NetFlix's free Internet movie service: free and worth every penny spent
NetFlix today announced that it will provide several hours of Internet movie viewing free to its subscribers. This offer mimics the one that Wal-Mart announced in November, but drops the $2.99 fee that Wal-Mart imposed in favor of restricting the number of hours a subscriber can view streaming movie content.
While this is a nice bit of PR for NetFlix, Blackfriars believes it will be ignored by consumers just as Wal-Mart's offer was. Why? Well, we set out the criteria for a successful Internet movie service last year, and we'll apply them again to this service. Blackfriars sees NetFlix's movie offering falling short because a viable Internet movie service needs to:
The other fatal flaw in NetFlix's strategy at present is a business one: free services rarely create great loyalty or business value. With NetFlix's video download service driving costs rather than revenue, NetFlix's incentive isn't to make it a great service, but rather to minimize its impact on its profitability. And while Microsoft may feed NetFlix co-marketing dollars to help defray the profit impact, those dollars will never be enough to compete with services that actually have to earn consumers' dollars.
If NetFlix really believes in video downloads, it should figure out a way to charge users for them. If it doesn't, it's in a price war with Wal-Mart for who can deliver the worst service cheapest. And no matter how wonderful the technology, price wars do not great businesses make. Meanwhile, Apple's iTunes Store will keep on adding to the 1.3 million movies and 50 million TV episodes it has sold to consumers -- and show consumers that they get what they pay for.
While this is a nice bit of PR for NetFlix, Blackfriars believes it will be ignored by consumers just as Wal-Mart's offer was. Why? Well, we set out the criteria for a successful Internet movie service last year, and we'll apply them again to this service. Blackfriars sees NetFlix's movie offering falling short because a viable Internet movie service needs to:
- Have a critical mass of users. NetFlix has more than four million subscribers, so they meet this requirement. Check this one off as a pass.
- Provide user accountability and billing. NetFlix has credit accounts on file for its users and therefore can easily make users accountable for misuse or illegal redistribution of its content. They pass this requirement too.
- Be dead simple to use. Sadly, this one isn't true. NetFlix uses Microsoft's video streaming digital rights management system and further requires both Windows and Internet Explorer to function properly. For anyone 1) using a computer not running the latest version of Windows or 2) caring about the security of their system and therefore not running Internet Explorer, the NetFlix service will just be another exercise in frustration. This fact was demonstrated clearly in the New York Times article when the one-minute plug-in installation turned into 15 minutes on the phone with technical support debugging Microsoft's seamless user experience. So this isn't going to be drop dead simple. The service fails this requirement.
- Work with TVs and portable devices as well as PCs. NetFlix promises that this is in the works and will be available real-soon now. But today, NetFlix's choice to use streaming technology ensures that portable devices won't work with the service, and getting the signal to your TV from your computer will be another exercise in frustration (see requirement 3).
The other fatal flaw in NetFlix's strategy at present is a business one: free services rarely create great loyalty or business value. With NetFlix's video download service driving costs rather than revenue, NetFlix's incentive isn't to make it a great service, but rather to minimize its impact on its profitability. And while Microsoft may feed NetFlix co-marketing dollars to help defray the profit impact, those dollars will never be enough to compete with services that actually have to earn consumers' dollars.
If NetFlix really believes in video downloads, it should figure out a way to charge users for them. If it doesn't, it's in a price war with Wal-Mart for who can deliver the worst service cheapest. And no matter how wonderful the technology, price wars do not great businesses make. Meanwhile, Apple's iTunes Store will keep on adding to the 1.3 million movies and 50 million TV episodes it has sold to consumers -- and show consumers that they get what they pay for.
Technorati Tags: Internet, iTunes, Marketing, Movies, NetFlix
posted by Carl Howe at
9:55 AM
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