Friday, February 3, 2006
Fantasizing about Netflix
OK, I know I've posted too much about NF lately; however, several things in the news lately made me think about how NF could get much better (and have a sustainable long-term business model). So I will deviate from my throttling experiments to actually provide some constructive feedback.
First, let's start with the facts, rumors and speculation:
1. Fact: HD-DVD and BluRay are coming and they are going to confuse the hell out of most consumers. They will also put a pretty large burden on NF when (and if) they choose to adopt one or both of them.
2. Rumor: There is going to be a set-top box coming from Netflix. See this post from Hacking Netflix for a screenshot of a registration interface that briefly surfaced on the NF site last year
3. Speculation: Recent job postings for NF engineers and a product manager to create the aforementioned set-top box.
So what would all of this mean for those of us using Netflix? Well, here is my Netflix fantasy (that just sounds wrong, doesn't it?):
Without abandoning their existing mail order business (for now), Netflix creates a set-top box (let's call it the Netflix Player or NFP, for short). The NFP allows you to interact with the NF website (see recommendations, check out your Friend's list, manage your queue, etc.) on your TV screen and then download a certain number of DRM-protected movies to the NFP hard drive.
As new high definition formats emerge, NF can simply upgrade the software of the NFP to allow the display of high definition movie formats.
In the short term, NF would dole out a bunch of cash to get this going; however, in the long term (when new competing and expensive formats are being added), NF could save big money (and attract new customers who don't want to hassle with which HD format to choose) by offering HD movies to the NFP (no need to buy an inventory of the same titles in both standard, HD-DVD and BluRay). Maybe as a format wins out, HD discs could be added to the mail order business, too; however, this is my fantasy, so mail order doesn't matter.
And before you start poo-pooing the idea because of bandwidth limitations/download times, think of this: NF could make the box smart enough to pre-download the next X number of movies in your queue. For example, you can have 3 movies to watch; howeverm the NFP will go ahead and download the next 3. You just can't access them until you delete one of the ones you're watching. Back to the fantasizing...
NF could offer different tiers of their service that add more bandwidth (faster downloads), allow more movies stored at one time (3, 5, 10, etc.) and allow for a certain number of movies to be added to portable devices like the iPod (which has the DRM thing all worked out).
Imagine being able to select a format (or multiple at once) from your Netflix Player before you download a movie(i.e. standard definition, high definition or iPod). So you could watch the movie at home in HD and then take an already-converted MPEG4 version with you on your iPod.
And to take this even further, NF could offer the software to other consumer electronics manufacturers, especially TiVo and the cable DVR makers. This would allow those customers to tap into the NF service and use existing hardware to store the content and provice connectivity to portable devices.
So that's my fantasy for Netflix. A little kooky, sure. However, I think NF has to see that the days of mailing discs will be over as soon as someone creates a solid download service (with support for HD content) with great user tools. And even if mail order never completely dies, the addition of HD-DVD and BluRay to mix will make things really expensive really quickly. I don't think price hikes for new formats will go over well with consumers. They are going to have to give us more in order to get more money.
I think NF already knows how to make the great tools and, hopefully, they are working on the rest.
OK, I know I've posted too much about NF lately; however, several things in the news lately made me think about how NF could get much better (and have a sustainable long-term business model). So I will deviate from my throttling experiments to actually provide some constructive feedback.
First, let's start with the facts, rumors and speculation:
1. Fact: HD-DVD and BluRay are coming and they are going to confuse the hell out of most consumers. They will also put a pretty large burden on NF when (and if) they choose to adopt one or both of them.
2. Rumor: There is going to be a set-top box coming from Netflix. See this post from Hacking Netflix for a screenshot of a registration interface that briefly surfaced on the NF site last year
3. Speculation: Recent job postings for NF engineers and a product manager to create the aforementioned set-top box.
So what would all of this mean for those of us using Netflix? Well, here is my Netflix fantasy (that just sounds wrong, doesn't it?):
Without abandoning their existing mail order business (for now), Netflix creates a set-top box (let's call it the Netflix Player or NFP, for short). The NFP allows you to interact with the NF website (see recommendations, check out your Friend's list, manage your queue, etc.) on your TV screen and then download a certain number of DRM-protected movies to the NFP hard drive.
As new high definition formats emerge, NF can simply upgrade the software of the NFP to allow the display of high definition movie formats.
In the short term, NF would dole out a bunch of cash to get this going; however, in the long term (when new competing and expensive formats are being added), NF could save big money (and attract new customers who don't want to hassle with which HD format to choose) by offering HD movies to the NFP (no need to buy an inventory of the same titles in both standard, HD-DVD and BluRay). Maybe as a format wins out, HD discs could be added to the mail order business, too; however, this is my fantasy, so mail order doesn't matter.
And before you start poo-pooing the idea because of bandwidth limitations/download times, think of this: NF could make the box smart enough to pre-download the next X number of movies in your queue. For example, you can have 3 movies to watch; howeverm the NFP will go ahead and download the next 3. You just can't access them until you delete one of the ones you're watching. Back to the fantasizing...
NF could offer different tiers of their service that add more bandwidth (faster downloads), allow more movies stored at one time (3, 5, 10, etc.) and allow for a certain number of movies to be added to portable devices like the iPod (which has the DRM thing all worked out).
Imagine being able to select a format (or multiple at once) from your Netflix Player before you download a movie(i.e. standard definition, high definition or iPod). So you could watch the movie at home in HD and then take an already-converted MPEG4 version with you on your iPod.
And to take this even further, NF could offer the software to other consumer electronics manufacturers, especially TiVo and the cable DVR makers. This would allow those customers to tap into the NF service and use existing hardware to store the content and provice connectivity to portable devices.
So that's my fantasy for Netflix. A little kooky, sure. However, I think NF has to see that the days of mailing discs will be over as soon as someone creates a solid download service (with support for HD content) with great user tools. And even if mail order never completely dies, the addition of HD-DVD and BluRay to mix will make things really expensive really quickly. I don't think price hikes for new formats will go over well with consumers. They are going to have to give us more in order to get more money.
I think NF already knows how to make the great tools and, hopefully, they are working on the rest.
¶ 10:42 AM 
Comments:
Davis:
Great info. I obviously didn't do much research before fantasizing.
While it is cool that NF will offer Bluray and HD-DVD, I long for a time when disc formats go away.
Great info. I obviously didn't do much research before fantasizing.
While it is cool that NF will offer Bluray and HD-DVD, I long for a time when disc formats go away.
posted by 
sMoRTy71 : 1:18 PM
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About Shawn Morton
Married father of 4, social media strategist at Nationwide, consumer electronics enthusiast, hair metal aficionado.
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1. Fact: HD-DVDs are certainly going to be confusing for consumers, but shouldn't this shouldn't be too significant of an issue for Netflix.
There is no doubt about if or when they will adopt this service. They told investors last week that not only will they support both formats as soon as they release, but that the studios won't be charging more for them. The expect that the pricing will remain the same for a number of years, so HD-DVDs shouldn't create too many problems for the company.
2. Rumor: This isn't a rumor, this is something that the company has discussed extensively over the last year and a half. The Netflix player was designed specifically to go into a TiVo box, but Netflix could never get the studios to license the content, so the company put the program on pause last Oct. until the content climate begins to thaw.
3. Speculation: No speculation here. The company has consistently allocated 1 - 2% of their revenue to technological research. They report these numbers every three months in their 8K.
With studios begining to understand the benefits of Net sales, the company wants be ready if and when hollywood allows movie downloads.
The reason why this won't happen is pretty simple. The set top box market is already pretty crowded and is quickly being dominated by the cable providers. If you can't get an agreement with the cable companies then you have to do it alone and TiVo is a good example of how difficult it can be to sell a product when the Cables Co's and Dish operators will give it away or rent it cheaply. The second reason why it won't work is because the telcos and satelites already have PPV. Why would they want to canibalize that revenue by allowing a competitor onto their platform. When/If TiVoFlix comes into existence, you can bet that it won't be offered on the Comcast TiVo boxes. You'll need to pay the big bucks to buy a standalone box if you want this type of functionality. Of TiVo's current subscriber base, this only represents about a million households. Not exactly the critical mass you would need to make this investment pay off.
So while I agree that this would be an excellent thing for the consumer, I don't the economics of wall street or hollywood will allow for it.
P.S. You can never write too much about Netflix.