attorney Alan Chapell of Chapell & Associates thinks the old VPPA law was out of date. He pointed to the fact that the law treated the video differently from other content, such as music services like Spotify, which are able to share.
“The VPPA created a rule set that treated movie consumption differently from book and music consumption,” he said. “Drawing that type of distinction in a digital world doesn’t make sense. If a consumer wants to be able to tell friends, via Facebook or some other platform, which movies he’s streamed via Netflix he should be able to do so.”
Chapell is right, people should have the right to share when they want to do so. But the underlying issue is that this new law creates a system where the public could easily end up sharing personal data without their informed consent.
Photo courtesy of Shutterstock.
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After an ill-timed outage on Christmas Eve zapped popular video provider Netflix – the popular refrain has been clear: Blame the cloud. But when there’s a car crash, do we blame the highway or the humans driving the vehicles? Is Netflix really the victim here, or did it drive off the road all on its own?
Reports of Netflix crashing again on Christmas Eve day started trickling in about an hour after my youngest daughter, stuck inside on a bitter cold Minnesota day, complained that the service wasn’t working on my iPad. That problem was alleviated by slapping a password on the device and sending her into the kitchen to help the rest of the family prep for dinner like she should have been doing in the first place. But the inconvenient timing of the outage was enough to cause a bump of coverage on the national news.
As the postmortems came though, it appeared that – once again – Netflix’s problem lay within the cloud on which the service is hosted: Amazon Web Service’s Ashburn, VA, data center.
Neither AWS or Netflix have released a detailed report on what actually happened, but reports indicated that it was the elastic load balancers at the Virginia data center that somehow dropped the ball and led to significant traffic loss for Netflix viewers trying to watch their favorite Christmas movies. The service was back up by Christmas Day, but dropping the ball on Christmas Eve didn’t make Netflix many friends.
Meanwhile, as many people noted during the Netflix outage, Amazon’s own Instant Video service had no reports of problems. That raised a few eyebrows for customers wondering how Amazon managed to keep its own service going while its competitor was kaput.
No one is accusing Amazon’s business units of collaborating to bring down Netflix. But the very fact that Netflix relies on a competitor’s infrastructure to deliver its services seems to generate a conflict of interest.
A lot of those same industry observers are also calling for Netflix to get the hell off of Amazon’s cloud. This is not the first time, after all, that AWS problems have smacked around Netflix and other popular Web services, and that Virginia data center specifically seems to be cursed.
I think a service like Netflix (of which I am obviously a customer) should keep its destiny in its own hands. But if you think that moving to it’s own cloud will be the sure-fire cure-all for Netflix’ reliability issues, think again.
The fault for the Netflix outage, the company would like us to believe, lies solely with AWS. But does it really?
Or does the problem lie with misuse of AWS tools? If the elastic load balancers were indeed the reason for the Christmas Eve outage, who was ultimately responsible for configuring those balancers?
Winning The Blame Game?
The highway analogy applies here, too. AWS is the highway, a shimmering ribbon of concrete, on-ramps and bridges that enable cars to get from point A to point B. Most of the time, the highway’s operations run smoothly. But when someone misuses the highway, chaos will most certainly ensue - no matter how good the infrastructure is.
If you don’t like the highway example, pick another brand of infrastructure, like a building or a ship or a bridge. It’s all the same: Use the infrastructure the wrong way, and bad things happen.
Netflix would (and can) argue that sometimes, no matter how well you’re operating within the infrastructure, that infrastructure can break. That’s true. Tragically, things fall apart and people and businesses can get caught in the wreckage. Such is life in an entropic universe.
But even if AWS has a faulty infrastructure, doesn’t Netflix still have ultimate responsibility to create the solution? After all, customers are “renting” their movies from Netflix, not Amazon. And as pointed out, this is not the first time there’s been problems at this particular data center. Why, after getting slapped off the Internet this summer, didn’t Netflix make sure such an occurrence would happen again?
Netflix shares were down slightly on Thursday (about 1% as trading drew to a close). Maybe some shareholders are asking themselves why Netflix hasn’t done more to shore up te reliability of its service. I know this customer is.
Image courtesy of Shutterstock.
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Tuesday morning, Deathwatch-favorite Netflix announced a new partnership with Disney. While the financial terms have yet to be disclosed, this looks like a huge step in the right direction for the embattled video service.
Under the terms of the agreement, Netflix will become the online distribution platform for Disney’s straight-to-video releases in 2013. In 2016, it will carry pay-per-view versions of Disney’s new, theatricallyreleased films. Effective immediately, Netflix will also have access to a back catalog of classic Disney films for its current subscriber base.
What It Means For Disney
By cutting a deal, Disney gains a pay-per-view foothold (and likely some perks to be named later) in the biggest online video distributor without giving up anything but Dumbo and Pocahontas. Its classic freebies will serve as a powerful lead-in for up-sells, and it will retain the power to charge a fee it considers fair for premium content. The deal also draws considerable leverage from cable operators that may have been less willing to negotiate a favorable revenue split.
What It Means For Netflix
The Disney deal is a major lifeline for Netflix. First, it brings reliable, popular content into the system right now, repairing some of the actual and perceived damage caused when Disney/Starz pulled out. It also shows Wall Street and other content providers that Netflix will be around for the long haul. If the mother of all content licensing providers is willing to do a deal, other suppliers are more likely to want in as well. It remains to be seen how far Disney has locked out competitors, but Netflix will draw new interest that it really needed.
The agreement also formalizes what everyone knew was coming: Netflix is evolving beyond the buffet model. Premium content will remove the pressure from the baseline offering and allow all sorts of new opportunities that provide legitimate value.
For example, millions of Netflix users catch up on back seasons of still-running TV shows, only to find themselves stuck in the limbo between the Netflix catalog and the current season. That’s a well-qualified sales opportunity sitting on the table. Now Netflix and content publishers can monetize that opportunity while consumers willing to spend a bit extra on a premium subscription or an a la carte purchase can stay up to date on their favorite shows.
This deal puts pressure on other video distributors to follow suit. Hulu, with its close ties to NBC, Fox and yes, Disney, will probably launch a counterattack soon.
Let’s be clear. This is a win for Netflix, but Disney is in charge. Netflix’s content model was getting pinched, and it needed an out. Content is still king, but the deal helps Netflix last long enough to maybe tip the scales a bit more toward distributors.
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Amazon is gunning for Netlix and Hulu. That’s been the conventional wisdom anyway, with many expecting the ecommerce giant to launch a stand-alone video streaming service to compete with those companies. This week, Amazon watchers got the clearest sign yet that this is exactly where they’re headed.
But don’t call it a Netflix killer yet.
Without telling anyone, Amazon started offering its Prime membership for a monthly price that will look familiar to Hulu and Netflix subscribers: $7.99. It’s the first time they’ve offered Amazon Prime for anything other than an annual fee. Its library of streaming TV shows and movies still comes bundled with free two-day shipping on Amazon purchases and one borrowed ebook from the Kindle lending library.
A lot of the headlines announcing this news were framed in that cautionary, “here comes the [insert popular product or company] killer” fashion the tech press is known for. Amazon is slowly positioning itself to go up against Netflix and Hulu, but it’s not there yet. For one thing, $7.99 per month works out to $99.88 per year, a 21% increase from Prime’s current price tag. If you want to make your product more competitive against incumbents, raising the price usually isn’t typically part of that formula.
But the subtle shift toward a higher price tag could also be a sign that the company plans to ramp up its content deals for Amazon Prime even further and needs to better cover those steep costs. That would be a smart move, because as it stands, Amazon Prime doesn’t quite have the content offering of Hulu or Netflix.
During peak hours, Netflix commands 33% of downstream Web traffic in all of North America, AllThingsD reported today. YouTube, as enormous as it is, makes up less than half that. Netflix is huge.
Even during the height of Netflix’s PR gaffes last year, I never considered canceling my subscription. Sure, I cut off the DVD-by-mail portion of it when they increased the price, but by then the Watch Instantly streaming catalogue had grown impressive enough for me to hang onto it. That, combined with Hulu Plus makes up the bulk of my TV and movie consumption. Amazon Prime is nice, but it’s still growing into something that could stand effectively on its own.
There should be no doubt that Amazon is planning to get more aggressive in this space. New deals with content providers, combined with an expansion of the service’s availability across streaming devices and smart TVs will make Amazon Prime a formidable force in the marketplace in due time. Meanwhile, Netflix isn’t going anywhere.
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After backing out of plans to compete with Netflix, Blockbuster is all but done. That’s not great news for the streaming-video space, and Netflix is in a rough spot. But Blockbuster’s latest stumble toward oblivion isn’t necessarily the final nail in NetFlix’ coffin.
On October 4, Dish Network scrapped its plans to revamp the Blockbuster brand and launch a subscription-based streaming-only product to compete directly with Netflix. Dish ran the numbers, evaluated its options, and (correctly) assumed it didn’t have the assets to make a Netflix competitor work.
That leaves Blockbuster on the ropes again, with just 900 of its former 3,300 retail stores and no clear digital strategy. But don’t assume that the math will work the same way for Netflix.
The Bad News For Netflix
Dish’s decision confirms what I’ve been saying for some time: the flat-rate streaming market isn’t a very profitable place. As I noted in Netflix Deathwatch over the summer: expensive bandwidth, second-rate content and strained relationships with content providers are par for the course for the entire industry.
Paul Sweeting, Principal at Concurrent Media Strategies, told E-Commerce Times that “…studios have long been leery of subscription-based streaming of movies because it produces the lowest per-view/per-capita return for the rights holder of any business model, and it cannibalizes higher margin businesses like pay-per-view rentals and even purchases.” In the same article, another analyst predicted that flat-rate streaming may have only another five or six years of life.
The market is obviously sick, and it needs to change.
The Good News For Netflix
Troubled or not, Netflix still owns the streaming video market, and that brings advantages Dish and Blockbuster couldn’t match. Most importantly, Netflix has existing content relationships that, while strained, put it in a better position than a startup.
In an October 8 analyst note, Morgan Stanley’s Scott Devitt estimated that Amazon, which already has relationships with most studios, would need to spend an additional $1 billion to $1.2 billion in licensing rights to launch a similar service.
If that price is too steep for Amazon, it’s probably beyond most competitors. Barriers to entry don’t validate the streaming-video business model, but they do buy time for Netflix to try to sort out its problems.
In the long term, Netflix has an infrastructure advantage, since it owns its own Content Distribution Network (CDN), and its massive user base should help it secure content from overseas and underexposed independent sources.
It’s also developing original content with headliners like Kevin Spacey to hedge against expiring contracts and differentiate from competitors. Netflix’s margins per customer may not be fantastic, but with all those users, it has cash to invest in programming.
Eventually, though, Netflix needs to balance cheap back-catalog offerings with enough premium and custom content to create a profitable offering “good enough” to justify its prices. It also needs to keep an eye on Hulu, HBO and other content providers looking to ramp up their streaming businesses.
Put it all together, and I wouldn’t want to be in Netflix’ shoes. Blockbuster’s implosion is a reminder of how tough things have gotten in Netflix’ core business, but at least Netflix still controls its own destiny.
Blockbuster and Kevin Spacey images courtesy of Shutterstock.
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Everyone has that mindless TV show they watch to unwind in the evening. Mine was Pawn Stars, the reality TV series hit about a family-run pawn shop. Then, last Friday, Netflix removed Pawn Stars from my life without warning. I ditched my TV back in college and I haven’t been tempted to own one since… until now.
What happened? Netflix’s right to broadcast A&E’s 800 hours of content expired. While Pawn Stars still airs every Monday night on cable, I no longer have access to it because I’m one of those cord cutters who relies on Roku to watch my favorite shows via Netflix and Hulu. The show might come back if negotiations work out between the two media companies. Then again, it might not.
The sudden removal of Pawn Stars, along with A&E’s entire catalog, is nothing new. In fact, things like this happen all the time. Earlier this year, for example, Netflix lost 8% of its content when its deal with Starz expired. The Starz shows, while horribly pixelated, comprised some of Netflix’s best offerings including one of my favorite romantic movies, The Illusionist.
Netflix doesn’t seem to have a problem with this. “A number of titles expired today, that is true, but we have titles coming on and off all the time,” said Netflix spokesman Joris Evers on Friday to the Hollywood Reporter.
Evers casual acknowledgement of how unstable the relationships his business depends on really wouldn’t be so insulting if I, as a paying customer, knew beforehand about titles being removed, or coming. I only had a couple episodes of Pawn Stars left to watch before I would have been caught up to the current season. If I had known the titles were being removed, I would have sat down and watched them all before the expiration date.
When I flopped down on my couch last Friday night all ready to hear Rick laughing at some ridiculous offer made by a customer before I went to bed, I was met with a significantly sparse Netflix page. At first I thought Netflix had been hacked. I had to seach Google News to find out what happened. To date, Netflix has yet to release an official statement on the deletion of 800 hours of content.
Netflix attracts customers like me by offering a catalog of worthwhile shows. If those shows can disappear at any moment, it fundamentally changes the nature of the relationship. Perhaps Netflix thinks its safe to add and drop content at the drop of a signature and keep customers in the dark about the resulting disruptions. After all, the company has few competitors. Frankly though, I’m ready take my business elsewhere.
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Senator Patrick Leahy is offering a new amendment that would allow Facebook users to automatically share the titles of movies they rent through Netflix. His proposal would strengthen ecommerce at the expense of a decades-old bill that keeps video rental record private. Guess what? The Vermont Democrat also wrote the old privacy bill, and he seemed to think it was smart public policy as late as the start of this year. Here’s the story behind the flip-flop.
The old Video Privacy Protection Act may have reflected Congress’ instinct to protect itself as much as the public. It was 1987, and Washington was consumed with debate over U.S. Supreme Court nominee Robert Bork’s thinking on a Constitutional right to privacy. Bork’s hand-written records from his local Washington, DC, video store were leaked to Michael Dolan, who published a fairly goofy piece in the Washington City Paper on them. “The Bork Tapes,” as the ensuing kerfuffle was called, was in many ways a small-town affair, but the case set Washington on fire. A panicked Congress set out in the special way that it has to solve its own problems.
“If we’re going to tell people, especially people who want to be in any form of public life,” said Leahy 24 years ago this week, “well, if you do, we are going to go all the way back and find out what you checked out at your public library, what you took out on videos or what you watch at night on television programs, then we are in a sorry state.”
The issue wasn’t what Bork had popped into his VCR. Recapping the incident at a hearing this past January, Senator Al Franken described the judge’s predilection for “mysteries and caper films.” It was that no one from Joe Average to high-ranking public officials seemed to be safe from snoops. The Judiciary Committee was split on Bork, but it was “unanimous in its outrage,” the Minnesota Democrat recalled, over the revelation of Bork’s rental records. “The point was that the movies we choose to watch are our business and not anyone else’s,” said Franken.
The problem is that, two dozen years after the Bork Tapes, the movies we chose to watch are exactly someone else’s business. Data on our personal habits drive the digital economy, from Facebook to Google to countless other social-enabled sites. Netflix wants its own targeted fix specifically so it can integrate with Facebook. Never mind the argument made by some that the Video Privacy Protection Act (VPPA) doesn’t apply to streaming video or that Netflix could satisfy the law by giving users a “play-and-share” option. That ambiguity, Netflix’s general counsel has said, creates “a drag on social video innovation that is not present in any other medium.” User accounts for music or books stores didn’t exist in pre-iTunes era, but in 2012 what sense does it make that I can tell my Facebook friends what’s on my Spotify or Hulu or Social Reader playlist but can’t easily share what movies that I watched this weekend?
In December, the U.S. House of Representative agreed. The way things stand now, video tape providers can disclose rental records only when the customer gives written disclosure, which must happen each time they’re sought. But under H.R. 2471, consent can be given online and ahead of time, and is considered binding until the user says stop.
“Durable sharing,” as advocates have called it, would be a boon for Netflix. For one thing, it increases the possibility of targeted ads like the ones Spotify displays, which are tailored to the information Facebook knows about the user. For another, there’s simple word of mouth. Netflix is betting on its streaming business, and Facebook is a high-profile venue for promoting its wares, including in places like Latin America and Europe where it is hoping to grow its business.
To opponents, moves to modernize VPPA put privacy at risk. There’s nothing in the bill, for one thing, that limits Netflix to sharing my watching habits with Facebook—or to any other social network, for that matter. For another, our viewing histories might reveal more about us than we’d like others to know. It might be fine for the world to know you just rented The Godfather, Franken said at the hearing. Less comfortable might be sharing the fact that checked out Yoga for Health, Depression, and Gastrointestinal Problems. “Why else,” testified William McGeveren, an associate professor at the University of Minnesota Law School, “did a newspaper reporter think Judge Bork’s rental history might be interesting in the first place?”
But there’s a bigger critique with this bit of lawmaking. It’s that Congress is modernizing the country’s video privacy laws in one direction only: Netflix’s. Legislators are not otherwise coping with the new digital economy by, say, clarifying that privacy protections written for the video tape era apply to modern video streaming. And they’re not redefining the personal account information covered by VPPA to cover things like IP addresses.
In fact, some have argued that VPPA’s protections should be expanded, not reduced. Let’s go the other way and cover listening and reading habits, too, McGeveren argued, like California did in October with its Amazon-targeting Reader Privacy Act.
Not long ago, Patrick Leahy seemed to agree with that way of thinking. He opened that January hearing by telling a joke about how privacy comes naturally to Vermonters like him. It’s also perfectly natural, he explained, for companies like Netflix and Facebook to want to increase the flow of user data online. But that doesn’t make it right. Waving his hands in seeming consternation, Leahy raised the idea that “a one-time check off has the effect of an all-time surrender of privacy.”
So what changed in the last seven months? One possibility: Leahy is eager to get tech company support on the much-contested cybersecurity bill he and others have been working on for years. Netflix has been a high-profile backer of VPPA modernization, but there are others: Facebook, Google, Barry Diller’s IAC. The bill stands to benefit any tech company that wants to mine the streaming-plus-social space. Throwing an otherwise non-germane amendment into the cybersecurity mix might be a nice inducement to tech companies to help push the cybersecurity bill through the Senate.
But the video privacy bill is also a test case in Washington’s effort to grapple with digital privacy and consumer choice. Lawmakers, generally, can’t seem to bring themselves to imagine that people are willing to share as much of themselves on Facebook as we regularly demonstrate we’re perfectly willing to do. Congress might not understand social media, but it doesn’t want to kill it. It only wants to figure out the artful public policy that lets the digital economy flourish while upholding very high personal privacy standards. It’s not ready to face the possibility that that might not be possible. So, instead, it tweaks laws, responding to its own needs here, responding to the needs of the increasingly vocal tech industry there.
An open question is what actual consumers in the digital age “like” when it comes to privacy. And that’s something that Congress and tech companies would, for now, rather not know.
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