Will Wal-Mart’s (NYSE:WMT) new video streaming service, Vudu, hurt Netflix (NASDAQ:NFLX)? That seems to be “the” question about this story. The short answer is yes; new competition and increased demand for more (and newer) video content are going to drive prices down. Netflix is going to have to answer with excellent marketing and management. Will it? Time will tell.
That said, if Netflix survives (and I’m sure it will), it's going to be part of a vibrant online video services marketplace that is going to literally change the way people consume entertainment. This may sound like hyperbole, but I assure you it is not.
The ubiquitous availability of video content, courtesy of on-demand video services, begs the question, “What does it mean to own a video in the 21st century?" To put it another way, if the bits are always available for streaming or download, do you really need to store the bits locally on your device … do you really need to "own" them?
This is not going to be a subtle change, and it is not going to take very long. If you look at the exponential rate at which technology is changing, you can calculate a time in the very near future where everything we think we know about traditional content distribution no longer applies.
Will wireless tiered pricing help save linear distribution? Will DVD sales level off, or will they just fall off a cliff? Will there be enough broadband connectivity for average Americans to get the content they want on the devices they want, when they want it? How badly will piracy impact a subscription-based or pay-per-view on demand world? Is there enough of a market to support the plethora of online on-demand services? Will consumers actually have enough money to enjoy the content they want in an on-demand world?
I have about 100 more questions, but we can stop here. Netflix and Amazon (NASDAQ:AMZN) have some competition – and competition is always good for consumers.