Netflix is not the enemy

Last night while at dinner with my friend T, she told me she was dropping Netflix’s Instant streaming service because they didn’t have new release titles available when she wanted them. My response was to beg, “Oh no, don’t do that.” It’s been a hot topic lately, as Netflix has announced their intention to separate their Instant service and DVD by mail and raise their subscription rates (to have both streaming and mail service will cost $23/month instead of $18/month) and the September 1 deadline for the hike is rapidly approaching. Netflix has some questionable business practices—throttling sucks—but raising their rates isn’t one of them. There’s a thorough and interesting look at this situation on The AV Club that’s worth your time.

They’re not perfect, no. But Netflix is constantly evolving and updating their services and protocols. Even with the price hike, I’m maintaining DVD by mail and streaming. Why? Because $23/month for EVERY MOVIE THEY HAVE is an awesome deal.  I’d keep paying even if it went to $50/month. My entertainment bill works out to $125/month (or it will be next month when the Netflix price hike goes into effect). I have Comcast Xfinity with no premium packages and Netflix. Any way I mix it up, staying with Netflix is ALWAYS cheaper than adding premium cable. I did splurge on the topline internet service from Comcast because I knew I’d be a heavy-bandwith user and the longest it takes me to download a streaming movie is maybe 90 seconds. Except for once during an electrical storm, I’ve never had a movie re-buffer during viewing. Zero complaints.

People sometimes complain about the technical quality of streaming content, but I never have major problems with this and my setup is pretty basic. I got a Sony Bravia TV of standard size and a Vizio DVD/Blu-Ray player. My image quality is fine on streaming. It’s not as sharp as Blu-Ray, but that’s the point of Blu-Ray. Nothing is as sharp as Blu-Ray. I’ve never watched a movie and thought, “Gosh, this is such distractingly poor quality”. Oh, and I use an HDMI cable. If you’re not using HDMI for your TV/cable box/disc player, get on it. But even with that very basic setup (I’m too technotarded to handle anything more complex than “plug this in here”), I’m getting a pretty good viewing experience out of Netflix Instant.

The real “enemy” here isn’t Netflix but the movie studios/distributors and TV outlets that don’t license their libraries. If Netflix COULD put everything available immediately and forever on Instant, they WOULD. That’s their goal, and I believe that one day they’ll get there. Why? Because I think Netflix is right. Enough people will stick with them out of convenience that eventually distributors are simply going to have to hand over their libraries or risk losing viewers for their projects. Take my recent exchange with an HBO employee who works on their signature streaming service, HBO GO. He asked me if I had seen HBO’s movie Too Big to Fail, sure to be a player in the television award season. I said I hadn’t seen it yet, and would not be doing so until it came to Netflix. He was visibly put off by this and wanted to know why I, an “alpha consumer” of entertainment, didn’t have HBO GO. “Easy,” I said. “I don’t subscribe to cable.”

This floored him and he spent twenty minutes trying to understand my reasoning which is basically: I’m poor and Netflix remains the cheapest option. I told him I don’t want to end up subscribing to half a dozen different services when really, given the technology we have, all this stuff SHOULD be available in one place. I told him that if it’s not on Netflix, I just don’t see it. If it’s not on Instant, I’ll see it eventually but it takes a lot longer since I tend to sit on the DVDs for a while before getting around to watching, while I sometimes burn through 2-3 Instant titles a day. Well he was flabbergasted. He couldn’t conceive of a person not wanting to pay for a service when she’s already paying for the exact same service from someone else (I compared it to buying gas and then paying another gas station to top off your tank). And that’s the crux of why I will stick with Netflix—I don’t want to pay three or four different services to deliver me movies in the same way. It’s silly. Like paying three different pizza places for one pizza.

But I do understand his point—cable companies fear Netflix because it takes away home video sales and subscribers and movie studios are beginning to really hurt over the decline of home video revenue, so they’re stonewalling Netflix. They’re making Netflix wait for new releases, they aren’t licensing things for streaming, and they’re all praying that enough users leave Netflix that it goes bust and everyone goes back to buying DVDs and subscribing to multiple cable networks. Guess what? That will never happen. Technology never goes backwards. Even if Netflix does fail, streaming/cloud-based delivery—which is going to replace streaming in the next couple years—is how people will get their movies. Discs won’t disappear completely but the model is shifting—has already shifted—to online delivery.

Netflix isn’t the bad guy here. A rate hike was inevitable—I wager that by the time this is all said and done Netflix will end up costing $50-60/month—but the issues with new releases and lags in availability is all down to distributors. They’re the ones holding out, not Netflix. And Netflix is right in thinking that eventually, consumer demand will simply force the distributors to play ball. There will be a loss of subscribers come September. Some people have already left and more will go in the next couple months. But I wonder how many end up re-subscribing when they find that, while there are alternatives to Netflix, none of them are as comprehensive or user friendly. Convenience is the name of the game and Netflix is still the most convenient service.

My conversation with the HBO guy ended with me asking him a question: “Why aren’t you charging them by percentages instead of flat rates?” When Netflix does a deal with a distributor, they pay out these massive contracts in flat rates for several years’ access to that company’s library. For example, Netflix pays Starz about $30 million/year for streaming rights to their whole library, which caused a problem with Sony, but that deal is up for renegotiation next year and Netflix is expecting to pay Starz north of $200 million/year to maintain their rights. That’s a lot of money but it’s also limiting. Starz will never get more than the agreed-upon amount from Netflix, no matter how much usage Starz titles get. So why isn’t the fee system based on percentages, or something resembling music royalties? Totally making up these numbers, but why not charge a quarter of a cent for each TV episode accessed and three cents for each movie?

The guy looked like his head was going to explode. I’m not a smart person, so I guarantee someone else has already thought of this, but I do wonder why it isn’t happening. The distributors are blocking Netflix access because they think streaming content will diminish their revenues but wouldn’t you make at least as much money—if not more—if you were being paid per use? Netflix has over 20 million subscribers watching and re-watching thousands of titles. Imagine what those revenue streams would look like! It’s likely more economical for Netflix, too, because they would be paying based on actual use, not guessing what a whole catalog—which could be filled with shitty titles people won’t watch—is worth and overpaying for access. Why isn’t this happening? This would solve the entire problem.

If you do choose to leave Netflix and try your luck with another streaming service, at least know what you’re doing. You’re telling the distributors that they can dictate where you get your content. No one can tell you how you get your movies. Netflix can’t and the distributors can’t. WE determine this market. WE are the consumers demanding easier, more comprehensive access. By leaving Netflix you’re not saying, “Netflix isn’t good enough anymore, I’ll try that other guy,” you’re saying, “I can be dictated to, please tell me how YOU want me to see my movies.” And as the rival streaming services like Amazon, Apple, Hulu and others grow, the distributors will pull this exact same crap on them because we let them do it to Netflix first. This isn’t really even about Netflix, it’s about studios and distributors trying to preserve their home video revenues, long the cornerstone of the industry’s profits. They don’t tell us how we SHOULD watch movies. We tell them how we DO watch movies.

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10 Responses to “Netflix is not the enemy”

  1. I really couldn’t have said it better myself. I mean, let’s face it. People had shotgun reactions and cancelled without really checking the market for other options and hello? There aren’t really any. I cancelled my satellite completely and just use Netflix now and I am a very happy camper. Plus, it’s still WAY cheaper then even basic packages of premium tv.

  2. Excellently put! I will be keeping both my Netflix services come September, as well. I do get a little signal degredation – everything is darker than DVDs or BluRays – but I always thought that was a function of streaming through my Wii. But I also don’t really care that much. I will also buy discs if I find something I like through Netflix because I am a special feature junkie. My Community DVDs are a prized possession.

    I wonder if royalty requests by actors, writers and directors have an impact on why Netflix doesn’t negotiate usage-basd contracts. Heaven forbid studios and distributors pay creative types for their intellectual property beyond cuts of merchandising and syndication! Think of the job growth from TV and Film royalties! Netflix need only send over some spreadsheets, no?

  3. We pay $8/month for our subscription to Netflix Canada and I’ve still heard people complain about that! In Canada we don’t have access to nearly as many titles as Netflix customers in the States do but I recently watched the entire first season of “The Big C” as well as most of “The Tudors.” I am constantly playing episodes of Dora for my 2 year old and my husband and I have rewatched many older movies that we wouldn’t have otherwise watched. You can’t even rent two movies from Blockbuster for $8! Sure, there’s not a ton of brand new content but I find the stuff that is there is pretty decent quality. We also don’t subscribe to premium cable channels so if we didn’t have Netflix we wouldn’t have discovered what an awesome show “The Big C” is. We will be sticking with Netflix for the long haul and if, in the future, Netflix Canada gets access to more content, I will gladly pay more money.

  4. I am not sure what service people are looking for, but there are several other options out there besides Netflix. Blockbuster is coming back into the game with their prices being restructured. I know through my provider/employer DISH Network you can get Blockbuster free for 3 months. Check out this link for the promotion through DISH http://bit.ly/iH7nwg . The thing I like about Blockbuster is that they offer new releases 28 days before Netflix does. I can’t wait to switch.

  5. Yeah, this Netflix change is still a good deal actually, but I just switched to Streaming only considering my laziness watching DVD. I kept their the Good the Bad The Ugly for 3 weeks and returned it unfinished watching it.

    Since I’m using Roku, I have decided to distribute the extra money from Netflix to Hulu Plus since they have a lot of TV episodes and huge collection of Criterion.

    • anaishilator Says:

      Yeah but my issue with Hulu plus is that even with that, you still have commercials, not to mention that I always seem to have buffering issues with them. However, I could give them a second look if they have a huge Criterion selection…

  6. anaishilator Says:

    I will say this…currently I am in love with Netflix streaming because so many of the shows and movies that *I* like are available. When the price hike comes I will most likely stick with the streaming and let my dvd service go, because truly- I have seen dozens of movies by stream but have only taken out maybe 5-6 dvds.

    However, I hope and pray that once the price hike comes that Netflix doesnt diminish its streaming content or I will be pissed. I mean, knowing I can watch Firefly pretty much whenever I want it, Pulp Fiction and the whole Miramax back catalogue plus Starz(for now) among other things is just amazing. Besides, I am in love with Netflix right now as they have BBC’s latest rendition of Sherlock with Benedict Cumberbatch…*squee* So please Netflix, no streaming fvggary once the price hike comes. K THX.

    • They have a lot of contracts to renegotiate in 2012 and 2013, so there’s no telling what ends up happening with content availability (hopefully it increases), but I think there’s supposed to be a lot of service upgrades that kick in next month to improve viewing.

  7. Wait…some people actually do not use an HDMI cable? That’s crazy talk.

    *Excellent post, Sarah.

  8. [...] Cinesnark‘s Netflix [...]

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