Thursday, November 25, 2010

Netflix’s Move Onto the Web Stirs Rivalries

The New York Times is noticing, consumers are too. Netflix has embraced the web and has found a better profit margin in serving it's content to consumers. Without the cost of postage, Netflix can get its content into the home instantaneously. Good news for consumers, bad news for the US Postal Service as well as cable companies. "For the first time, the company will spend more over the holidays to stream movies than to ship DVDs in its familiar red envelopes (although it is still spending more than half a billion dollars on postage this year). And that shift coincides with an ominous development for cable companies, which long controlled home entertainment: for the first time in their history, cable television subscriptions fell in the United States in the last two quarters — a trend some attribute to the rise of Netflix, which allows consumers to bypass their cable box to stream movies and shows."

Netflix's remaining dilemma is how to increase its inventory of content. Cable can boast more on demand content currently, but it is at a higher cost to the consumer. With a much lower price point than cable, Netflix may not have the most, but they may have enough of the right content. Cable and satellite also have promoted the fact that some top transactional movie titles are available a month before Netflix customers can view. As Netflix demand grows, studios may have to rethink this tactic.

As consumers watch their spending, Netflix represents a real game changer that can hasten the cord cutting threatening cable. With just a broadband connection, video content is instantly available. Technological innovation continues to change the entertainment landscape, turning leaders into followers.