It has been a tough few months for Netflix (Nasdaq: NFLX) since its failed attempt to split its business in two drew the ire of customers.
Qwikster may be dead, but Netflix still faces an array of challenges. Now news outlets such as TechCrunch are pointing to a rumored collaboration between Verizon Communications Inc. (NYSE: VZ) and Redbox, the video rental company owned by Coinstar (Nasdaq: CSTR), as a potential rival that could trounce Netflix. However, not everyone is drinking that snake oil.
The rumored Verizon-Redbox offering "doesn't exist today," said Dan Rayburn, executive vice president with StreamingMedia.com. "It's not out on the market."
Redbox, which rents movies and video games through 28,000 automated kiosks across the country, did not immediately respond to requests for comment on the rumors. Deidre Hart, a Verizon spokeswoman, wrote in an e-mail, "Verizon talks to a lot of companies. There are no definitive agreements to discuss with anyone at this time."
Rayburn said a collaboration between Redbox and Verizon could make sense. "Verizon already has deals with the TV guys through their other services. Redbox has deals with studios. They would have to work on streaming rights."
With only unconfirmed rumors to go on, little can be assumed about how such a collaboration would take shape. "We don't know what it's going to cost," Rayburn said. "We don't know what the quality will be like. We don't know what the inventory is or what devices it's going to be on."
Meanwhile, Netflix's missteps show the company is out of touch with its customers, he said. Qwikster was supposed to separate Netflix's DVD-by-mail business from the streaming video service. Customers balked at the plan, and Netflix backed down, leaving the old model of combined services intact, though at higher rates.
"There is such disconnect between Netflix and its consumers right now," Rayburn said.
Even without Verizon and Redbox potentially nipping at its heels, Netflix must contend with increasing competition from others, he said. Growing rivals include the Hulu Plus service from Hulu, a joint venture of Comcast (Nasdaq: CMCSA), News Corp. (Nasdaq: NWS), and The Walt Disney Company (NYSE: DIS); Amazon Prime; and Blockbuster, which is owned by Dish Network (Nasdaq: DISH).
"Dish stated that it will come out, sometime in 2012, with a streaming-only subscription offering for those who don't have Dish TV," Rayburn said. He also expects Google (Nasdaq: GOOG) and Apple Inc. (Nasdaq: AAPL) to offer their own streaming video subscription services eventually. Even video game console makers may give streaming video a try. Microsoft Corp. (Nasdaq: MSFT) and Sony (NYSE: SNE) "will end up offering something at some point across Xbox and PS3."
Amazon.com (Nasdaq: AMZN) seems to be gaining ground fast on Netflix and leveraging advantages that may be hard to match, he said. In February, it began letting Amazon Prime subscribers stream movies and television shows. "They are already at 12,000 titles. They have grown their inventory very quickly."
Furthermore, Amazon already sells DVDs, Blu-ray discs, and digital downloads. "Amazon is putting the content in front of the consumer in as many different ways as possible, which the studios love."
The other surprise star in this space is Walmart with Vudu. Without much promotion it has surprised the walmart officials and is growing at a really good rate. There is also iTunes. Netflix has no shortage of competitors and it really will come down to content access.
Looking at the rear-mirror, the fiasco at Netflix is obviously due to its broken business model.
Couple of years ago, Netflix was the king on DVD rental business. Its business model doesn't require Netflix to deal with content providers. Buying a DVD, Netflix can rent it as many times as it can. Like Dell in the PC era, Netflix was lean and fast on this business model.
Then Reed Hastings found that people were moving to streaming video, Netflix decided not to be left behind, so it jumped on streaming video bandwagon, only found that it needed to spend tons of money and energy to deal with these media providers. And its fate was at the mercy of these former enemies.
Furthermore, Netflix raised the price and made its customers angry at the worst possible time - transition period from DVD to streaming. It is a perfect storm.
Who pays subscription fees anymore? There is always a way to get things cheaper and faster with today's technology. It's not always legal but the truth of the matter is it's out there. I just found out from my young neice that she has a way to transform a youtube video for a new song that comes out into an MP3 file for her Ipod and it sounds as good as buying off of Itunes. I'm lucky I know how to turn my Ipod on but it's this kind of stuff that keeps these companies from staying on top for too long.
Erierunner, I pay subscription fees. If I wanted to I could get most of my content for free via non legal avenues, but bother? It's not worth it, not only because it's illegal, but it would take too much time, time that is worth far more to me than my monthly fee to Netflix.
Erierunner, I pay subscription fees. If I wanted to I could get most of my content for free via non legal avenues, but bother? It's not worth it, not only because it's illegal, but it would take too much time, time that is worth far more to me than my monthly fee to Netflix.
My comment was meant to have some tongue in cheek. I couldn't figure out the illegal stuff if you paid me. Point was, these things are out there and at the end of the day are having an impact on businesses such as this. Technology helps and technology hurts. Just like how newspapers are dying and media outlets needed to reinvent through the internet the same applies to companies such as netflix.
Telefreq, you definitely under-estimate the temptation of free stuff. You may want to see the following movie: http://www.imdb.com/title/tt0284363/. Even super rich people can not resist the temptation of a few free coins.
Free stuff is definatly tempting, but there comes a point where it is more work then it is worth. But trust me, I love free stuff as much as the next guy.
In many cases, people know perfectly well that free stuff doesn't worth the time they put on . But they just can't resist the temptation. Unfortunately, I am one of these people from time to time. I still have the problem to attend some not-so-interesting seminars during the trade shows, just to get some free perks. Maybe studying behavoir finance can help me to overcome this temptation.
I have been known to pop my head into some of those free seminars from time to time for the perks. And I always try to rub elbows with the vendors who are known to throw the big parties to try and get invites haha.
Every kid I know does the youtube song grab. It may not be legal, but it is pervasive. As adults, it's easier to pay 99 cents on itunes. But kids would rather spend their cash on illegal beer than legal downloads.
But kids would rather spend their cash on illegal beer than legal downloads.
@Noreen, true. Infact you can download most of the videos/movies using torrent site's. The day when the government strictly restricts such site's I think people will start paying for legal downloads.
I use the Amazon streaming service and it is very good. If you do have an issue you can call them on the phone and the person at the other end really understands what is happening and how to fix things. They also have a lot of titles available especially in older movies and TV shows. I think this is a winner. Netflix better watch out...
With their Kindle Fire rollout now a Total success;I would never bet against this behemoth.
Its good to hear your experiences with them were so good.
Amazon has got all those humungous resources(not to mention Jeff Bezos spirit) backing them.
Wth Amazon,Hulu,Apple,DISH and Walmart all snapping at their heels Netflix better up their game and wary or they will have no market/customer-base left to speak off.
I haven't tried out Amazon either. From what you have said it looks like their streaming service is really good. I think it's time Netflix got in touch with its customers and focused on catering to their changing needs. It should also have a good look at what its competitors are doing.
I am trying to think of what the value is that Netflix offers that is unique and differentiated. It seems to me that the technology to download music/film is becoming pervasive and built into everything (cable TV, XBox, Web, e.t.c.). In the end what Netflix has is distribution contracts and streaming technology but in fact these can all be replicated by many services so Netflix is going to have its hands full trying to keep this market to themselves. In the end the content owners own the value that the user is downloading, so Netflix will continue to find themselves in a weak bargaining position with the content owners going forward.
The "First Sale Doctrine" establishes the solid foundation for NetFlix's successful DVD rental business. NetFlix can acquire any movies issued on DVD at fixed cost and rent them to anyone. Media companies have no way to stop or even slow Netflix's progression.
Streaming is a totally different story, the "First Sale Doctrine" does not apply to streaming video. For Netflix, the cost of streaming business is unlimited why the rights are limited. Sometime, Media companies can simply reject Netflix to access its content library.
Now nobody knows if Reed Hastings can fix the broken streaming business model. I shall say it is not a easy task, even for Mr. Hastings.
Though I think its easy to say Netflix is out of touch with its customers, I still think trying to split DVD rental from streaming was the right move, I just think they went about it in the way wrong way. And I still think its something they will try to make happen again in the near future.
After the mess and retraction last time, it will be much harder to do in the future. I agree that it is the right move, but it was really done the worng way.
in this case I think the wrong way would be an understatement.
It will need to be done going forward, I think if they were able to dramaticly boost their online content that would go a long way to helping the cause.
If they do it better be on a grandfathered basis for the old customers. Another debacle like last time could be the end. I agree it makes sense but implement it for new customers and let the old ones stay as is.....at least for awhile and try to slowly convert. That is what most customer friendly companies do.
Blockbuster also has a presence in the streaming business, having deals with Facebook and Dish Network. This, together with retail storefronts and DVD's by mail make Blockbuster something of a triple-threat. They also recently expanded their selection of '80's B-movies after long being deficient in that area.
That is curious. When I interviewed Rayburn, I asked him about the possibility of anyone wanting to acquire Netflix and he didn't seem too hot about that idea.
In short, he saw a more likley scenario where rivals got into this market on their own especially if they had other revenue channels (such as Amazon, which sells a broad range of products).
BUT if you think about the licenses Netflix already has negotiated with TV and movie studios, it could make life a little easier for a company that wants to build up their inventory quickly...
The buyout rumor has been around since NetFlix shares was whacked, I am not sure how creditable it is this time. Netflix has a market cap of 5B, and with a 20% premium, it will cost the acquirer 6B, not a small price tag, even for Amazon.
It's amazing how it seems like one bad move has almost killed netflix. It seemed like they were flying high until their whole split talk and price change. Now just a short time later all of the other sharks are smelling blood and are ready to attack.
I don't necessarily think it was just one bad move. The price thing was big. But the way they handled it with their existing customers was rough. That's what left a bad taste in alot of people's mouths. Everyone knows the economy isn't so good and there will need to be price increases here and there. It's just how you present it to your user base that matters most.
In this economy a subscription fee to something like Netflix is easy to let go especially with their ill though tout price increase. Eventually Netflix will become like the physical blockbuster stores—outdated. The technology for streaming is evolving rapidly and will easily be the choice for consumers one it’s readily available through multiple channels.
Noreen, based on their recent results it’s a conversation being had across the country, the prevalence of redbox and streaming media through free sites are making the Netflix subscription fees seem exorbendent.
The blogs and comments posted on Investor Uprising do not reflect the views of Investor Uprising, PRNewswire, or its sponsors. Investor Uprising, PRNewswire, and its sponsors do not assume responsibility for any comments, claims, or opinions made by authors and bloggers. They are no substitute for your own research and should not be relied upon for trading or any other purpose.
To save this item to your list of favorite Investor Uprising content so you can find it later in your Profile page, click the "Save It" button next to the item.
If you found this interesting or useful, please use the links to the services below to share it with other readers. You will need a free account with each service to share an item via that service.
Tweet This