NetFlix Goes Online

My partner, knowing of my interest in the eventual disintermediation of network and, perhaps, cable television, by direct web access, sent me a recent piece from the New York Times, by columnist Dave Pogue.

In part, it read,

"Last week, a new contender entered the field with a radically different approach to Internet movies: Netflix.
Now, this isn’t the first time “radically different” was applied to a Netflix business model. Its main service, renting DVDs by mail, entails no per-movie fee, no late fees and no shipping fees.

Once again, Netflix has rewritten the rules — this time, of the online movie-rental game. The company has done away with expiration dates, copy protection and multi-megabyte downloads. That’s because you don’t actually download any of Netflix’s movies; instead, they “stream” in real time from the Internet to your computer.

Netflix has also done away with per-movie fees — in fact, there are no additional fees for watching movies online at all. Instead, the Netflix service is free if you’re already a Netflix DVD-by-mail subscriber. When you log in to Netflix.com, you see a new tab called Watch Now. It opens what looks like a duplicate set of the company’s usual excellent movie-finding and movie-recommending tools, except that you now see two buttons beneath each movie’s icon: Rent and Play.

The first time you click Play, you’re sent a tiny software blob that takes under a minute to install, and doesn’t require restarting your browser or PC. After that, when you click Play, the movie loads for a few seconds and then begins playing, right there in your Web browser. That’s it: one click. No special program, no confirmation boxes, no credit card charges, no copy-protection hassles. The movie just begins to play — full-screen, if you wish. You can jump to any spot in the movie, although the movie takes a few seconds to “catch up” each time you use the scroll bar.
Even more startling: Your movie watching is measured by time, not by individual movie title or by individual viewing.
The hours of movie watching you get each month depends on which DVD-by-mail plan you have. You get one hour of online movies per dollar of your monthly fee. So if you pay $6 a month (for the one-DVD-at-a-time plan), you can watch six hours of movies online; if you pay $18 (for the three-DVD plan), you can gorge yourself on 18 hours of online movies. And so on.

But the huge, mind-bending, game-changing advantage of this model is that you can channel-surf movies just the way you channel-surf TV. You can watch 15 minutes of “Single White Female,” decide you’re more in the mood for a documentary, and switch over to “Super Size Me.” When a buddy tells you that “Twister” is lame except for the climactic final sequence, you can fast-forward right to that part. You can watch the beginning of “Gladiator” tonight, and watch the rest of it a month later, without having to re-rent it or pay late fees.
Or you can casually sample one movie after another, looking for something that grabs you.
Movie surfing like this has never been possible before. All other movie delivery formats require you to make your movie choice based only on the box shot, the movie trailer and a synopsis.
(Starz’s Vongo service comes close; it offers unlimited movies for a flat $10 monthly. But you have to download a movie before you can watch it, which rules out this sort of casual real-time movie surfing.)
Netflix-by-Internet, in other words, is deliciously immediate, incredibly economical and, because it introduces movie surfing, impressively convention-shattering.
It will not, however, change the way most people watch movies in the short term, for many reasons.
First, it works only on Windows PCs at the moment; Second, only 1,000 movies and TV shows are on the Play list— but Netflix’s lawyers and movie-studio negotiators have a long way to go before the number of movies online equals the number of DVDs available from Netflix (70,000). Still, the company says that at least 5,000 movies will be on the list by year’s end. So far, the sole holdout among major movie studios is Disney, perhaps because of its partnership with Apple’s movie service.
Third, you generally get only the movie — not the DVD featurettes, alternate languages, subtitles, director’s commentary and so on.
Fourth, you can’t control the video quality you get. Your movies arrive in one of three resolutions, depending solely on the speed of your broadband Internet connection. A prominent speed meter on the Netflix page tells you which version you’ll get. Finally, remember the biggest drawback of Internet movie services: Only a nerd would gather the family around the PC to watch a movie.
The masses have yet to connect their computers to their TV sets. Only then will the decline of the DVD begin in earnest. Only then will the futurists’ fantasy of instant access to any movie, any time become a reality.
When that day arrives, Netflix, for one, will be ready."

I could not agree more. In fact, I think this marks a major shot across the networks' bows, because NetFlix also rents television series. It's not too hard to see how NetFlix sees this as breaking the ceiling to its current monthly fee structure, and leading to substantially increased revenues/account, as we begin to use NetFlix like a large-scale Tivo or DVR, without the bother of actually choosing what to record.

What interests me is the potential combination of this service with Apple's coming AppleTV. If this service can stream onto that device, or simply drive a second 'monitor' which happens to be your living room TV, the networks and cable companies have some serious problems ahead.

My friend S, in Connecticut, will, and has already, reminded me of how slow people will be to change. That Comcast and their ilk will punish any channels that move off of cable, to direct purchase from a website.

Still, this move by NetFlix may be the opening shot that begins to condition and teach the early adopters of video programming to turn to the web for their content. NetFlix is choosing the pay-for-time approach, rather than the pay-per-view model. However, they are clearly experimenting with how to reap gains from a whole new form of "on demand" video content provision.

It's unclear how long the revolution will take, or exactly how it will unfold. However, with AppleTV, the new NetFlix features, and dozens of hungry, innovative engineers, marketers and content producers out there, I believe we'll begin to see substantial new video viewing and delivery models gain size within only a few years. Even if the networks, a la CBS's Les Moonves, allege that they are talking to everyone and moving online, this new development still puts more pressure on them to attempt to seize, develop and protect key online real estate, before viewer habits get formed by someone else's delivery model.