Netflix Competitors Can Only Play Catch-Up

Netflix (NASDAQ:NFLX) has more than 10 million subscribers and like this recent article, "Netflix passes 10 million subscriber mark", discusses, it is the only firm in the marketplace offering instantaneous viewing of its media to consumers.

So how come the firms' competitors, namely Amazon (NASDAQ:AMZN) and Blockbuster (NYSE:BBI), aren't following suit? The simple answer is that Netflix has positioned itself to be the trailblazer in their industry and the other firms are playing catch-up. Consumer spending has been growing steadily, rising 5.75% in 2008 overall according to MSSI figures.

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Delving deeper into the numbers reveals that the subscription retailer’s revenues are more than assured for the short term, but the main issue is sustainability. As was brought up in an MSSI story last year, "Busted Blockbuster", the future lies in online expansion and ultimately profitability, which as Amazon can attest to is difficult in a still developing industry.

With plans starting from as little as $4.99/month, the issue will be if the content producers can be compensated enough by firms, like Netflix, in this ever-changing marketplace. Netflix has proven that people are willing to pay for both good content and customer-oriented products, but expanding its business in the digital arena will certainly be well fought by its competition.

This data was compiled by the Geezeo Main Street Spending Index (MSSI).

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Comments

[Linda Nelson:]

The biggest issue for Netflix will be to provide a huge library of content for its streaming customers. As an independent filmmaker and distributor of a small library, I've seen how difficult it is for content owners to get their films up on the Netflix site. They need to find a way to open up the floodgates and make all that great independent product available to their customers. This will help keep them in the lead - otherwise, platforms that embrace the diversity of content available, to feed the shattered niche markets, with great independent content from the endless shelf, will quickly take over. There are great sites that stream wonderful independent film like Indiepix.com, Jaman, Caachi.com and even Amazon.com's VOD service. Like iTunes, these sites will find that people are more than happy to spend a few bucks to see great film, rather than the dumbed down, mass appeal tentpoles that the studios must make to protect their bottom line.

Feb 20 11:25 AM

[jkk:]

sorry - streaming is a deadend for NFLX (they could be easily priced out by cable through tweaking internet prices and cable setting up own streaming service)- they are losing money in streaming right now and they are better off not pushing into this area to keep the dvd alive longer - and they are about to get hit by a redbox explosion in the physical area (coinstar making a big move here) - the only thing that made NFLX streaming any good was Starz Play - look at the Alexa.com page views since that deal was announced - the hook up with xbox helped compund that deal - but Starz Play is not cheap - $5.99 per subscriber the cheapest only if you have Verizon - even if NFLX got a better deal say $2 bucks pur user - this is going to add up - and Starz Play will have to increase fees cause they are going to lose fees from cable companies for trying to cut them out - Starz is probably going to shoot itself in foot here (they might not have realized the amount of people that would be streaming to TV - even Starz's website only wanted Stars Play downloads to go to handheld and protable devices, not to TVs) - HBO wont sign on with NFLX - they dont want to compete with themselves and they make to much money from cable to risk changing the game - hence NFLX sent out notice to customers if they would be will to pay $10 bucks more a month for HBO -

i would say follow the cd music model to see where streaming is going in the future (anyone can use it but must pay royalties based on views); DVD has lagged a bit behind, but with better compresion techniques, more broadband, bit torrents usage is growing especially in this economy - and is following the napster MP3 path. But there is one wrench here - and this is what cable/telco companies are doing now - (before with MP3 they did not care because they were not losing rev from movies and VOD) they are montioring users for illegal downloads and sending warning letters and bandwidth caps to stop bit torrent from spreading - this will allow hollywood to charge more through limited pipeline and this is good for NFLX dvd physical

Feb 20 12:42 PM

[esymoni:]

Difference between video and music is that the video cost are much greater and the studios are moving to protect their intellectual rights. Look for it to become more difficult for online streaming of new products in the future. if the studios can not make a buck, they won't make the movies.

Look at Napster, most of the downloading is now paid for. Free is not in the studios best interest going forward.


On Feb 20 12:42 PM jkk wrote:

> sorry - streaming is a deadend for NFLX (they could be easily priced
> out by cable through tweaking internet prices and cable setting up
> own streaming service)- they are losing money in streaming right
> now and they are better off not pushing into this area to keep the
> dvd alive longer - and they are about to get hit by a redbox explosion
> in the physical area (coinstar making a big move here) - the only
> thing that made NFLX streaming any good was Starz Play - look at
> the Alexa.com page views since that deal was announced - the hook
> up with xbox helped compund that deal - but Starz Play is not cheap
> - $5.99 per subscriber the cheapest only if you have Verizon - even
> if NFLX got a better deal say $2 bucks pur user - this is going to
> add up - and Starz Play will have to increase fees cause they are
> going to lose fees from cable companies for trying to cut them out
> - Starz is probably going to shoot itself in foot here (they might
> not have realized the amount of people that would be streaming to
> TV - even Starz's website only wanted Stars Play downloads to go
> to handheld and protable devices, not to TVs) - HBO wont sign on
> with NFLX - they dont want to compete with themselves and they make
> to much money from cable to risk changing the game - hence NFLX sent
> out notice to customers if they would be will to pay $10 bucks more
> a month for HBO -
>
> i would say follow the cd music model to see where streaming is going
> in the future (anyone can use it but must pay royalties based on
> views); DVD has lagged a bit behind, but with better compresion techniques,
> more broadband, bit torrents usage is growing especially in this
> economy - and is following the napster MP3 path. But there is one
> wrench here - and this is what cable/telco companies are doing now
> - (before with MP3 they did not care because they were not losing
> rev from movies and VOD) they are montioring users for illegal downloads
> and sending warning letters and bandwidth caps to stop bit torrent
> from spreading - this will allow hollywood to charge more through
> limited pipeline and this is good for NFLX dvd physical

Feb 20 06:46 PM

[ravik:]

There will always be challenges, but netflix will do better than it rivals. They have a moat which very few companies have and that is 10 million monthly subscribers. They have done better than others to retain their customers. I do not see any move from their competitors which they cannot beat. If netflix keeps on growing and keeps on improving its online offer it will be the market leader. There will be other companies doing the same thing (wal-mart is not the only one in retail!!) but netflix will be the best one of them.

Feb 23 02:31 PM

[jenny:]

Simply said-they are playing catch up. Its like the Apple/Microsoft chase. Being a "me too" kind of company never works out, originality will prevail. With Netflix, not only were they trailblazers in this industry but they perfected the model. And as consumer spending decrease, more and more people will turn to NetFlix as a cheap home entertainment alternative. NFLX has growing market share and their sentiment is becoming more bullish (www.predictwallstreet....). I think investors are starting to see NFLX as a good buying opportunity and a company that keeps getting positive press.

Feb 23 03:02 PM

[reiser999:]

You can prevent a technology from becoming mainstream for only so long, torrents and p2p are the future. Remember dial-up in the 90s? The US is behind quite a few countries in broadband so it will take some time for newer free technologies to catch on.
The new napster is a failure, most internet traffic is still p2p derived, torrents themselves account for up to 40% of all internet traffic.
Netflix will fail, it panders mainly to the middle-aged "hip" crowd that won't not necessarily carry on with the next generation. Streaming for free is the future, whether it be on offshore servers that could care less or whether the studios set up their own streaming services (ad-supported).

Jul 23 04:12 PM