Since beginning operations in 1999, Netflix has gone on a meteoric rise to the top of the DVD rental business. Not satisfied to rest on their laurels, Netflix executives have the company well prepared for the next big innovation in the home video market, video-streaming. Integration with each of the big three gaming systems (Microsoft’s Xbox 360, Nintendo’s Wii and Sony’s Playstaion3), as well as a variety of web enabled Blue-ray DVD players and televisions, seems to ensure Netflix’ domination as a video-streaming provider for the near and distant future. Having already dispatched former strip mall anchors Blockbuster to near extinction, Netflix is on the verge of doing the same to on-line video-streaming providers YouTube and Hulu. All this and a planned expansion into international markets may make it seem that Netflix is on an unstoppable roll, but the future may not be as bright as some might think. There are two issues which may make today’s Netflix projections look like fool’s gold, content and broadband caps.
Forty-eight percent of Netflix subscribers took advantage of their watch instantly feature, which allows users to stream video from the internet to their television, during the forth quarter of 2009. However, users were only able to choose from some 17,000 titles, compared to 100,000 available to the more traditional DVD rental users. Streaming rights are held by the movie and television studios that produce the content and as the market expands, they may seek to sign exclusive contracts with an as yet unknown Netflix competitor or even strike out and set up their own video-streaming services. In what may be a template for future agreements, Netflix announced a deal with Warner Brothers in January. In exchange for video-streaming rights, Netflix agreed to withhold rentals for until 28 days after release, allowing the studios time to make money selling DVDs and Blue-Ray discs.
A far greater threat to Netflix’ future as a video-streaming giant, in fact a threat to the video-streaming industry as a whole, is the potential for bandwidth caps. As broadband usage quickly outpaces network capacity, Internet Service Providers (ISPs) have been searching for ways to curb the usage of their busiest customers. ISP’s have reportedly done this is by instituting a bandwidth cap. There are several ways to achieve this. The simplest way is to limit the bit rate, or speed of data transfers for all users. A hard cap, institutes a bit rate limit on individual users that have reached or exceeded a set data transfer rate within a certain period. Bandwidth throttling allows users to transfer at high speeds until they reach a cap, at which time they are a limited to slower transfer rates. To date, ISPs haven’t instituted across the board bandwidth caps, but as more and more users take advantage of bandwidth hogs, like Netflix video-streaming, they could become more and more common. The effect on Netflix, and other video-streaming providers, could be devastating.
This article was very interesting. I currently subscribe to Netflix and am a very satisfied customer, especially with the watch instantly feature. I have been disappointed more than once when a movie or TV series wasn’t offered to watch instantly, and this explains why. I actually hope that movie and television studios don’t try to come out with their own watch instantly features, as this would just complicate my life. I think that if all of these movies could be found in one place it would increase the number of times they are viewed. It also doesn’t make much sense to me that the production companies would be reluctant to make their products available to watch instantly, while they are selling their DVD’s to Netflix to rent out to people anyway. I’m sure there could be some sort of deal worked out where Netflix would agree to pay the production companies a certain amount for the ability to stream the movies and TV shows not currently available.
As far as the bandwidth problem goes, That could become a major problem for the watch instantly feature. When a movie takes a long time to load on my TV I sometimes almost wish it was just a DVD so that I wouldn’t have to wait that extra 3 minutes to watch the movie. Having caps put on would extend this time even more, which may frustrate some users into going back to the DVD format.
Michala