Poor Reed Hastings. The Netflix (NFLX) chief executive had a service so widely used that it accounted for a huge slice of evening Internet traffic. His customers and profits were growing quarter after quarter. And then, as he was taking his victory lap, a piano fell on him from out of the sky. He announced unexpectedly that he was dividing DVDs-by-mail and Instant Streaming into separate services; that essentially doubled the price if you wanted them both. When customers screamed with outrage and his stock price fell, he issued an apology that confused them even more, and the stock moved still lower.
Yet Hastings’s decision, I believe, was inevitable and realistic. Video streaming represents the future of Movies on Demand. It’s instantaneous, the overhead is lower, and continuing to mail DVDs is a marketing and distribution approach as obsolete as book rental libraries, the tented circus—or snail mail.
Consider me a test case. I’ve been online since the heyday of MCI Mail. I remember finding a site that was “streaming” movies and found myself peering at a scratchy western in a window the size of a postage stamp, which always seemed to be paused for “recacheing.”
Bandwidths and streaming got better. You could see how good the picture was. YouTube and Vimeo leaped in popularity. Web users now took quality streaming for granted. Howard regaled Robin every morning (on satellite radio) about the porn he’d watched last night.
Three years ago, I was persuaded by my friend Andy Ihnatko, the Mac guru, to purchase a Roku player, which would bring online movies to my big-screen TV. It could be hooked up in five minutes. With my good cable Internet connection, via Netflix and Amazon.com (AMZN), I could stream movies that came through bright and clear, with quality rivaling HD. I could view a movie on impulse—right now, no delay—and pause it at will. I could move forward and backward. I could keep it hanging around forever. I was a happy camper.
Netflix was costing me about $9 a month. When the new price structure was announced, what did that mean for me? Since I now never ordered DVDs by mail, it meant a savings of about $1 a month.
Naturally, there were limitations. Most of the titles in the enormous Netflix library were not streaming. After meandering through films that were, however, I currently have 33 films in my queue. Since I have already seen thousands of films on the job, that says something good about their selection.
These days most DVD players and game consoles come with video streaming capacity already built in. New services such as fandor.com, MUBI, and Asiapacificfilms.com supply the demand for indie, foreign, and classic films.
Now that Hastings has split apart his DVDs-by-mail (now Quikster) from his streaming service (still called Netflix), he claims Netflix will greatly expand its offerings. I hope so. I hear grumblings that the service is tilting too far to the mainstream and not renewing its rights to some independent films. A mistake. Netflix users are more involved in all kinds of movies than most people. Streaming makes it easy for them to sample smaller films they’ve heard about, all at the same price. That film from Austin, South Korea, or Iran that you heard about somewhere is now opening soon on a TV set near you.
Netflix is woefully short on silent films and weak on foreign films. It offers all of three operas on film. It should work on those areas. Its website is a disaster. A more searchable front end would dramatize the depth of its selection. But it remains a service I treasure and use often.
I understand lots of people are upset that they can no longer get movies by both mail and streaming at one low price. There is no free lunch. Netflix has done what it had to do. Its announcement was clumsy and Hastings’s “apology” not a model of tact, but his business decision was correct. Netflix is nearly 50 percent off its high. I think that’s a Buy.