*spinoff* Comparison of the console's download video services

[jonabbey]

You're right, it's not even close to the same. That's because for some downloadable Netflix is actually a significant if not insurmountable advantage that blu-ray can't hope to compete against, even more so since it's just $200 to get it. But you can't see that because you feel everyone watches movies like you.

What's to stop Sony from implementing an 'all-you-can eat' pricing plan for the PlayStation Video Store? What is intrinsically special about Netflix over any other video download service?

One of the things that Blu-Ray has that Netflix, iTunes, etc., don't have is that there is one silo for HD physical media. You don't have to worry about whether the new device you acquire will be able to access media from your particular vendor, and you don't have to worry about whether all of your gear comes from the same manufacturer.

Granted, when Apple hasn't adopted Blu-Ray drives for their systems despite being an early member of the BDA, that whole 'ubiquity' thing doesn't go as far as the same line of argument does for DVD, but it's still a factor. Video download services are inherently splintered for no good reason to the consumer.

Why does Microsoft benefit from providing access to the Netflix service rather than just spinning their own with a similar availability/pricing model, anyway? What's the long-term benefit to Microsoft for letting Netflix profit from their customers?

<oblig>The PS3 Slim looks great, and I agree that it appears to lay the groundwork for an effective re-launch of the PS3. Probably not the best time for it, what with the economy and all, and we'll have to see how aggressive Sony gets about marketing, co-marketing, and increasing their support from 3rd party developers, but at least now they have a price that won't get them laughed out of the room.</oblig>

 

[deathindustrial]

Why does Microsoft benefit from providing access to the Netflix service rather than just spinning their own with a similar availability/pricing model, anyway? What's the long-term benefit to Microsoft for letting Netflix profit from their customers?

Presumably Microsoft will just buy Netflix if they feel that more money is there to be made. In fact I am surprised that has not happened already - anti-trust concerns maybe?

Cheers

 

[joker454]

What's to stop Sony from implementing an 'all-you-can eat' pricing plan for the PlayStation Video Store? What is intrinsically special about Netflix over any other video download service?

It would cannibalize their blu-ray investment, which at this point is quite substantial. Sony would be competing with themselves effectively. There is a class of consumer out there that if exposed to a full service download movie option would likely never buy a disc again. Plus there is something to say about brand recognition. Everyone knows Netflix, that gives it substantial value at point of sale when a customer sees a brand they are familiar with or already use. It's just like what the name Sony means to many here on this forum, the name Netflix similarly gives people that warm fuzzy feeling.

Granted, when Apple hasn't adopted Blu-Ray drives for their systems despite being an early member of the BDA, that whole 'ubiquity' thing doesn't go as far as the same line of argument does for DVD, but it's still a factor. Video download services are inherently splintered for no good reason to the consumer.

I don't think ubiquity matters that much in this case, all that matters is what movie catalog someone has access to. If someone can download all the movies they want on the 360, they they will be happy.

Why does Microsoft benefit from providing access to the Netflix service rather than just spinning their own with a similar availability/pricing model, anyway? What's the long-term benefit to Microsoft for letting Netflix profit from their customers?

Brand recognition! If someone told me that Microsoft had a movie download service, I probably wouldn't think much of it, at least not without doing some in depth research on it. But tell me that Microsoft has Netflix and bam, instant street cred because I know them, so there is definite value there. Basically if you are into downloading movies, then you will know Netflix, it's a given.

but at least now they have a price that won't get them laughed out of the room

It is very late, but still I'm thrilled that they finally cut price. We don't have enough console volume out there to support these uber expensive games, which of course has cause some havoc in the industry. This is mostly because of high console pricing, if you can't pay you can't play. Microsoft doesn't really set the pace of console pricing, they just follow off what Sony does (although possibly less now given their success), so we've been all watching Sony to cut price to set the new cost of entry. So I'm happy, although I would add that it's about damn time!

 

[obonicus]

Presumably Microsoft will just buy Netflix if they feel that more money is there to be made. In fact I am surprised that has not happened already - anti-trust concerns maybe?

Is it worth it to them? It doesn't seem that Netflix is hugely profitable to begin with.

 

[Asher]

Netflix is profitable and its profits are increasing at high rates (something like 30-35% year over year so far?). It'll only continue for the forseeable future. It's a solid target for an acquisition by a player who is very much pro-digital distribution (eg, MS).

 

[patsu]

Netflix is doing well because people watch more movies at home during recession. The bulk of Netflix's profit comes from DVD rental, followed by Blu-ray rental. The digital download part did not drive growth (It's an investment for now):
* http://blog.streamingmedia.com/the_...-service-not-increasing-earnings-for-now.html
* http://digitaldaily.allthingsd.com/20090723/netflix-earns/

EDIT: Back to Slim:
http://www.andriasang.com/e/blog/2009/08/20/ps3_losses/

The slide lists the material cost for the PS3 as ¥40,000. The announcer explains that a price drop to ¥29,800 means that Sony's losses will increase with each system they sell. However, if they increase their sales, the material cost will gradually go down, and so too will the losses.

Disclaimer: I didn't check their numbers.

 

[liolio]

Brand recognition! If someone told me that Microsoft had a movie download service, I probably wouldn't think much of it, at least not without doing some in depth research on it. But tell me that Microsoft has Netflix and bam, instant street cred because I know them, so there is definite value there. Basically if you are into downloading movies, then you will know Netflix, it's a given.

I think this argument goes a long way for instance in France (and some others europeans countries?) Ms has land a deal with canal (which is a tv french tv channel present in some others countries hence my question) in regard to digital distribution.

 

[obonicus]

Actually, I knew they were profitable (and their net income did grow 35% from 2007 to 2008, and this year seems even more positive), I was just wondering if it'd be worth it for MS to shell out several billion to buy them. It's a recognized brand name and it'd help against Apple, but does MS want to get into the dvd/BRD rental business? Maybe that money would in fact be better spent working out a deal with studios.

 

[betan]

Since no one is talking about it, should I assume that Netflix's online offering is finally on par with their DVD/BD service?

 

[AzBat]

Since no one is talking about it, should I assume that Netflix's online offering is finally on par with their DVD/BD service?

No. Still way short. But it's getting better. It's not so static as with DVDs. The content is always changing(expiration dates on content). Plus, if you want the newest stuff that just hit DVD, then you're better off with a DVD or PayPerView on Cable/Satellite, etc.

Tommy McClain

 

[betan]

No. Still way short. But it's getting better. It's not so static as with DVDs. The content is always changing(expiration dates on content). Plus, if you want the newest stuff that just hit DVD, then you're better off with a DVD or PayPerView on Cable/Satellite, etc.

Tommy McClain

That's what I thought. I don't even bother checking online stuff anymore.

I'm sure it's growing fast, the thing is though, from the content provider's point of view, in order to release content within a all-you-can-watch service, the revenue from optical media or pay-per-view should drop significantly for that particular content. So even if it grows to 95% or so of DVD offerings I'm not sure it will ever have the latest 5% with the current payment model.

 

[Ben-Nice]

It would cannibalize their blu-ray investment, which at this point is quite substantial. Sony would be competing with themselves effectively. There is a class of consumer out there that if exposed to a full service download movie option would likely never buy a disc again. Plus there is something to say about brand recognition. Everyone knows Netflix, that gives it substantial value at point of sale when a customer sees a brand they are familiar with or already use. It's just like what the name Sony means to many here on this forum, the name Netflix similarly gives people that warm fuzzy feeling.

Yet oddly enough they are doing video on demand...but to your point I don't think you can download a whole Blu-Ray movie on SD.

SCEE has confirmed that its long-awaited movies-on-demand service is heading to Europe, with the UK, France, Germany and Spain set to receive the service first of all, kicking off this November.

The service will allow users to both watch films over their PS3 and also on their PSP – with both old and new models of the handheld being supported. It will be implemented through PSN, and PS3 users will be able to start viewing films as they are downloading.

Studios already on board include 20th Century Fox, Disney, ABC, ESPN, Lionsgate, MGM, Paramount, Universal and Warner Bros.

 

[patsu]

It hasn't been proven true. In general, movie execs found that VoD does not cannibalize Blu-ray -- at least for this generation of users. I remember one of the Sony execs mentioned this in his interview as well. Enough consumers still want to own high quality content, and resent digital movie DRM.

Despite the economy, Blu-ray purchases actually went up. The packaged movies have much higher revenue than digital download too (although per-unit wise, the studios earn more from digital distribution per delivery).

Here's an example of the numbers and high level analysis they went through:
http://www.digitalrenaissance.se/2008/09/20/video-on-demand-increases-dvd-sales/

 

[joker454]

It hasn't been proven true. In general, movie execs found that VoD does not cannibalize Blu-ray -- at least for this generation of users. I remember one of the Sony execs mentioned this in his interview as well. Enough consumers still want to own high quality content, and resent digital movie DRM.

Many existing VoD/streaming services are too limited to compete, either with crappy selection, getting content too late, or gimped in many other fashions. Much of this is by design specifically to not affect disc sales. If a proper download service was available that offered HD movies day and date with discs, with a full selection as well and on a device that millions already own, then I'd be shocked if disc sales weren't affected. Netflix 360 still isn't there yet but it's improving, but both Netflix and Microsoft ultimately have incentive to make it work.

 

[patsu]

What you said has already been conducted. People buy Blu-ray for a reason. People rent movies (disc or digital) for another. At least for now.

 

[joker454]

What you said has already been conducted. People buy Blu-ray for a reason. People rent movies (disc or digital) for another. At least for now.

Right, but all those stats are skewed because streaming/vod now is mostly ass, or not available to many. Some are as bad as $7 for a 4 hour viewing window. Who in heck would use that? Likewise the entire population has access to discs, how many have access to downloads? It's currently apples to oranges comparison. It would be the equivalent of someone saying that people preferred to buy red cars over yellow cars, but then omit the fact that yellow cars had a tendency to explode. Well, of course then red cards are preferred! Same with discs vs downloading currently, the download scene has been severely gimped to uselessness and/or not available to most. Just like betan said, "I don't even bother checking online stuff anymore."

Netflix on 360 though is the first real incarnation of a viable download service that has the potential to challenge discs, although it's in it's infancy. All the rest are non starters.

 

[patsu]

I don't think so. Netflix is US only. There are other more convenient ways to get movies too (cable, DirectTV, etc.). The studios will simply tier the channels to maximize their profit. As it stands, their conclusion is for the same movie, they didn't see the cannibalization so far because the rental people and the purchase people have different needs. For these tests, they would have normalized the differences you highlighted, and more (These are formal tests and the studios have very sophisticated demand modelling systems).

The studios have been conducting lot's of experiments over the years. This is their bread and butter. They are not stupid. In the end, the overwhelming majority of Netflix's business is still packaged movie rental.

I believe at this stage, the major studios are more wary of the $1 rental RedBox kiosks (in US).

And then there's the iTunes service and portable video. It is also possible for BD-Live players to evolve into an open video download service.

 

[DrJay24]

Netflix's streaming service was to combat BB's swap the mail disc in store deal. I have literally never met a person who has used it and I have told many people about it. I think it's big in the 360 world because many kids attach their parents Netflix account to their Live account, then they can get free TV/movies even if they cannot chose the physical disc to rent.

 

[joker454]

The studios have been conducting lot's of experiments over the years. This is their bread and butter. They are not stupid. In the end, the overwhelming majority of Netflix's business is still packaged movie rental.

Except all their experiments are flawed. So far everything they have been doing in the downlodable movie space has been engineered to not interfere with disc sales with a variety of limitation/restrictions in place. So it's not a surprise when they currently say that sales of one haven't cannibalized the other. Of course not, they have engineered it this way. But they are making the same mistake the music industry made years ago, who also kept their head in the sand and did everything in their power to protect disc sales by similarly gimping any download music features instead of anticipating future user demands.

Some will always want to buy discs and collect. But there is a large portion of people that would be fine just downloading a movie and watching it if they had the option. At this point most do not have user friendly/price friendly/cost friendly options for this so they go to disc. These people are not "disc people" or "download people", they are one and the same. They are just currently not served by any download option.

 

[patsu]

Except all their experiments are flawed. So far everything they have been doing in the downlodable movie space has been engineered to not interfere with disc sales with a variety of limitation/restrictions in place. So it's not a surprise when they currently say that sales of one haven't cannibalized the other. Of course not, they have engineered it this way. But they are making the same mistake the music industry made years ago, who also kept their head in the sand and did everything in their power to protect disc sales by similarly gimping any download music features instead of anticipating future user demands.

I believe the tests were done in closed but large enough groups, so they could vary the parameters. The movie release schedule and pricing (for both rental and sales, offline + online) is an on-going study to optimize their revenue. I remember they also piloted with various startups.

But back to reality, the studios have many channels and prices to manage. Netflix is only a small member of the ecosystem. There are bigger gorillas in the movie distribution business. In terms of convenience, the cable operators, satellite or even Uverse is more convenient and bigger. Blu-ray and DVD sales + rental businesses are entrenched and won't go away anytime soon. In fact, the RedBox kiosks worry the studios because take up rate is fierce, and its pricing cheapens the movies. iTunes, NetFlix, PSN and Vudu are just budding.