So Felix is right — and it’s now becoming clear to everyone the shift in Netflix’s business model to mainstream content (tv and movies) and away from long-tail (or even mid-tail) independent, documentary, and international films. It’s a sensible business move – for one reason, it lets them free ride on all the marketing dollars that Hollywood puts behind their content.

The Independent published a great interview with Netflix on this subject in January. (http://www.aivf.org/magazine/2011/01/ne tflix_distribution_independent_diy_filmm akers) They’re only interested in content with proven “queue demand.” Query what that means anymore if they’re moving away from the queue for streaming customers?

That’s fine with us — it creates opportunity for companies like Fandor to help out customers who are looking for interesting, thought-provoking movies beyond what Big Hollywood has to offer.

Our belief: on-line delivery is critical to the success of independent and international film because it directly attacks the biggest obstacles people face to discovering and watching those movies: easy access, risk-free exploration, and ability to spread the word about great movies via word-of-mouth.

That’s what we built Fandor to do. I invite your readers to check us out at http://www.fandor.com!

In the beginning, Netflix was a marginal media purchase for movie buffs. Most subscribers got Netflix in addition to Cable TV, movie theater visits and DVD purchases so studios viewed this as marginal revenue. Now more and more people are replacing cable with Netflix subscriptions (myself included), movie theaters are needing to turn to gimmicks like 3D as home theaters improve and DVD sales are way down. The content producers are realizing that Netflix is in fact a direct substitution for other forms of media consumption rather than a marginal additional source of revenue.

Consumers seem to be spending about the same amount of time watching content, so for Netflix to be a good deal for the studios the Netflix content rights deal need to replace dollar for dollar the revenues from the other content distributors they are stealing eyeballs from. Movie theaters, DVD sales, iTunes Store and TV networks pay way more per viewer-hour (usually at least $1 per viewer-hour) than Netflix currently does (assuming at least say 3 two-hour DVDs and 6 hours streaming per month for $10), and thus the studios are missing out on this revenue.

Now, I know you can use countless other tools online to manage a list of movie titles, but really, are any nearly as convenient? Especially now that there’s integration like the Flixster iOS/Android app that lets you browse the week’s movies and throw them onto your queue.

So in that sense you can think of that $8 dvd option as more than just a vehicle to get hard-to-find movies. It’s also a means to keeping your queue alive in the spot it’s been all these years.

I’ve been a member of Netflix for a number of years, and I have been a great admirer of their business model. More than half the movies on my queue (217 of 393) are Instant (streaming). I would estimate that fully half of the total have been recommended to me by Netflix. The predictions of films that I would like in their five-star rating scale are rarely off by more than half a star. They have suggested movies that I’ve never even heard of — and that I’ve absolutely loved.

In addition, Netflix is the only subscription service — heck, the only business — that has decreased the fee I paid with no decline in service, in fact, with an enormous increase in capacity when they began free streaming with any subscription.

I’m not an expert in movie distribution, but I do have a guess about what has happened to justify the sudden about-face, and rise in prices. Just a guess.

The DVD business is essentially a purchase-as-you-use operation for Nextflix. Whether they buy 1 copy or 10 or 100 depends on how popular they think the movie is going to be. Their efficient distribution service — and it is efficient — takes care of the rest. (Sometimes they even shipped me an extra DVD while I was waiting for a shipment from a non-local distribution center.)

Internet streaming is different. There are huge upfront costs to purchase an entire library of movies — present and future. And while Netflix was once able to exploit the streaming niche for its own profit — and subscribers’ low cost — movie studios have caught on. (Perhaps internet providers, as well?). It is because of these huge up-front costs that Netflix must have a huge price increase, I believe. As it turns out, subscribers are going to have to pay a chunk of change for the convenience (and) wide choice of a new delivery medium.

I’ve just come across a blog-post by someone who knows a lot more than I do, that says pretty much the same thing:

“Let’s use 60 percent as a generous estimate of the portion of the Netflix subscriber base that streams. Now, let’s assume that these users stick with streaming only at $7.99 a month. That translates into $1.3 billion in top-line revenue. Relative to the content, international expansion and, now, potentially increasing DVD delivery costs Netflix faces, that number represents a spit in the bucket. Just think about the hundreds of millions of dollars Netflix will have to dish out to renew the Starz (LSTZA) and Epix deals alone. And there’s no guarantee that the composition of what effectively will be a brand new subscriber base will end up split 60/40 in favor of streaming.”
http://seekingalpha.com/article/279146-a re-movie-studios-calling-netflix-s-shots

My issues with Netflix have been the delays for new movies, but Redbox also has the same delays, these are studios deals so Netflix and Redbox can get discounts on discs. I guess a can wait an extra month since I wasn’t interested enough to see the movie in the theater anyway.

I suspect that I will go from my two at a time to one at a time to cut my costs, but I’ll be staying with Netflix for now.

If they could and they were honest, they would say, like anyone else in the content business, that most people are only interested in watching content that they’ve already heard of, and that (as with news stories) movies and TV rapidly lose their value as they age.

The convenience factor is Netflix’ core strength, not content.

If for example, HBO went direct to consumer with its HBO Go product, which has an extremely impressive film library, it could be the big winner, though if Netflix remained focused on niche content it could still hold on to most subscribers.

___

Nope. I will eventually dump Netflix. I’m running out of things to add to the queues and they are removing the things I would watch on streaming faster than I can find anything to add. We don’t watch the “popular” dreck churned out by the studios like Attack of the Mutant Teenage Bride (god can’t beleive that anyone who watches that garbage is allowed to vote let alone breed!)

Right now I only have 83 titles in the DVD queue (only put the first title of a series in to keep it simple.) The Instant queue has about 80 titles that we have not yet watched – and over 120 in the ‘no longer available’ purgatory where Netflix removed them from streaming. They are removing movies from the streaming list faster than I add them.

Recently I had switched from the 3 DVDS + streaming to just streaming as a temporary thing as we are working our way through a BBC series that has 54 1 1/2 hour episodes on streaming and we only watch 3 -4 a week. When we finish that I will NOT put it back to the 3 dvds + streaming with its 60% price hike. I will switch back to the 3 dvds only ($16 a month and less than I paid for the 3 dvds + streaming) while we work our way through some things on that list. Then I will change it back to only streaming when there is a cluster of things I wnat to see ($7.99 a month.)

Good move Netflix. I will spend LESS with you than I did before.

Basically Netflix’s streaming list SUCKS! It keeps suggesting cartoons for us when a glance at what we have watched any fool can see are Masterpiece and classic movies. They are rapidly adding total dreck that appeals only to brain-damaged 13 year olds.

And Hulu is appalling – it is where horrible Grade D movies go to die. Won’t waste 10 cents on it. And I refuse to pay for cable for junk like the home shopping channels when we would only watch maybe 4 or 5 channels out of a list of 500+ (which is what I have to pay for to get 2 of the 4 we would watch.)

BTW, PBS puts the recent Masterpiece shows up on line after they have run and leave them available online for about a month. And then Netflix gets them in DVD…..why wait for Netflix,eh?

I NEVER ‘make do’ when a seller starts trying to offer me inferioe goods or services for the same or more money. I walk away.

ANd there are these marvellous things called ‘books’ if you want entertainment….

I realize bandwidth and server costs will decrease (although that is factored in for the near future), but usage will also increase, offsetting any reduced operating expenses per gbyte. Also, increased viewing will increase licensing costs.

Or does somebody at Netflix have a magic wand?

I’ve been with Netflix for years and years (since 2004), and I’ve recommended Netflix to countless friends and family. And to now get an email announcing a 60% rate increase is just insulting. Only oil companies are so greedy.

Sure, I could just cancel the streaming or DVDs by mail (I use both), but with a 60% increase, I feel I have no choice to but take my business elsewhere on principle alone. I already use Amazon’s streaming and Redbox occasionally, and I will use them exclusively.