Netflix Aims to Finish Off the DVD

Outmaneuvering opponents with a streaming-only plan

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Those red envelopes—now as ubiquitous as the Blockbuster rental (R.I.P.) once was—may disappear in the not-so-far-off future. Netflix has taken a small step that direction by introducing a new streaming video service for $7.99 a month, and by bulking up their catalog of instantly viewable movies. The announcement, conveniently timed before Black Friday, is intended to swell the subscriber ranks and outflank rental-industry opponents (Hulu, iTunes, Amazon). As of now, the Times reports, 20,000 films are streaming titles, only a fraction of those available on DVD.

  • It's an Improvement, but It Could Have Been Better  Josh Smith at AOL's Wallet Pop notes that Netflix isn't "tinkering" with its trademarked red envelopes as much as you'd think with this announcement: "Netflix's selection of streaming movies and TV shows is improving, and can be part of an overall attempt to cut the cord with your cable company and stream everything you want to watch; but the unfortunate reality is that to watch every show you want, you'll still likely need a Hulu Plus subscription and have to watch some episodes at other online locations. For movies, you may want to look into supplementing your Netflix streaming plan with a few trips to your local Redbox."
  • What Market Analysts Are Saying: Content Costs Will Rise   The Wall Street Journal's Matt Phillips reports that the move will indeed "bolster" the company's ability to provide an alternative to TV subscriptions. But a few of the research analysts he quotes don't seem as bullish, they write: "Given that major studios are very likely to expect increasing rates to obtain streaming only rights, we fully expect Netflix’s content costs to rise further." Meaning that the "rights to stream content could cut into any savings from mailing disks as the company shifts to more of a streaming company."
  • The Future—Streaming—Is Coming Soon  Will Richmond, a contributor at Seeking Alpha, weighs in on the new service tier and praises the savvy timing (right before Black Friday): "Netflix is putting its money where its mouth is, incenting heavy streamers to drop out of the company's DVD-by-mail services entirely, while appealing to new subscribers who don't care about DVDs at all. But since many titles are still only available on DVD, and not streaming, the odds of a massive downgrade to streaming-only are probably low, for now at least. Regardless, given streaming improves Netflix's margins vs. DVD delivery, even lower revenues per subscriber make Netflix a more profitable company."
  • But the DVD Isn't Dead. Yet.  Sam Diaz at ZDNet concedes that a "fair number" of people are excited about the cheaper "instant gratification" aspect of the announcement. But here's what you should ask yourself before you convert to streaming-online: "do you have a lot of movie catching-up to do or are you one of those people who watches out for new releases to put into the queue?" He explains it this way: While streaming is a "great deal," it may not be right for those voracious movie lovers who would want to pay the extra dollar for the DVD option that gives access to many, many more titles.
  • This Is a Move to Stave Off Competitors  As the company moves away from its "roots," Verne G. Kopytoff at The New York Times notes the many competitors that have cropped up to dethrone the company: "Netflix faces challengers on several fronts online, including, Apple and Google. Hulu, a start-up jointly owned by NBC Universal, the News Corporation and the Walt Disney Company, is also a competitor." He also references his prior Times article on the subject, in which he describes the new battleground like this: "the war will not be won by the company that perfects the logistics of moving DVDs, but by whoever can best negotiate with Hollywood studios."
This article is from the archive of our partner The Wire.