Netflix and Streaming Videos

The popularity of streaming videos, movies, and television shows to computers, gaming systems, or even smart phones has grown immensely in the past few years. Instead of going to the video store, such as Blockbuster or Hollywood Video, customers no longer have to leave their home in order to rent their favorite movies. Companies such as Hulu and Netflix provide the services that allow for customers to download these movies instantly over a broadband connection to any of these devices. DVDs may very well become a thing of the past in the coming years. Twenty-three percent of consumers have televisions connected to the internet, while another twenty-six percent say they would like to be. Of these, fifty percent stream or would stream movies instantly to their television.[1] This could be a huge hit for movie studios, and this struggle has been clearly seen by Netflix.

Netflix began as a DVD by Mail Company and has since branched out into the streaming video business. Since the convenience of streaming has created so many more customers, movie studios now want a giant chunk of lost profits due to lack of DVD sales. Netflix is still a rather small company finance wise. Netflix charged users 7 dollars a month for streaming service, 7 dollars a month for DVD by mail, or 10 dollars for both. Movie studios decided to ask for millions more for the rights to stream their movies. Netflix does not have the capital to pay these increased fees. This is allowing other, larger companies in on the streaming movie business. “Amazon has 6.4 billion in the bank at the end of last quarter. Google had 39.2 billion, Microsoft had 52.8 billion and Apple a whopping 76.2 billion…Netflix had just 376 million.”[2]

As a result Netflix decided to split into two companies, one that conducted DVD by mail and the other streaming. They also decided to increase their low prices. Thousands of customers cancelled their Netflix service and stocks plummeted. I personally cancelled my service, not because of the price increase, which brought prices to ten dollars, but because the movie selection was poor. The split was recently cancelled and Netflix will continue with its hybrid DVD by mail/streaming business model. The uproar made them realize that many people still want DVDs sent to them and that they still support the company’s model. [3] Instead of paying per movie, people still enjoy the lower monthly costs that Netflix provides. We will see in a short amount of time whether or not Netflix can survive this drop in customers and what will happen in the field of streaming movies and videos if the company that started it all, goes under.

http://www.retrevo.com/content/blog/2010/07/will-streaming-movies-kill-blu-ray-discs
http://money.cnn.com/2011/09/19/technology/netflix_cash/
http://www.investors.com/NewsAndAnalysis/Article/588136/201110141708/Netflix-When-A-New-Service-Idea-Goes-Bust.htm