Hollywood and the cable companies have a vested interest in killing netflix, at least short term. Even if the 1.94 billion dollars that hollywood wants for it’s content is cut in half it’s almost 200 million more than netflix made last year. I think we are just starting to see the result of the war on netflix. Don’t underestimate hollywoods ability to destroy anyone that threatens thier old business model. Like it or not they control the content netflix needs to survive. With DVD’s there are options to bypass them. Streaming doesn’t have that option.

Right. And those positions offer them a platform from which to market DVD lending and/or streaming. Would also look for competition from Google (infrastructure is in place), Microsoft (XBox TV?), or Apple (could push through iTunes store?). If the business is profitable, and content streaming certainly SHOULD be profitable, then others will look to elbow in.

“First mover advantages can be pretty tough to overcome.”

Are they selling the brand? Or are they simply a retail outlet with some easily replicable technology? Is there any reason for customers to stick with Netflix once somebody else offers a comparable product at a superior price?

The Moat is clearly not unassailable… anyone who owns content can stream. I would be shocked if big content owners like Disney did not get into a streaming business in a big way. Walmart’s moat comes from it’s scale. Ditto Amazon. I can say with confidence that in 5, 10, and 20 years that Walmart will still be the #1 retailer in the U.S. and that Amazon will still be the #1 online retailer.

First mover advantages can be pretty tough to overcome. Warren Buffet once boosted that that if god offered him 100 billion dollars and told him to wrestle #1 global cola share away from Coke that he would give the lord his money back… for it simply could not be done.

y2kurtus, the better question is whether or not Netflix has an unassailable moat? They are (rightfully) attempting to shift their business to streaming, yet in doing so they will face increasing competition from other streamers.

Even after this decline, they are trading at a 40 P/E. If their business takes seven years to mature, then they will need to increase profits by 6-8 times over that period. All while abandoning the established revenue stream and shifting to a new business model, under pressure from Google, Amazon, the studios, the networks, and anybody else who hopes for a piece of the action (Walmart?).

They might pull it off, but it is a major challenge. Remember that “value” is determined not merely by utility but also by competition.

Five years from today NFLX will have twice the customers paying twice the current price.

Wager = full course dinner for yourself and a guest with my wife and I at the restaraunt of your choice in Portland, ME. (We’ve got half a dozen that have earned national props!)

I think people vastly underestimate the value of “free” childerns content on demand. I think half of the kids stuff on NFLX is from Public broadcasting an so was free at one time. The ability to flip through 100 options an pick something kid at the moment of our choosing is massively underpriced at $9/month.

P.S. @joshh I will dance in the streets the day I can pay ESPN $10/month instead of paying Comcast $80!

If cable was serious about keeping subscribers, they would offer channels a la carte. Better yet, why can’t I just pay ESPN directly? Cable is just a middleman.

Agreed that the unregulated monopolies are also a piece of that, however.

Cable companies have become regional monopolies that like all underregulated monopolies destroy price discovery. I can’t comment on Net Flix as I have not researched the stock, but currently access to them is limited by cost of cable internet access or mobile phone data streaming. Those two bottlenecks can exert pricing power over access to Net Flix content. Both need to be taken into account before you can calculate the full cost of having access to NF for poor households.

Today, with the government reclaiming the VHF analog spectrum two years ago, cable (or satellite) is a necessity to have live TV at all. I believe that there are subsidies available for the poor. We can debate if live TV is a necessity, but because it was free in the past, if we accept that premise, then cable TV must be a necessity today.

Understood. With Netflix you are paying for the convenience, selection, and interface. (Though inter-library loan extends the selection your library can offer.)

“I find myself rarely having time to watch anything on the good old boob tube, be it actual TV or DVD’s.”

We ditched the TV nine years ago, haven’t missed it. But even when we had one, it wasn’t used much. TV viewing is based on habit at least as much as on any real attraction of the product.

“Be it reading library books/magazines/newspapers/blogs or watching TV/movies/etc. online”

Note that the first four have been around for decades. :) Only the blogs and the online streaming content are truly new.

But the bigger problem that all content providers are facing is the proliferation of high-quality, low-cost (or free) content. Compared to a few years ago, there are a lot more ways for me to cheaply stimulate my brain than there were a few years ago. Be it reading library books/magazines/newspapers/blogs or watching TV/movies/etc. online, I find myself rarely having time to watch anything on the good old boob tube, be it actual TV or DVD’s.

Consumers want to be able to watch anything, in any format, on any device, at anytime…and the sooner content providers start figuring that out, the better.