[PSound]

Impressive!!

Quote:
Netflix earnings during the second half of the year will continue to rise as more owners of Microsoft Xbox 360 videogame consoles sign up for Netflix's video-streaming service, one analyst wrote today. The increase in subscriptions to the rental service is because of more features being made available to gamers looking to stream movie titles from Netflix.


About 500,000 Xbox Live subscribers added Netflix's video-streaming service during the second quarter, Wedbush Morgan analyst Michael Pachter wrote in a note to clients today. Pachter also wrote that growth in the number of Xbox Live members subscribing to Netflix's streaming service will accelerate during the second half of the year.


Netflix, which entered into an exclusive agreement last year to make Xbox the only games console to be able to play Netflix's digital titles, has been trying to augment growth in subscribers to its DVD-by-mail service by broadening the number of electronic components that allow for subscribers to play Netflix's inventory of more than 12,000 digital titles directly on television sets. Earlier this month, Netflix added Sony Bravia TVs to a list of components that can stream Netflix's titles on TVs. Others include TiVo digital video recorders and Samsung Blu-ray Disc players.


"It is clear that Netflix is gaining traction with its streaming initiative," wrote Pachter, adding that streaming activations by Xbox users "will help [Netflix] subscriber growth, lower subscriber-acquisition costs, limit churn and drive gross margins higher, as a greater number of subscribers begin to substitute streaming for physical DVD rental."

http://www.videobusiness.com/article/CA6672085.html

 

[mproper]

That is impressive....and it's not 500,000 total (like the title alludes to)....it's 500,000 in the last quarter...according to the article.


That is quite a few.

 

[jagouar]

Just imagine how much faster this is gonna start going when they actually get new releases. Ive always thought netflix streaming is the future of movie watching. Nobody else is even close to their pricing model/experience.

 

[eddy_winds]

The Movie List to Stream movies


Is not impressive..

 

[PSound]



Quote:
Originally Posted by eddy_winds /forum/post/16861328


The Movie List to Stream movies


Is not impressive..

And still had tremendous growth. Imagine what will happen when Netflix strikes up deals for content closer to day/date with DVD and Blu-ray.


WoW!!

 

[lakers42]



Quote:
Originally Posted by PSound /forum/post/16861383


And still had tremendous growth. Imagine what will happen when Netflix strikes up deals for content closer to day/date with DVD and Blu-ray.


WoW!!

That's a long ways off. They won't do day/date for an unlimited streaming anytime in the near future. Day/date for a rental is closer but still can't offset the loss in revenue from a DVD or Blu-ray purchase. There is no financial incentive to close the early window yet with digital yet.

 

[PSound]



Quote:
Originally Posted by lakers42 /forum/post/16862139


That's a long ways off. They won't do day/date for an unlimited streaming anytime in the near future. Day/date for a rental is closer but still can't offset the loss in revenue from a DVD or Blu-ray purchase. There is no financial incentive to close the early window yet with digital yet.

Based on what I have read, Digital Distribution (including subscription) has the ability to provide higher rental revenue for the studios. Netflix has repeatedly stated that currently 1/3 of subscriber revenue goes to the post office. They have stated that $$ goes to the studio instead with streaming.


The rental market is further muddied with the growth of kiosks. The $1 rental for new titles significantly lowers the ARPU (for studios) on rental of new titles.

 

[lakers42]



Quote:
Originally Posted by PSound /forum/post/16862249


Based on what I have read, Digital Distribution (including subscription) has the ability to provide higher rental revenue for the studios. Netflix has repeatedly stated that currently 1/3 of subscriber revenue goes to the post office. They have stated that $$ goes to the studio instead with streaming.


The rental market is further muddied with the growth of kiosks. The $1 rental for new titles significantly lowers the ARPU (for studios) on rental of new titles.

You're avoiding the fact that going day/date to an unlimited streaming service kills the entire kiosk, video store, VOD business, and retail disc sales without making up enough revenue from unlimited streaming. Unlimited streaming offers unlimited access to a movie for the whole month or longer. The other delivery methods restrict you to the duration of the rental term. You're over simplifying the revenue model breakdown to what's best for Netflix. No studio is going to crap on their business to offer day/date, unlimited cloud access to new titles.

 

[PSound]



Quote:
Originally Posted by lakers42 /forum/post/16864790


You're avoiding the fact that going day/date to an unlimited streaming service kills the entire kiosk, video store, VOD business, and retail disc sales without making up enough revenue from unlimited streaming. Unlimited streaming offers unlimited access to a movie for the whole month or longer. The other delivery methods restrict you to the duration of the rental term. You're over simplifying the revenue model breakdown to what's best for Netflix. No studio is going to crap on their business to offer day/date, unlimited cloud access to new titles.

It is a faulty premise to assume that would kill all other business.


And if it did, it would mean that (by definition) it must mean that every single man/woman/child in America who ever buys or rents movies or TV shows MUST have a Netflix subscription that has access to new releases. With 2/3 of all subscriber revenue going to the studios with the streaming model, that would represent a flood of consistent monthly revenue.

 

[lakers42]



Quote:
Originally Posted by PSound /forum/post/16865057


It is a faulty premise to assume that would kill all other business.


And if it did, it would mean that (by definition) it must mean that every single man/woman/child in America who ever buys or rents movies or TV shows MUST have a Netflix subscription that has access to new releases. With 2/3 of all subscriber revenue going to the studios with the streaming model, that would represent a flood of consistent monthly revenue.

2/3 of what? What's the value of every movie streamed? Is it 2/3 of $1 or $5? It can't be 2/3 of a monthly subscription fee because there is no way for studios to split it up. I'm saying what Netflix is willing to pay on an acquisition fee for day/date isn't enough to make up for other revenue and in fact it eats into other revenue. Revenue share won't work either unless Netflix is willing to give up 2/3 of $4-$6 which is what VOD charges.


This is why some analysts don't think the Netflix model will hold up over time. Right now, they've got no new movies because their business model doesn't allow them to afford acquiring the rights.


Here's how Netflix might be able to get studios to say yes to new movies. $20/month subscription to view 4 new titles (one time viewing) and unlimited streaming of old titles.

 

[PSound]



Quote:
Originally Posted by lakers42 /forum/post/16865266


2/3 of what? What's the value of every movie streamed? Is it 2/3 of $1 or $5? It can't be 2/3 of a monthly subscription fee because there is no way for studios to split it up. I'm saying what Netflix is willing to pay on an acquisition fee for day/date isn't enough to make up for other revenue and in fact it eats into other revenue. Revenue share won't work either unless Netflix is willing to give up 2/3 of $4-$6 which is what VOD charges.


This is why some analysts don't think the Netflix model will hold up over time. Right now, they've got no new movies because their business model doesn't allow them to afford acquiring the rights.


Here's how Netflix might be able to get studios to say yes to new movies. $20/month subscription to view 4 new titles (one time viewing) and unlimited streaming of old titles.

The entire market has changed.


How much revenue per user do you think the studios see from rental kiosks?


Remember that they need to produce each disc, give a cut to the wholesalers and pay for shipping (and packaging). To make things worse, the kiosk owners them dump those discs on the used market further cutting into the perceived value of new discs (for purchase).


Heck, how much revenue per physical rental from Netflix do you think the studio sees?



There is devaluation already happening in the market. The $4-$6 revenue per viewing is no longer the reality of the market. Fortunately the costs associated with service delivery are lower for streaming, and it does not end up with a glut of physical media being dumped on the market.


NOTE: I am aware of the partnerships being forged between studios and kiosks (and already in place for Netflix) that lessen the amount of used media on the market. But the fact remains is that even with physical media the ARPU is already down (to well under $1).

 

[lakers42]



Quote:
Originally Posted by PSound /forum/post/16865057


It is a faulty premise to assume that would kill all other business.


And if it did, it would mean that (by definition) it must mean that every single man/woman/child in America who ever buys or rents movies or TV shows MUST have a Netflix subscription that has access to new releases. With 2/3 of all subscriber revenue going to the studios with the streaming model, that would represent a flood of consistent monthly revenue.

Quote:
Originally Posted by PSound /forum/post/16865326


The entire market has changed.


How much revenue per user do you think the studios see from rental kiosks?


Remember that they need to produce each disc, give a cut to the wholesalers and pay for shipping (and packaging). To make things worse, the kiosk owners them dump those discs on the used market further cutting into the perceived value of new discs (for purchase).


Heck, how much revenue per physical rental from Netflix do you think the studio sees?



There is devaluation already happening in the market. The $4-$6 revenue per viewing is no longer the reality of the market. Fortunately the costs associated with service delivery are lower for streaming, and it does not end up with a glut of physical media being dumped on the market.


NOTE: I am aware of the partnerships being forged between studios and kiosks (and already in place for Netflix) that lessen the amount of used media on the market. But the fact remains is that even with physical media the ARPU is already down (to well under $1).

But going back to the point of first discussion. Unlimited streaming on old titles is very different from unlimited streaming of new titles day/date. There is still great value in charging a premium rental fee on a per view basis (whether disc or stream or download) over just giving up unlimited streaming rights as part of a minimal subscription fee.

 

[PSound]



Quote:
Originally Posted by lakers42 /forum/post/16865347


But going back to the point of first discussion. Unlimited streaming on old titles is very different from unlimited streaming of new titles day/date. There is still great value in charging a premium rental fee on a per view basis (whether disc or stream or download) over just giving up unlimited streaming rights as part of a minimal subscription fee.

Netflix already does not charge on a per view basis. I could watch the new disc as many times as I want.


Or I could send it back, and call on it a week later if I know a friend is visiting who wants to see it. In that case all I do is rack up USPS costs that could go to Netflix or the studios.


Generally speaking, people will "purchase" a title if they want to have it in their collection for multiple viewings. For new titles that people want to rent, they generally want to watch it (once) and then be done. Today they can go and rent it for $1.


How much of that $1 do you think the studio sees? Keep in mind that kiosks are designed specifically to offer big titles on day/date availability. The studios incur the same costs to manufacture and ship these discs to kiosks as they do for sell-through and see very little revenue (per user). Ouch!!


They could likely see similar revenue with day/date streaming with significantly diminished costs. Keep in mind that they really near zero costs with Netflix since Netflix covers all their operating costs out of the 1/3 subscriber revenue that they see.



I believe that there is no longer any financial incentive for the studios not to support subscription based streaming of new titles when the new effective "value" price for rental of a new title is $1 (and which the studios only get a percentage of).

 

[lakers42]



Quote:
Originally Posted by PSound /forum/post/16865397


Netflix already does not charge on a per view basis. I could watch the new disc as many times as I want.


Or I could send it back, and call on it a week later if I know a friend is visiting who wants to see it. In that case all I do is rack up USPS costs that could go to Netflix or the studios.


Generally speaking, people will "purchase" a title if they want to have it in their collection for multiple viewings. For new titles that people want to rent, they generally want to watch it (once) and then be done. Today they can go and rent it for $1.


How much of that $1 do you think the studio sees? Keep in mind that kiosks are designed specifically to offer big titles on day/date availability. The studios incur the same costs to manufacture and ship these discs to kiosks as they do for sell-through and see very little revenue (per user). Ouch!!


They could likely see similar revenue with day/date streaming with significantly diminished costs. Keep in mind that they really near zero costs with Netflix since Netflix covers all their operating costs out of the 1/3 subscriber revenue that they see.



I believe that there is no longer any financial incentive for the studios not to support subscription based streaming of new titles when the new effective "value" price for rental of a new title is $1 (and which the studios only get a percentage of).

Redbox is paying $460 million for 5 years ($92 million/year) for the Sony distribution rights. Netflix would have to pay at least that much to each studio for day/date rights. The revenue share based on a $9/month subscription fee doesn't add up once you split $9 among all studios and Netflix for unlimited streaming. There's value to charge a rental fee for one time use of new titles. You're only looking at it from a consumer perspective and ignoring the business side by devaluing the content.

 

[jagouar]

If that was true then how is the netflix dvd/bd by mail allowed to work? It works because netflix can offer what most other companies cant offer. 10 million accounts paying atleast $10 each a month (the average is probably closer to $15 because of the higher priced plans). The streaming service will work the same way when its finally doing new releases (they will just bring the streaming prices to the level we pay now and give the studios more money each month because they will not have all the fees associated with physical media)

 

[PSound]



Quote:
Originally Posted by lakers42 /forum/post/16865603


Redbox is paying $460 million for 5 years ($92 million/year) for the Sony distribution rights. Netflix would have to pay at least that much to each studio for day/date rights. The revenue share based on a $9/month subscription fee doesn't add up once you split $9 among all studios and Netflix for unlimited streaming. There's value to charge a rental fee for one time use of new titles. You're only looking at it from a consumer perspective and ignoring the business side by devaluing the content.

First off, the content is already devalued. $1 rentals for new titles is the current price point. Under $10 for used DVDs for purchase (usually within 10 weeks of new releases) is easy to find (just go to Blockbuster).


The last I checked, the average Netflix subscription was around $15 a month. With 11 million subscribers that is $165 million in revenue a month, or $1.98 billion a year (which may be lower that what they pull in for fiscal year 2009).



Figuring the 2/3 number from Netflix (2/3 being the amount of revenue that would go to the studios under streaming plan), we are talking about $1.3 billion in revenues to the studios. Let's go crazy here and say that is split evenly between 10 studios (the biggest portion of the real pie would be split amongst a smaller number of majors).


That is still $130 million in revenue for each studio. Well above the $92 million a year Sony will get in revenue from Redbox. And that is with virtually ZERO manufacturing and shipping costs from Sony when working with Netflix (compared to them having to manufacture and ship physical media to stock 17,000 kiosks).


So how do the financials not work again? And keep in mind that as Netflix attracts more subscribers, the size of the revenue pie goes up... with ZERO increased studio costs.



I understand the business concepts very well. Please show me a detailed model that contradicts those financial numbers.

 

[PSound]

And here is a quote from Sony Picture Home Entertainment President talking about the Redbox deal and the market:

Quote:
Even before the recession we were getting 65% to 75% of transactions from rental channels, Bishop said. Just like in every category, we're seeing consumers start to trade down. We can either ignore that trend, or choose to find ways to maximize our profitability. We chose the latter.

There is clear and definite pricing pressure. When price is challenged you look to cut costs to keep net profit strong. That is a business fundamental.

 

[lakers42]



Quote:
Originally Posted by PSound /forum/post/16866017


First off, the content is already devalued. $1 rentals for new titles is the current price point. Under $10 for used DVDs for purchase (usually within 10 weeks of new releases) is easy to find (just go to Blockbuster).


The last I checked, the average Netflix subscription was around $15 a month. With 11 million subscribers that is $165 million in revenue a month, or $1.98 billion a year (which may be lower that what they pull in for fiscal year 2009).



Figuring the 2/3 number from Netflix (2/3 being the amount of revenue that would go to the studios under streaming plan), we are talking about $1.3 billion in revenues to the studios. Let's go crazy here and say that is split evenly between 10 studios (the biggest portion of the real pie would be split amongst a smaller number of majors).


That is still $130 million in revenue for each studio. Well above the $92 million a year Sony will get in revenue from Redbox. And that is with virtually ZERO manufacturing and shipping costs from Sony when working with Netflix (compared to them having to manufacture and ship physical media to stock 17,000 kiosks).


So how do the financials not work again? And keep in mind that as Netflix attracts more subscribers, the size of the revenue pie goes up... with ZERO increased studio costs.



I understand the business concepts very well. Please show me a detailed model that contradicts those financial numbers.

Again you only focus on disc rentals and unlimited streaming. There is a large opportunity for single view VOD rentals for new titles as well. Why make something brand new unlimited, when there's a large population that is willing to stream it for $4-$6 per movie?

 

[PSound]



Quote:
Originally Posted by lakers42 /forum/post/16868288


Again you only focus on disc rentals and unlimited streaming. There is a large opportunity for single view VOD rentals for new titles as well. Why make something brand new unlimited, when there's a large population that is willing to stream it for $4-$6 per movie?

I am focusing on the current market. Kiosks are setting the price for rental of new titles at $1. This is using a model that requires a large amount of physical production and shipping (in other words, relatively high costs).


If you can target the same audience of kiosks and use streaming to have significantly lower costs, you increase profits.

 

[munkyxtc]



Quote:
Originally Posted by lakers42 /forum/post/16868288


Again you only focus on disc rentals and unlimited streaming. There is a large opportunity for single view VOD rentals for new titles as well. Why make something brand new unlimited, when there's a large population that is willing to stream it for $4-$6 per movie?

I think you are severely overestimating the population which is willing to pay $4-$6 for a VoD movie, as an extremely similar and much cheaper service emerges. Certainly, VoD suppliers are making money with this model, but with the emergence of Redbox and others; people are beginning to feel that the added convenience of being able to stream right away isn't worth the added $3-5 premium. Rather they'll take a 5 minute drive to a kiosk and pick up a new release; or as I have done, plan on my trip home Friday night to pick up a couple of titles I literally drive by 22 locations that have Redbox. I pay $2 for 2 movies vs the $10-12 I would pay through DTV VoD ($5 + $1 1080p premium). The only next logical step is for VoD titles to significantly reduce in price to the same level or slightly above those which are found in Kiosks for physical media. A market leader such as Netflix has the subscriber based to prove that 1st day releases via stream could still result in massive profits and studios would still make their money.