Netflix online movie streaming revenue explodes, slices Apple share in half - Page 4

 

See my post earlier in this thread: I was in the same situation as you, wanting to see those same three movies for the same reason. I did watch them on Netflix. No Iron Man 1, and no Incredible Hulk though.

 

Regardless, you still have made a great point. The movie industry loses out on revenue specifically because of their restrictive models. I know you rejected piracy as an acceptable alternative, but the fact remains that piracy thrives primarily because it's significantly less hassle. The studios should embrace the Netflix model if they seriously want to stamp out piracy. It's cheap enough that there's no reason to complain about the price, and it's much easier than torrents. For even the most picky viewer, the only missing ingredient is improving the selection.

http://blog.netflix.com/2012/03/holding-out-for-hero-new-films-in.html

Thor & Captain America aren't available for streaming on Netflix in the USA. They are available in Canada. This explains the difference.

I don't think 'millions' is overstating a bit.

Way back in September of 2010, 100 million movies had been downloaded (and several times that number of TV episodes). That number is clearly much higher today.
http://techcrunch.com/2010/09/01/itunes-downloads-100-million-movies-35-million-books-11-7-billion-songs/

Undoubtedly, the "it's too expensive" whining is not universal.

I think he meant on the Ferrari comment. About 3 to 7 thousand Ferraris are made a year.

Correct.

LOL  ;-)

 

 

I don't.  I can't trust any of those services to be around tomorrow.  While Netflix is fantastic to help entertain the kids when it's raining outside, and truthfully it is convenient when its working, I prefer to own my content and have it stored locally.  I may be in the minority but as time passes or if our family moves somewhere to where hi-speed internet isn't available, I'll have a nice library to keep me going.  Hopefully there will be places still retailing physical media.

 

 

I'm doing the opposite.  I've been taking my DVD's and adding them to my iTunes library.  I'm not paying twice for something I already own.  If it were something that I didn't own I might consider using iTunes.  Currently Ive been purchasing impossible things to find anywhere else such as classic hockey games, etc.

Netflix is also paying Amazon, which charges 5 times the amount for bandwidth than it would cost them if they just had their equipment at cheap edge nodes. If they borrowed a page from Youtube/Google's playbook all they have to do is put their own equipment inside ISP's data centers, and the bandwidth cost to deliver to end users is magically zero.

 

I don't know Netflix/Amazon's actual numbers, but the cheapest bandwidth you can get requires building your own datacenters, which is something netflix should be doing, and not simply using Amazon since Amazon is competing with them for exactly the same thing.

 

As for the big picture, it's actually meaningless. Netflix doesn't sell shows, Apple does. Most people either want one of two camps:

1. They want to pay a flat fee and watch anything, anytime, anywhere (with internet access.) You can't do this with Cable or Cable VOD.

2. They want to pay for content once, and watch it on anything they own, anywhere they have it. You get this from physical discs or digital downloads (which is what Apple does)

 

Cable company VOD, I can't honestly say I know anyone that uses it. The local cable company started competing with PVR's by putting all the shows available on the basic Standard Definition tier on the VOD so you can watch it anytime, but you have to watch it within 2 weeks otherwise it's gone. This problem doesn't exist for #1 and #2 above. I have watched stuff on it, but since it's not HD (unlike netflix or apple) it's completely useless to me. In fact I'd cancel the cable entirely if it would actually make a difference in the bill. But it doesn't make it worth it (unbundled and bundled with TV is like 5$ different.)

Many people will steal something if they cannot afford to buy it (the music industry discovered this).  iTunes succeeded because it sold music at a reasonable and affordable price... low enough to make piracy not worthwhile and high enough to keep record label executive in their ferraris. I'll go to a kiosk, library or video store.  I'm not justifying piracy, but telling you it will happen without a reasonable alternative.  I am also not talking about just buying one movie, I will buy iTunes movies from time to time.  TV series more expensive than physical media... come on this is not reasonable

The model is too expensive and broken for more than casual use. It cannot at these prices replace cable tv. Explain to me if you can why I can rent physical media from a brick and mortar store cheaper than streaming through iTunes? Greed would seem to be the reason.
Edited by samiam - 6/4/12 at 6:08am

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Edited by jr_b - 6/4/12 at 4:20am

 

Actually, no because the rate at which you can watch movies via DVD is gated by how fast discs move back and forth.  For streaming...well one time I was sick I watched all the episodes of Dollhouse in a couple days.  Plus, even though you're not supposed to, sometimes the kids and I watch different movies at the same time.

 

Netflix is pretty much a bad deal all around for studios...but I have no pity for them.  If VOD/PPV and digital rental was $0.99 just like DVD rentals the economic model would be much better for them than the Netflix model.  $5 for HD rental from iTunes?  Forget it.  I'll wait for it to show up on Netflix or buy the BluRay off Amazon.  The $4 for SD rental on iTunes is even worse.  Heck, the $20 they charge for HD purchase can often get me the same movie on BR with DVD and Digital Copy.

 

I've only ever purchased only 3-4 movies from iTunes and never rented. 

I watch on a Roku, PS3, Xbox 360, iPhone (iOS) and Apple TV. 

 

Most of the time it is on our Apple TV which is an iOS device...NOT that Apple seems to know this. :/ Where are the apps? I am still waiting to be able to play Crunchyroll on my Apple TV, but right now I have to use my PC, iPhone 4, or Roku. Who else would love to have some control over their Apple TV? Who else would love to remove the sports channels that require a subscription? Mine just take up space on my screen!

Apple bit themselves in the butt by agreeing to the removal of TV rentals. Instead of adding TV purchases to the TV rentals Apple felt the need to remove the rental option completely. Sorry, but there are many shows that I might need to rent an episode if I miss it, but have NO intention or desire to own. So now, customers are FORCED to pay $1.99 (or more) versus the $.99 rental fees of a year ago. This is one of the reasons Apple has lost ground. 

 

Apple...bring back the cheaper rental option!!!

I think there are a lot of people who only steal when they think something is over priced. That happened in the music industry and now it is happening with movies. I can rent a new release DVD for $5. Why should I pay $5 or more to stream the same movie when I know the costs for streaming are substantially less than for a physical disk?

 I am not one of the ones who steal for the above reason but those that do will eventually force the industry to fairly price streaming content.  That will be good for all consumbers.

Not for much longer. iTunes is getting a face lift!

 

{citation needed}

 

Needs it, sure, but there's no guarantee. I would be happy if they changed absolutely nothing but just added subcategories of subcategories in the Store search. 

 

"Games" is not enough when you have 600,000 apps to search through. You need, for example, "Games/Grand Strategy/Real-time" at least to get this stuff right.

I don't know why YOU would do so, but lots of people apparently do. Apple rented 100 M movies as of Sept 2010 (IIRC). For some people, the convenience of not having to hop in your car, drive to the movie rental place, pick up the movie, watch it within the stated time frame, and then hop in your car and drive back to return the movie is well worth the extra $5.

You see, Apple doesn't have to make everyone happy, nor does their product have to be perfect for everyone. If they tried to price it at a level that NO ONE would say it was overpriced, it would have to be $0.01 - and no one would make any money. Apple simply has to offer a product/service that enough people will use to make it worthwhile.

DNS cruft can cause problems with Tivos as well.  To optimize your DNS get Namebench and put the DNS numbers it finds into your router.  It will even tell you how much faster the new number is over your current one.

The fact that many people do is more a result of there being no other "legal" choice rather than accepting that it is a fair cost.  I agree that the studios, actors etc etc need to get paid.  What I do expect is that what I get charged, over and above production costs, for the distribution is somewhat reflect of the distribution costs. That is not the case right now. My impression is that this is due to the Studios licencing arrangements rather than the distributors taking excess profit. 

Maybe no one ever explained to you - consumers don't get to set the price. The provider sets the price and the consumer chooses to either spend that money or not. If they spend the money, then they obviously think it's worth spending.

And, btw, the amount Apple tacks on for distribution costs just about covers their costs - since they have reported that iTunes media is roughly break even. So where is the 'excess profits' argument coming from?

 

thinking something is overpriced is no excuse for stealing. That sort of thinking isn't acceptable for high priced items (like a sportscar), why should it be acceptable for low priced items (like a song, movie, software app)?  Just because it item is digital doesn't mean it doesn't take work to create.

 

And how much difference is there really between printing a DVD to rent and streaming a digital file?  The DVD costs pennies to make, the cost of those pennies are split between all of the people who rent it.  renting involves the inconvenience of traveling to a video store twice, the inconvenience of titles being out of stock, let fees, etc.  If people got that route to save a couple of dollars vs the convenience of streaming, that's an argument that streaming is overpriced for them.  But if they decide to steal a stream of the same content, there's really no ethical way to justify it. There is no entitlement to take someone's work without compensation.

Just like DVDs, h.264, etc all use lossy compression, I'm sure Netflix uses lossy compression to deliver content to their users.  Uncompressed 1080p would require a pipe of ~3Gbps, and even using lossy compression won't get you much lower than 1Gbps.  

 

I think what you meant is that Netflix's compression algorithms compress the data too much resulting in blocking etc.  However, I bet a lot of that could be the result of your ISP.

 

Phil

You're ignoring the cost of disc replacement for lost and damaged disc and mailer packaging and mailing. According to netflix, the hold up of release for streaming is from the content creators. All they have to do is delay release of new titles to netflix until a decent amount of time after release for disc purchase so streaming services don't eat into initial disc sales; then cut a deal with netflix to adjust the cost of streaming subscription to offset the difference to title owners from streaming's lack of built in "speed bump" vs disc turn around in mailing. I don't think many streaming customers would object to a modest increase in subscription service it gave them parity of title availability with the disc service. The result would probably be an increase in streaming subscriptions over all. $5 dollars is cheaper than going to the movies. Sorry, but I don't see how it makes since to purchase a movie on blue ray at a much greater price if you're already complaining about a $5 dollar rental. How many times do you really wanna watch the same movie?

 

 

The hold up is because the $7.99/month all you can view price massively devalues the perceived worth of the available content vs $100/month cable, $0.99 DVD rental, etc.  If I were a content producer I would be dragging my heels too.  Increased subs for Netflix does zero for my bottom line.

 

 

Because it's not about cost but perceived value.  I can either buy Iron Man 2 from iTunes for $19.99 or from Amazon as a blu-ray for $14.96 that has a DVD and digital copy.

 

And I'd much rather spend $15 and own it than spend $5 and not have anything.  

 

Or watch it for "free" as part of Netflix when it shows up for $7.99 a month.  $5 is too large a fraction of the netflix monthly subscription for me to perceive it as a good value.  But $0.99 per rental I view as a fair price even if it means I end up paying more than $7.99 per month for the content I watch.

.

 

 

You're undercutting your own argument. Folks inclined to purchase movies because they personally find more value in owning a movie (like yourself), aren't going to be dissuaded from buying it just because it's available for rental on a download service in whatever model. If content creators feel otherwise, all they have to do is work with netflix to adjust the current streaming model—limit the number of downloads of a given title per subscription year, or limit the time frame it's available after you choose it, and after that window it won't be available to you again until another particular stretch of time passes. Most customers interested in renting, vs. buying, aren't going to give a crap if they can't watch a particular title a hundred times, they only want to watch it once.

 

As per cable TV, your stated cost isn't quite accurate. You can't compare the cost of your entire TV cable bill to any particular streaming model. If you want uncut, commercial free movies you by a premium channel.  In my service area that's $15 bucks a month. In essence, it's a limited movie/specials rental service where the available titles are relatively few, but they rotate titles every month. In reality the streaming model I described above is comparable in price to a premium channel subscription (like HBO or Showtime).

Edited by GMHut - 6/4/12 at 12:31pm

 

My argument is very simple: $5 rental of HD video is very expensive in comparison to a $8/month Netflix sub OR a $1.50 Blu-Ray rental from Redbox OR a $15 Blu-Ray purchase.  

 

It feels like a bad value proposition in comparison to any of those three options.  It's not about absolute cost since one of those options is more money.  Again, it's about perceived value in comparison to alternatives.  

 

Sure, people still rent form iTunes but as these numbers show, Netflix SVOD is perceived as a much better value by the majority of digital viewers.  The pricing of iTunes EST (electronic sell through) and VOD sucks in comparison to Amazon (for BR purchase) and Netflix (for SVOD).

 

Your argument is simplistic.

 

5 dollars to rent a movie is not more expensive than $15 to purchase a Blu-Ray. Renting is entirely different than owning, comparing them as if they're the same is useless. I almost never buy movies. I own maybe 10 movies I feel worth owning. Unless you think every movie available for rent at $5 is a movie you'd rather own, than a $5 dollar rental is a helluva lot cheaper than a $15 dollar purchase for a Blu-Ray you don't want, especially if it turns out the movie you've never seen before happens to be a turd of a movie.

 

You have to take yourself to a Redbox to get a movie, then take the movie back. So you can look at that 5 dollar single stream movie rental as equivalent to the $1.50 Redbox, but you purchase your way out of a trip to a kiosk for an additional $1.75 per trip. Since the whole purpose of digital streaming is convenience, that's a reasonable price to many.

 

Someone was arguing on behalf of title owners in favor of netflix continuing to limit their streaming library. That $8 dollar subscription is not cheaper than a single $5 dollar streaming rental, if the movie you want to rent isn't available on netflix when you want to watch it, or maybe never. For that particular movie, paying for netflix is paying to NOT watch the movie you want. That puts you back to renting for $5 bucks, vs. purchasing a Blu-Ray disc. I happen to have streaming netflix, and I also rent movies on iTunes. So that single $5 streaming rental is only "very expensive" if you ignore all the other criteria for how people chose their entertainment value and the opportunity costs associated with it.

Edited by GMHut - 6/4/12 at 1:06pm

 

If my argument is simplistic pray tell why ITunes VOD model is less successful today (4%) than Netflix SVOD model (61%)?  If most folks believe that $5/HD rental or $4/SD rental is a good value proposition then I would assume that we wouldn't see such a large divergence in market share.

 

You also cannot tell me that I cannot compare X to Y when I make that value comparison all the time and it appears that many consumers also make that value comparison all the time and have chosen Netflix SVOD over iTunes VOD.  Most of the time I don't need or even want to watch a specific movie.  I just want an entertaining one I haven't seen yet.  This does not strike me as unique so the comparison is more than valid for a large percentage of viewing and how folks "chose their entertainment value".

 

How many people have an AppleTV? Percentage of marketshare does not preclude profitability or the value of the service to the niche market customer the smaller market share holder offers.

 

I can offer myself as an example to answer your question.

 

I have NetFlix streaming. I also have Amazon prime streaming (because it came with Amazon prime which I subscribe to for the free shipping and purchase points.) I have premium cable channels as well (HBO/Showtime). I have Hulu on my PS3 (and NetFlix and Amazon prime on that as well). NetFlix and Amazon are virtually duplicates as far as title library. Obviously, I watch a butt load of TV. I have an AppleTv mainly because it allows me to stream my iTunes music library to 4 different AVRs. I watch NetFlix on my Apple TV because I prefer that interface to the PS3 implementation of NetFlix. If I happen to have the time to watch a movie, and I've seen everything currently on premium cable channels and there's nothing on netflix I wanna see at a particular time, I rent a movie from iTunes because they have a large assortment of new releases and any number of old stuff not on NetFlix or the other providers I mentioned. I don't watch any particular thing simply because it's on NeFlix, or iTunes, or cable. I watch what I want, when I want, from what ever source it's available for the lowest cost at that particular time I want to watch that particular thing. You are evaluating the price of an iTunes rental in isolation as if everyone's choice for a particular movie/TV show at a particular time they want to view it, is a choice betweens iTunes and nothing else, or netflix and nothing else, etc. That's not the way media is consumed. Again, "very expensive" is relative to the availability of the particular title you want to watch, when it's available, and how available it is on other sources. One more time, pricing models are not as simplistic as you insist they are.

Edited by GMHut - 6/4/12 at 3:02pm

 

They aren't even targeting the same use.  The only thing they have in common is they stream movies.  How many of the top 100 movies on the iTunes store are even available on Netflix streaming. I would be shocked if the number is more than 5.  Apple doesn't consider netflix streaming a competitor, they even bundle it on the AppleTV.

 

The question for Apple isn't does Netflix generate more revenue than iTunes movies, it's simply the question of if iTunes movie revenue is growing or declining.  The recent artificial change to market share numbers is totally irrelevant.

Agreed, simple argument or not, it is all about perceived value. The "suck it up bitch, you are paying for the convenience" argument seems like the simplistic one. 100 million downloads for movies isn't really that impressive; Netflix streams that in a month. They ship more dvds than that by mail (1 billion by 2007). If I feel like I am being ripped off for no good reason, I am not going to pay. Now I'll get my movies from kiosks, libraries etc but others when they feel they are being ripped off feel far less sympathetic when they pirate your movies (the old you rip me off, I rip you off argument) With iTunes movie and TV rentals, I feel like I am being ripped off.  Streaming should be cheaper for all kinds of reasons, but I am being charged 100% more than I think I should be paying... 100% more than I would pay at a dvd rental store or a kiosk. What I think I should be paying is all that really matters to me... the consumer. 

 

They are targeting home and mobile entertainment.  They compete for revenue and usage.  In both areas iTunes now trails Netflix.

 

Apple currently includes Netflix it's because the studios won't let them offer SVOD out of fear.

 

Apple tends to commoditize content to a certain level to make their hardware ecosystem attractive.  While they insure that the content producers are profitable they certainly make sure that the content is commoditized.  Something that media content providers don't want to happen.  

 

Take games.  Traditional hand held games are $20 to $40.  iPad/iPhone games are $0.99/$19.99 with probably an average of $4.99.  Same for music.  $0.99 individual songs are profitable but not like the old album sales.  These content producers make money and it is in Apple interest that they do so and are healthy but the lions share of the immediate revenue ends up in Apple's hands in the form of hardware sales.

 

They haven't been able to do that to TV or movies.  So Apple uses Netflix for this for now.  Eventually content producers will cave and we'll see much better pricing for iTunes VOD. 

 

 

AppleTV volumes are so-so.  aTV margins are so-so.  aTV ASPs are meager (only $99).   iTunes video profitability is so-so.  It's profitable, yes.  But as Cook pointed out, very very different from other Apple offerings.  A product in any other category that was this so-so would have been axed.

 

iTunes doesn't just exist on aTV but also iPod, iPhone, iPad and Mac.  So your implication here that iTunes VOD lacks potential customers because it is limited to the aTV is untrue.  It is niche but not because there isn't a critical mass of potential users.  It is the offering itself that is weak IMHO.

 

 

It does?  What do you think the question is?

 

 

 

The way most folks I know seem to pick what to watch is to watch whatever happens to be on cable vs renting something specific.  That strikes me as the way media is consumed and not some laser like zeroing in on a particular movie.

 

One more time...pricing models are whatever they are but consumers decide what represents a good value and vote with their dollars.  Those dollars appear to be going for the streaming whatever they can get when they flip on the TV vs your "I wanna watch X and therefore I'll only watch X even if I have to pay $5 on iTunes".

 

Even in your example iTunes is the last step: "If I happen to have the time to watch a movie, and I've seen everything currently on premium cable channels and there's nothing on netflix I wanna see at a particular time"...

 

Given the data provided it appears that most folks don't get that far.  Probably because they know in a month it'll appear on cable or netflix for "free".

They probably have AT&T u-verse. I also have an AE router & AppleTV, quality is fantastic for Netflix streaming.

I saw this mentioned on some other site and I remembered your comment. It sounds like they've been working on it for a bit:

http://blog.netflix.com/2012/06/announcing-netflix-open-connect-network.html

I wouldn't be surprised if the AppleTV margins were in line with other Apple products, especially when you get the economies of scale going. Raspberry Pi is a single board ARM computer with HDMI out, network port, a USB jack and costs $35 a piece. I think it's possible to add a shell, throw in a remote, power supply, cable and still be as profitable as any other Apple product, especially given the million+ unit runs.


AppleTV seems to demand more bandwidth for the same service, and I can't find any setting to fix that. My Netflix streaming works considerably better on a PS3. My AppleTV often halts to buffer several times for a 20 minute episode, the PS3 sometimes, but at most once. So yes, if you give it ideal internet service, but not everyone is working with the ideal. Other products seem to work better with non-ideal situations. I would say PS3 is more robust for this use.

I prefer to stream movies and TV shows instead of buying them. I own about five DVDs. They were bought when I wasn't willing to wait for a video stream version. I don't think I've watched more than one of them twice. There are less than ten movies I would want to own on DVD and I still haven't gotten around to buying them. That is how little I really want to own DVDs. I love movies and some TV shows. I watch every day and night.

 

Movies can be like music to some people. They are just as much fun to watch numerous times as they are to see the first time. I'm not that way with movies. Netflix is my favorite source for video content. This is my second favorite streaming source for quality: http://xfinitytv.comcast.net/?cmpid=rdrct_td  My third choice is an aggregate site: http://www.free-tv-video-online.me/internet/. After that I just go to TV networks to watch shows that aren't available on the others.

I guess I'm a little confused here.  How can Netflix compete with Apple in the Movie business when Apple supports Netflix on the Apple TV.  So, the more Apple TVs they sell the more access Netflix has to their customers.  Do you think if they saw them as competitors that the Netflix app would be on their device.  I'm going with NO!