Netflix chief: DVD business to peak in 5 years
SAN FRANCISCO--Netflix is banking on the belief that streaming movies to people's living rooms is the future.
CEO Reed Hastings said during Netflix's investor day here that he expects the business of renting physical DVDs to peak within the next five years. However, Netflix representatives later said they forecast that DVDs will remain strong for at least a decade.
The company also plans to experiment with pricing, including both increases and decreases.
Netflix, however, is already moving beyond DVDs. Its $99 set-top box for streaming movies came out earlier this month, generally to positive reviews.
Hastings said that through streaming, Netflix could grow to 20 million subscribers worldwide. But the company cautioned that it will be some time before its streaming-movie service, which is offered free to consumers, will pay off big.
Some of the hurdles Netflix faces in Web delivery are competition from video-on-demand providers, as well as Internet services such as those from Apple and Amazon.com. The number of rival VOD players will likely grow, according to Netflix executives.
Netflix's streaming-video service will be frequently blocked from getting access to newly released films because the flicks might be locked up in exclusive agreements the studios have with pay channels such as HBO or other outlets.
It's important to note that Apple has cut deals that allows iTunes to rent movies from the top Hollywood studios without worrying about these exclusive deals. But it's early yet, and Netflix hopes that it can establish a foothold in the still-untested streaming-movie sector. To do this, Barry McCarthy, Netflix's chief financial officer, says the company is uniquely positioned to help movie enthusiasts transfer their rental dollars toward Web services.
It's going to be hard for "a free-standing service to compete until it has enough content," McCarthy told the crowd. The sector is in transition, and "Netflix is betting that during this time, we can establish ourselves as a leader in the space," he said.
Another interesting tidbit from Netflix's investor day: Blu-ray Discs are more fragile than standard DVDs, according to Andy Rendich, Netflix's vice president of operations. The next-generation movie discs are still a small part of Netflix's business, Rendich said, but so far, the "break rates" are higher.
He said the company is working with the disc makers to help make improvements.
Greg Sandoval covers media and digital entertainment for CNET News. He is a former reporter for The Washington Post and the Los Angeles Times. E-mail Greg.
If providers start capping services, streaming (or downloading) movies could become a moot point.
Forget the high prices for renting dvd, it will be about getting the masses to flock to your service. Video on Demand will take on a new meaning you will not be paying for each movie but subscribing for unlimited viewing of the latest releases depending on the business model, but I feel it will be subscription based and attached to a mobile business model. The two major factors, instant enjoyment (streaming) with access anywhere (mobile viewing), and it is here now! Enjoy! Thanks to companies like Netflix, Hulu, Apple and hopefully soon Amazon.
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I can see streaming low quality HD that is not much better than DVD, however if the bandwidth becomes available to start pumping out 7.1 channel lossless audio that looks good on a 72 inch screen, the MPAA will squash it.
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I watch streaming TV from time to time, however, if I truly want to watch something, I don't want random artifacts and skips caused by the Internet, or the garbage quality hyper compressed 5.1 channel audio (If you are lucky).
We are talking about the masses here not a few people. Maybe it is different where you are but 99% of the people I know or deal with don't have 7.1 audio, most have 2.1 or 5.1 (low end 5.1 by an audiophile standard) and they also are lucky if they have a 42" HD TV, 30" are pervasive. And when it comes to them they won't really care if the video is HD quality or if the audio if 5.1?
Most people do not have the speed required from their internet connection to stream quality video. I'm using a cable connection, and it would barely handle streaming movies at 300K, certainly not without any pauses, especially during peak hours.
ISPs are more interested in capping bandwidth than they are in upgrading the infrastructure so you can actually use the bandwidth you're paying for.
DVDs and Blueray discs may disappear eventually, but I think they will be replaced by small memory cards that you can plug directly into your TV. Perhaps they will hold multiple movies, and you will be able to add more by bringing it to your local store or even down-loading to it. Or, perhaps they will be in their own package with one movie plus extras per memory card.
Either way, I doubt purchasing movies from stores will go away in my lifetime...
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The cost of 7.1 systems today is not any indication of the cost in one or two years. In a short time 7.1 channel will be the low end (They will have tiny little speakers). Screen sizes will go up, cost will go down.
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The low end of the market may very well be the part of the market that will be most concerned about picture quality. If a 65 inch TV costs about the same as a 40, most people will by the 65, even if they live in a tiny little one bedroom apartment with a living room the size of a closet (Not walk in). If you sit too close to a big TV you see artifacts you would not see from 30 feet away.
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The high end TV and sound system of today will be on the bargain rack at Walmart next week. :)