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Sean

That looked really great. Slick user interface and great features, but best of all Macintosh compatibility! I'll never have to run Windows in Parallels again! I hope it supports Safari as well though instead of just Firefox.

prozac


Really nice...hope to see this soon.

gir

I wish they'd talked a little about TV integration.

Ricklogic

The critical question is content rights for streaming. Streaming rights are entirely different rights than the rights that Netflix specifically has on physical DVD's that they buy and/or revenue share specifically for physical rental.

We know from Neil Hunt of Netflix that "the vast majority" of the $40,000,000 budget for 2007 for streaming was for the content rights on the 2,000 to 5,000 titles that Netflix said that they will offer during 2007. What is the budget for 2008 for additional content rights for streaming and how will they design new pricing plans?

Netflix has offered streaming for free, up to now, while they have a relatively small amount of generally inexpensive content. If they buy rights to a significant amount of premium content, how much will they charge subscribers for it?

joshhyde

Mac and Firefox compatibility is great but, what about Opera? I want to Watch Now on the Wii. Is that too much to ask?

Hunter McDaniel

Ricklogic - Yes, streaming rights are a different set of negotiations from DVD purchase. But what the studios want for those rights and what they may be able to extract from Netflix and other VOD providers are two different things. I know I certainly am not willing to pay significantly more just to avoid the day or two it takes getting DVDs in the mail. NF will not be offering really big bucks for streaming unless they can convince millions of subscribers to pay for it. That's a hard sell vs. the value of the service we already have.

Also, a lot of the content that they have on WatchNow may be inexpensive but it is good enough if I'm just looking to pass some time. It is at least as good as what I'm likely to find surfing cable.

Ricklogic

Hunter

Well put.

I do think that the content owners are sitting pretty with so many more parties buying content:
- the battle among cab's, sat's and telco's, using the triple play.
- the game consoles offering content.
etc.

It puts the content owners more in the driver's seat than has been true for awhile.

It makes the content owners less worrried about any one entity, probably especially physical DVD rentailers who provide such a low margin to the content owners.

Netflix is in a quandary: how to max the payback on their huge investment/commitment to physical DVD rental (inventory, equipment, distribution center long-term leases, etc.) while being careful not to become, practically speaking, irrelevant. That's why you see them playing with electronic delivery but still tending to talk it down like they still believe that physical DVD's will dominate for decades. It's a tricky balance to maintain as time goes on.

Firstlawofnature

Current model is built for a decade, not decades. They expect, probably correctly so, a long hybrid period. Can’t see how it’s anything other than that given the installed base of players and the lack of standards for digital at this point.

Still down on renting I see.

leonardodicrapio

"NF will not be offering really big bucks for streaming unless they can convince millions of subscribers to pay for it."

Possibly true (my guess would be that most likely a price hike would happen first for the 3-out plan, which costs as much as it did five years ago -- with a price hike in-between), but not necessarily. Netflix's biggest expense right now is postage. Netflix's biggest expense in the future may be for the digital rights to movies.

If Netflix's average customer rented 8 DVD's per month through the mail and this average went down to 7.5 DVD's per month through the mail with the WatchNow service, Netflix's postal costs would decrease by 6.25%. If Netflix was spending $400 Million per year on postage (Subscription costs and Marketing expenses), this decrease of 0.5 average DVD's mailed out per month would result in a $25 million decrease in postal costs alone.

Of course, people would probably be watching 0.5-1.0 movies per month with WatchNow, and the cost for the digital rights could very well exceed the savings on postage.

http://yahoo.brand.edgar-online.com/fetchFilingFrameset.aspx?dcn=0001193125-07-042689&Type=HTML

leonardodicrapio

"- the battle among cab's, sat's and telco's, using the triple play."

yawn, the triple play. comcast's 3 for $33, which goes up to $135 after the trial period (which they are extending out to two years now).

personally i like to piggyback my internet and video provider with an independent voip provider. i wouldn't pay comcast $40 on top of a $95 bill for hi-speed internet and expanded basic for a service that costs them $10 to $20 -- not when i could get plain old telephone service (pots) for just a bit more (or a lot less if i didn't want caller id and voice mail) and have 99.999% reliability from the local baby bell (when has the cable company been able to say that?)

prozac

Also, a lot of the content that they have on WatchNow may be inexpensive but it is good enough if I'm just looking to pass some time. It is at least as good as what I'm likely to find surfing cable.

I have to agree with Hunter and if they add movies here and there it's fime by me. Now if they want to charge more (kind of a premium service) for newer movies then we can decide if want to purchase it.

Ricklogic

FirstLaw - you may be right on the 'decade' timeframe although sometime back I thought they had indicated longer (maybe it had been longer and they've come down a bit since they added streaming?). I'm not down on renting per se. There are various forms of renting and I think that physical DVD rental is ultimately the model that will be tougher to stay viable. It is not as important as sales and the margins are light for content owners. But the real fundamental problem that I see (and that Hastings referred to) is the addition of new competition for consumer cash and eyeballs: YouTube (Hastings actual comment), many new forms of interactive activity on the Internet, game consoles growing faster than ever, etc. Someone has to lose.

Leo, I understand why you customize your set up but I also see the cab’s, sat’s, and telco’s adding lots of customers – the reason (illiteracy?) doesn’t much matter as much as the fact that it is happening. No one can say that Netflix/Blockbuster won't survive but they are going to need some luck. Netflix certainly had their day but things are really changing fast recently.

hueristix

This just in:

Microsoft Director Hastings Buys $3M Worth Of Co Stock >MSFT
Last update: 5/1/2007 7:25:27 PM
DOW JONES NEWSWIRES

Ricklogic

It's an extremely tiny % of Microsoft but it is greater than the amount Hastings has in Netflix.

Ricklogic

Scratch the more than he has in Netflix. I read it as 3M shares which would have been more than $80,000,000 of Microsoft but it actually says $3M.

Firstlawofnature

"... tougher to stay viable."

Tougher sure. Strategically placed DCs using the post office will go by way of the video store eventually. The real questions: how much money will NF make before that happens & will NF be a leader in the digital era as well.

Some of these activities are not mutually exclusive from each other but yes someone loses. Maybe all the local gyms will close down. A good flick trumps all.

MSOs were on their asses a few years ago. Now all is rosy. We won't have to wait too long for cable to have its head back on the block.

Ricklogic

re: cab's, sat's, and telco's
MultiChannel News
May 1, 2007
Comcast Predicts Sustained Double-Digit Growth
Comcast provided aggressive growth guidance at its biennial Investor Day Tuesday, telling an audience of investors and analysts it expects double-digit revenue and cash-flow growth for at least the next three years. The MSO’s optimism was fueled by strong growth in its triple-play offering of voice, video and high-speed data, as well as expected gains in online advertising through its Comcast.net Internet portal. More

leonardodicrapio

re: cab's, sat's, and telco's
Comcast is poaching Verizon's phone customers. Verizon is striking back, poaching Comcast's cable customers (even offering Comcast SportsNet programming -- in standard definition and High Definition). Satellites are poaching Comcast's customers, also. Some people are dropping their local phone entirely in lieu of using their cellular phones (especially considering how much that one mobile line costs). This is a somewhat limited size pool, and Vonage and SunRocket are draining revenues, too (offering people VOIP for less than half the cost of POTS). If Comcast is projecting growth rate that is roughly in the teens (percentage-wise), I would believe that it is happening more from (analog customers to) digital conversion (forced ala Chicago, which Comcast is making into a virtually entirely digital spectrum) or coerced {dropping off somewhat popular channels like ESPN Classic and The Nashville Network (TNN) -- hey, you've gotta love the Dukes of Hazard (especially Daisy's Duke shorts). Three for $99 is a promotional rate, and the rate likely goes higher than the $135 I quoted because I believe Comcast gets you on digital cable for that $99 rate (and I was figuring that number on what they charged for Expanded Basic). Three for approximately $150 is not nearly as appealing.

Edward R Murrow

Despite all the anti-cable sentiment here, according to announcements about Cablevision and earnings from Time Warner Cable and Comcast, cable continues to make a comeback with customers.

Looks to me like BBI is taking NFLX into hell with them.

leonardodicrapio

Blockbuster is riding solo on its ride into hell. They just sold one of their prime assets at a fire-sale price (an estimated 35 to 53% off). I guess they didn't want to rish coming close to getting near their $250 Million threshold for lender approval (otherwise saner minds might have prevailed).

"Blockbuster announced it has sold U.K.-based Games Station Ltd. to European retailer The Game Group PLC for about $150 million in cash.

Barton Crockett, an analyst for J.P. Morgan Securities, said he had expected the sale to bring in $80 million to $170 million more."

http://biz.yahoo.com/ap/070502/earns_blockbuster.html?.v=8

"The Dallas-based company said last month it had negotiated a credit agreement amendment with its lenders to gain more latitude in selling off assets.

The amendment raised the value of sales, transfers or disposals of assets that Blockbuster may transact without lender approval to $250 million from $100 million."

http://money.cnn.com/2007/05/02/news/companies/blockbuster.reut/index.htm?source=yahoo_quote

eazyguy52

And this just in:

Blockbuster Loss Widens in tough rental market

http://www.hollywoodreporter.com/hr/content_display/news/e3iec99c77ee81db5e3f191f280fce30078

leonardodicrapio

And since shares of the Game Group jumped 6.5% (adding 34 million British pounds to their market cap, which is over $67 Million U.S. dollars), I would say the market is agreeing that Game Station is a steal for $150 million.

eazyguy52

Try this:

http://www.hollywoodreporter.com/hr/
content_display/news/
e3iec99c77ee81db5e3f191f280fce30078

leonardodicrapio

Quotes (four successive paragraphs) from the link that eazyguy posted with my notes (translations):

"Chairman and Chief Executive John Antioco said the stores face 'an extremely tough' sales climate but said Blockbuster's online service will turn profitable next year."

My thoughts: Gross margins will dip below 50% next quarter {from 51.7% this quarter (1Q07) and 56.5% from 1Q06}. Is Antioco's statement supposed to mean Blockbuster will turn a profit in 4Q08 of for the full year 2008? I guess it is not Antioco's problem at that point in time. I'm not sure if Blockbuster can even turn a profit in 4Q07.

"Antioco said prices for online rentals might have to rise and that the chain is may allow customers to rent movies over the Web without paying a monthly subscription."

My thoughts: Premium pricing for Total Access and special ordering of DVD's?

"Analyst Stacey Widlitz of Pali Research agreed.

'This year the goal is to get as many consumers as possible no matter the cost, then try to make it profitable next year,' Widlitz said. 'I think it will pay off in the long term, but in the short term, there's some bottom-line pain.'"

My thoughts: Selling Game Station at a significant discount is a big cost. If all of the approximately 2.5 million BBTA customers (from 1Q07) paid $4 more per month that would net $30 million more for the quarter. That only cuts into 2/3 of BB's loss for the quarter. And Blockbuster would lose a significant number of BBTA customers with a price increase.

Edward R Murrow

"Blockbuster is riding solo on its ride into hell"

If I'm reading the announcements by both companies correctly:
BBO added 800,000 customers while NFLX added 485,000 subscribers for the quarter.

With churn and subscriber acquistion costs like they are for both companies, with NFLX adjusting guidance for customer growth and revenue downwards and with BBI running up losses, make no mistake that they're both on the Highway to Hell.

Does BBI have some sort of plan where they take losses in the short-term in order to tar, feather and ride NFLX out of town on a rail in the long-term?

leonardodicrapio

All right, this has gotta be one of the strangest comments -- "We think we have other ways to do that beyond price." What is Antioco hinting at? The only thing I think maybe he is talking about is possibly some type of free VOD (which is pretty much what Netflix is already offering now).

"Tony Wible - Citigroup

When you indicated that you didn't foresee any changes in the online program other than potentially an online-only option, could you provide a little more color? Are we talking about the online being a discount to where we're currently pricing Total Access? Is that what we should read into in it?

John Antioco

I don't think you should read anything into it at this point, Tony, other than we believe that option ought to be available to customers. Obviously we would try to do it in a way that would create some competitive differentiation. We think we have other ways to do that beyond price. So stay tuned for further details."

http://retail.seekingalpha.com/article/34304

leonardodicrapio

I also love how they dance around the additional cost of $2 per Total Access customer per month. They are now saying this year it will average out to $2 per TA customer per month. Somehow I don't see them being able to average down to $2 per TA customer per month from what I would approximate was about $5 per TA customer per month from the past quarter. Of course Blockbuster probably isn't taking into account that they are cannibalizing their own in-store sales (not just Hollywood Video's in-store sales) with Total Access.

leonardodicrapio

Ed, I don't think they have a solid plan. Judging by Antioco's comments, I believe he thinks they can simply raise rates on Total Access customers and instantly become profitable. But he is selling a bill of goods for $18. If he raises the price to $22, some of the customers they have "invested in" will defect. This thinking is about as one-dimensional as Politicians who talk about lowering/raising taxes and/or decreasing/increasing spending in dollar amounts as if those changes won't have secondary effects.

People clearly aren't switching from Netflix in droves, despite the fact that you could get many more movies with Blockbuster. I tried it and didn't like it. I get all the movies I need with Netflix.

Ed, you said, "Does BBI have some sort of plan where they take losses in the short-term in order to tar, feather and ride NFLX out of town on a rail in the long-term?"

John Antioco said in the conference call, "If we decided to slow the growth of our subscriber base, our online service could be profitable now."

Firstlawofnature

The beauty of today is that the street's latest honeymoon with BBI is over for now. It ain't gonna reward BBI for growing the sub base at the expense of profits. Difficult decisions loom.

Brian

Hopefully, they can get this up and running by the summer. Nothing says summer better than watching Waterworld on my MacBook in an air-conditioned room while chugging water and drinking some beer

Joe Cassara

Well, isn't that pretty? January '08 already, and they still haven't implemented this. So much for "internet time", Reed.

OldNetflixPlayer

The silverlight version is horrible. It takes ten times as long to 'load' and 'buffer', and has far more problems

coach purses

Luckily to read your article,thank you. With very best wishes for your happiness in new day.

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