Netflix Claims Americans Don't Want Standalone Streaming Movie Service

from the say-what-now? dept

Netflix's streaming movie service has been pretty successful according to most of the analyses I've seen, but it's still tied to the DVD rental service. So it's a bit surprising to find out that, while Netflix is readying a streaming-only service, it won't be available in the US because (according to CEO Reed Hastings):

"the company hasn't seen much interest in something of that nature in the States."

Karl Bode, over at Broadband Reports, has the appropriate response:

Wait, What? 42% of Netflix users have streamed at least 15 minutes of one TV show or movie during the last quarter, up from 22% just one year earlier. Personally, my DVD queue has sat unused for months, with the majority of my film and HDTV viewing now occurring via the far more efficient Xbox 360. The demand is certainly there, it's just not quite mainstream yet. So what's really going on?

His guess... and it's a good one, is that Hollywood isn't really thrilled with the situation, and is holding back the licensing that would enable such a service.

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Forget Piracy Or Boxee... Could Netflix Take Down Cable?

from the submarine-innovation dept

A bunch of folks have been sending in the recent Wired Magazine article talking about how Netflix's online streaming offering may be a disruptive innovation that takes down cable. The thinking is that, with Netflix service being built into lots of different settop devices, and the ability to watch various TV shows that are offered via DVD (and the Netflix streaming service, as well), why would people need cable any more? They can just wait until the "video" is out, and stream it via Netflix. The article may go a bit far in proclaiming Netflix as the winner of this battle right now, but it does suggest that (whether it's Netflix or some other provider) the model that cable television has relied on for so many years is certainly facing a pretty big disruption, one way or another.

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Netflix $1 Million Award Shows The Value Of Collaboration... But Kicks Up New Privacy Questions

from the good...-and-bad dept

Back in July, we wrote about how the Netflix $1 million prize showed how much further research efforts could get by collaborating, rather than hoarding. Now that the official prize has been awarded, we're hearing even more about that point:

The blending of different statistical and machine-learning techniques "only works well if you combine models that approach the problem differently," said Chris Volinsky, a scientist at AT&T Research and a leader of the Bellkor team [which won]. "That's why collaboration has been so effective, because different people approach problems differently."

Indeed. There's plenty of research out there showing the leaps that are made in innovation when people with different approaches collaborate. Yet, with so much of a focus on "patents" representing "innovation," the opposite occurs. The patent system is all about hoarding information and making it harder to collaborate by putting tollbooths in the process. Many of the final "teams" involved a whole bunch of different approaches. Imagine if each one had a patent on their method. Think of how expensive that kind of innovation would be. Then, realize that there are plenty of technologies that face that exact problem today.

In the meantime, Paul Ohm is raising some serious questions about people's privacy on the new Netflix Prizes that are being announced. While Netflix claims that the data is anonymized, we've seen before that anonymous datasets are almost never anonymous, and in Netflix's case, the details are pretty bad:

Although I give Netflix a pass for its past privacy breach, I am astonished to learn from the New York Times that the company plans a second act:

The new contest is going to present the contestants with demographic and behavioral data, and they will be asked to model individuals' "taste profiles," the company said. The data set of more than 100 million entries will include information about renters' ages, gender, ZIP codes, genre ratings and previously chosen movies. Unlike the first challenge, the contest will have no specific accuracy target. Instead, $500,000 will be awarded to the team in the lead after six months, and $500,000 to the leader after 18 months.

Netflix should cancel this new, irresponsible contest, which it has dubbed Netflix Prize 2. Researchers have known for more than a decade that gender plus ZIP code plus birthdate uniquely identifies a significant percentage of Americans (87% according to Latanya Sweeney's famous study.) True, Netflix plans to release age not birthdate, but simple arithmetic shows that for many people in the country, gender plus ZIP code plus age will narrow their private movie preferences down to at most a few hundred people. Netflix needs to understand the concept of "information entropy": even if it is not revealing information tied to a single person, it is revealing information tied to so few that we should consider this a privacy breach.

Ohm also points out that this prize almost certainly violates the law:

Because of this, if it releases the data, Netflix might be breaking the law. The Video Privacy Protection Act (VPPA), 18 USC 2710 prohibits a "video tape service provider" (a broadly defined term) from revealing "personally identifiable information" about its customers. Aggrieved customers can sue providers under the VPPA and courts can order "not less than $2500" in damages for each violation. If somebody brings a class action lawsuit under this statute, Netflix might face millions of dollars in damages.

Additionally, the FTC might also decide to fine Netflix for violating its privacy policy as an unfair business practice.

It seems rather surprising that Netflix's lawyers did not consider this.

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Netflix Refunds Money Without Being Asked

from the that's-how-it's-done dept

With so many stories out there of companies screwing over customers or making life difficult for users, it's always nice to hear a good story. Apparently, Netflix recently had a problem with their Xbox video streaming, and proactively refunded money to customers without them asking. I can't think of any other company I've heard of that's done that. Hell, I remember a past broadband provider who I would call (regularly) without outages, and the best they would do is say that after the service came back, I could call and then they would process a refund -- knowing that when that finally happened hours later, it wouldn't be worth the hassle to call back in and wait on hold.

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Hollywood's War With Redbox Expanding To Netflix As Well?

from the shooting-the-foot dept

Hollywood really never learns, does it? Following 20th Century Fox's decision to try to stop Redbox from getting movies to rent via its kiosks (to which Redbox has responded by suing Fox), Warner Bros. has joined in as well, but isn't just trying to stop Redbox, but Netflix, too. It wants to force both companies not to rent DVDs until a month after the DVDs are actually released... unless the companies agree to share revenue from the rentals.

There's basically no legal basis for this move, which would only serve to piss off consumers (yet again). These companies are free to buy the DVDs and rent them out, but the studios want a cut of every rental. It's sort of like video game makes demanding a cut of every used game sale, or an artist demanding a cut every time a piece of his artwork is sold. It's entitlement society all over again. Nothing should happen without the original company getting paid. What they don't realize is how this limits them. Netflix and Redbox become less interested in promoting Warner Bros.' movies, because they're now a lot more expensive to those companies. Instead, Hollywood is handing incentives over to these companies to promote other films that don't demand their tithe.

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What The Netflix Prize Tells Us About Innovation, Collaboration, Info Sharing And Game Theory

from the fascinating! dept

While there's lots of attention being paid to the fact that some team has won the Netflix Prize (it probably won't be announced who until September), there's an interesting side story that's worth noting -- which is how important collaboration was in breaking through. Plenty of studies have shown that innovation happens much faster when you have the free and open sharing of information (rather than having it locked up, say, by patents), as that mixture of different approaches and ideas allows for breakthroughs to come much faster (in fact, studies have shown that much of the success in Silicon Valley came from the free sharing of info across companies as people rapidly moved around).

And, in fact, that's exactly what happened with the Netflix Prize. The first "team" to break the 10% finish line, BellKor, was actually a merger of a few separate teams, allowing them to combine different pieces of different approaches to actually leap ahead. So, rather than trying to hoard the idea for themselves to claim the entire prize themselves, they realized it was better to team up to make the real breakthrough.

But, then a second interesting thing happened. Since the rules allowed another 30 days for other teams to offer up solutions that beat the first one, a bunch of other teams realized that it was in their best interest to team up as well, in order to leap-frog the original team. So they created the aptly named Ensemble -- and, again, the merger of various teams and different approaches allowed them to jump forward. It's not clear who actually had the best solution (both teams claim they did), but it's nice to see yet another clear example of the value of collaboration in innovation, against the standard myth of the lone inventor having a "flash of genius." It's also interesting to see the game theory aspect of the "loser teams" recognizing that they had to team up in order to catch up with the leader in the space.

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Did Someone Finally Win The Netflix Prize?

from the nice-work dept

For years, we've been fascinated by the Netflix Prize -- the $1 million offer to any team that can come up with a recommendation algorithm that is shown to be 10% better that Netflix's current recommendation engine. For years, different teams worked on the problem, and the early improvements were fast, but then progress seemed to stall out. Some different approaches were tested out which pushed the numbers up even further, but getting that last little bit has proven quite elusive... until now. Apparently, two of the leading teams combined efforts and have submitted an entry that breaks the 10% barrier for the first time. If the results are verified, then other teams have 30 days to submit an algorithm that performs even better. But, if they can't, then this team should win the $1 million... at which point they're supposed to tell the world how they did it. Seems like a much more innovation friendly approach than locking it up with a patent.

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Movie Studios May Be About To Learn That Netflix Has The Leverage

from the over-and-over-and-over-again dept

You know how movies studios keep making the same movie over and over and over again with just slight changes? It seems that the entertainment industry simply has a problem recognizing that doing the same thing repeatedly won't lead to different outcomes. In particular, the entertainment companies continue to think that because they own the content, that they somehow have leverage against the new generation of distributors -- missing out on the fact that it was always the distribution side of things that gave them the leverage, rather than the content itself. That is, they're overvaluing the content and undervaluing the services that make that content useful. That's why the record labels were unable to realize that they handed Apple tremendous power over digital music sales. It's why the record labels still don't seem to realize that they need YouTube more than YouTube needs them.

Now it's the movie studios' turn.

Jeff Nolan points out that the movie studios are apparently pissed off at Netflix, saying that they're trying to renegotiate deals on tougher terms. As Nolan points out, those studios may discover they have a lot less leverage than they think. If a studio pulls its movies from Netflix, those studios may find that it hurts them a lot more than it hurts Netflix, which has increasingly built a dominant position in the movie distribution space. Yet, of course, because these firms overvalue the content, they don't seem to be able to see this coming, despite all the foreshadowing...

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Oh Look, Another Set-top Box For Streaming Movies

from the heard-this-one-before,-I-think dept

One tech idea that simply won't go away is the set-top box for streaming movies. It's been tried plenty of times before (Netflix, Vudu, Akimbo, Moviebeam, and more) with little success, thanks to technical problems, poor content, bad business models, or some combination of all of them. Each iteration takes a slightly different tack, but the end result usually ends up the same: the dedicated set-top boxes go out with a whimper. Now, there's yet another one coming out, called ZillionTV, with its own take on things. It's the same basic idea: you hook the box up to your TV and your broadband connection, then use it to stream video content. The business model's a little different, though: it will be sold in partnership with ISPs, and users will be able to choose between pay-per-view content without ads, and ad-supported video, including both films and network TV shows. The usual bugbears seem to apply, including worries about the streaming quality and lack of a wide range of content. The ad-supported model, which will be based on targeting ads to users by tracking their viewing habits and other data, is interesting, though TiVo was playing around in a similar space a few years ago and their efforts seem to have gone quiet. What's a bit odd, though, is that the company says the box will cost $100, because "consumers didn't respond as well to free." That's puzzling -- especially if the company really hopes to make its money from advertising. In any case, we definitely won't hold our breath to see if ZillionTV can succeed where so many others have failed.

Carlo Longino is an expert at the Insight Community. To get insight and analysis from Carlo Longino and other experts on challenges your company faces, click here.

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Ocean Tomo Patents Being Used To Shake Down Companies That Have Online Recommendations

from the ebay-for-patent-trolls dept

Ocean Tomo is a company that's been around for a few years, trying to establish itself as the auction house for patents. I've already made clear how troubling I believe its business model to be, but the company always tries to put a friendly face on it, claiming that it's not about aiding so-called "patent trolls" but actually reducing the problem of patent trolling. However, that (of course) isn't what's actually happening. A patent on personal recommendation systems ("if you bought x, you'll like y") was bought via Ocean Tomo by what seems likely to be a bunch of lawyers under the company name Quito (though, it's not entirely clear who's involved) and is now being used in a lawsuit against thirteen big internet companies that employ any type of rating system. The companies being sued are: Netflix, Amazon, Yahoo, RealNetworks, last.fm, Pandora Media, Slacker Inc., Veoh, Hulu, NBC Universal, CBS, News Corp., and Strands.

As you look through that list, you'll recognize that some have done significantly innovative work in taking the concept of an online recommendation system and actually making it useful. The simple idea of doing recommendations is pretty straightforward. Making it work well? Not so much. Hell, that's why Netflix is offering $1 million to anyone who can improve their recommendation engine by just 10%. The basic ideas expressed in the patent are not where the value in these recommendation systems lies. It's in the actual effort of figuring out how to make them work better. This patent has nothing to do with the actual success of a recommendation system, but the holders of it may now get a pay day just for holding the patent, thanks to Ocean Tomo's auctions. And, of course, this means that all of those companies that were actually innovating will, at the very least, now need to spend legal dollars defending against this massive innovation blocker.

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Today's Ridiculous Lawsuit: Wal-Mart, Netflix Sued Over Conspiracy To Create A Monopoly

from the ugh dept

Way back in 2002, Wal-Mart decided to enter the online DVD rental business, launching an almost exact replica of Netflix. Of course, Wal-Mart quickly discovered what almost every other player in that marker discovered: just offering a competing service to Netflix isn't enough to get anyone to use it. Wal-Mart had a lot of difficulty signing up customers (and keeping them once they signed up). The whole project was going nowhere fast, and eventually, Wal-Mart decided that it was a waste of time to throw more money into a project that was pretty far removed from its main business, and decided to simply let Netflix take over its online DVD rental service. This was a reasonable business move.

However, nearly four years later, a lawsuit has been filed claiming that Netflix and Wal-Mart "conspired to create a monopoly" in the online video rental market, and as a result of that monopoly, Blockbuster raised its prices. Read that sentence again. Netflix and Wal-Mart are being accused of creating a monopoly -- and because of that monopoly another major player in the space raised its prices.

If there's another major player in the space, there is no monopoly.

Besides, the folks bringing the lawsuit are going to have to convince a judge that the relevant market is online DVD subscription services, rather than any kind of home movie viewing service (which includes store rentals, purchases, internet downloads, subscription services and more). This seems like a random bogus lawsuit targeted at a company with deep, deep pockets (Wal-Mart), rather than anything serious.

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Hollywood Removing Hit Movies From Apple, Netflix

from the stupidity-knows-no-bounds dept

Some days you just wonder if entertainment execs wake up in the morning planning to shoot themselves in their collective foot. The latest display of entertainment exec short-sightedness is that the Hollywood Studios have apparently forced both the Apple iTunes store and Netflix's download store to remove certain movies just as they're getting close to being available for TV. As you probably already know, Hollywood makes a lot of money through a "windowing" system, where they release movies in different formats at different times: theaters, special locations (airplanes, hotels), DVD, cable and finally network TV. Of course, they're working on adding some more tiers to this as well, but apparently they convinced these online download stores that they need to kill certain movies as the timing reaches where the movies can appear on TV.

The studios' myopic reasoning is that TV broadcasters pay a lot of money for those rights, and they don't want to piss them off: "It wouldn't make any business sense to do it any other way," claiming that allowing the videos to be downloaded via these online stores would kill some of its biggest money makers. Of course, this makes no sense. The movies are already released on DVD and the studios don't prevent Blockbuster or Netflix from offering the physical DVD for rent, so why do that with the download version? If people really want to download these movies, they're more likely to just go get them from an unauthorized site, rather than bother to watch the network broadcast version (which, given recent MPAA statements, they'll probably try to prevent you from recording via your DVR anyway). If TV networks have been willing to pay good money for the broadcasting rights all these years while DVDs and unauthorized downloads have been available, are they really suddenly going to stop paying because legal downloads are available? Unlikely.

So what are we left with instead? A bunch of consumers really pissed off at the movie studios yet again. One of these days movie studio execs will discover that business models are much harder to implement when a large percentage of your customers hate you.

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Now Blockbuster Wants To Sell You A Proprietary Box So It Can Sell You Streamed Movies

from the broken-record dept

Stop us if you've heard this before: a company wants to sell people a box so they can pay to download movies. Sound familiar? That's because plenty of companies have tried it before -- all with little success. Consumers haven't shown much interest in buying service-specific hardware so they can buy movie downloads from a single provider for a number of reasons: poor selection of movies, the cost of downloads, the cost of the hardware, download times, and lack of portability to name a few. What's amazing is that so many companies keep lining up with their own efforts, without ever really fixing any of the problems, as if time will solve them. Now, it's Blockbuster's turn, as it's announced a $99 box that can access $2 movie downloads. Blockbuster says its service is different than all the failed ones before it because it has "more recent" movies. Netflix's streaming service has 12,000 films and TV shows -- less than 10 percent of its collection, thanks to Hollywood licensing schemes. Blockbuster has a whopping 2,000. But they're newer, they swear. So not only has Blockbuster failed to solve one of the problems of these services (narrow selection), they've exacerbated it and are calling it a feature. Now that sounds like the path to success.

Carlo Longino is an expert at the Insight Community. To get insight and analysis from Carlo Longino and other experts on challenges your company faces, click here.

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The Napoleon Dynamite Problem Stymies Netflix Prize Competitors

from the love-it-or-hate-it dept

We've been covering the ongoing race to claim the $1 million Netflix Prize for a while now, highlighting some surprising and unique methods for attacking the problem. Every time we write about it, it appears that the lead teams have inched just slightly closer to that 10% improvement hurdle, but progress has certainly been slow. Clive Thompson's latest NY Times piece looks at the latest standings, noting that the issue now is "The Napoleon Dynamite problem."

Apparently, the algorithms cooked up by various teams seems to work great for your typical mainstream movies, but where it runs into trouble is when it hits on quirky films, like Napoleon Dynamite or Lost in Translation or I Heart Huckabees, where people tend to have a rather strong and immediate love or hate reaction to those films, with very little in-between. No one seems quite sure what leads to such a strong polar reaction, and no algorithm can yet figure out how people will react to such films, which is where all of the various algorithms seem to run into a dead end.

Some folks believe that's just the nature of taste. It really can't just be programmed like an algorithm, but takes into account a variety of other factors: including what your friends think of something, or even if you happened to go see that movie with certain friends. Basically, there are external factors that could play into taste, that isn't necessarily indicated in the fact that you may have liked some other set of quirky movies, and therefore you must love Napoleon Dynamite. In some ways, it makes you wonder if we're all putting too much emphasis on an algorithmic approach to the issue, and if other recommendation systems, including what specific friends think of a movie might be more effective. Of course, Netflix is hedging its bets. It's been pushing social networking "friend recommendation" features for a while as well.

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And You Thought The Next Generation Video Standards Battle Was Over?

from the we've-got-a-new-one-coming-on dept

If you thought the questions about what technology standard we'd be using to watch movies was settled when Blu-ray won the next generation DVD standards battle, then you're in for a bit of a surprise. In taking nearly half a decade to decide which standard would make it, the DVD camps left open plenty of opportunity for online competitors to start making their moves. The technology for delivering movies online has been rapidly improving. But, of course, what we didn't count on was that it would just create a huge new mess.

Earlier this week, there was all sorts of talk about Netflix streaming movies to the Xbox as part of Netflix's effort to get consumer electronics companies to build in support for Netflix streaming. As we warned when that announcement was made, it's a bad idea for Netflix to focus on a proprietary streaming solution, as it's only going to set up another standards battle. And, indeed, Blockbuster is working on its own such solution. Then, of course, everyone knows that Apple's in the market with the AppleTV. And don't forget Sony, which is selling a special (extra expensive) TV for downloading movies. And, of course, there are countless startups in the market as well.

Oh, and how could we forget Amazon? The company is now announcing its own proprietary online store for streaming movies and TV. This one piggybacks a bit on Sony's awful plan (meaning if you buy that super expensive internet-connected TV, you'll also be able to stream movies from Amazon).

But the end result is a total mess for the entire market, and that doesn't help anyone. All of the players should take a look at how badly the multi-year DVD standards battle hurt the industry. It makes people unwilling to buy certain hardware, as they don't want to be stuck with the "loser" a year from now. What's wrong with coming up with a single standard for streaming movies from any particular service to various TV-connected devices and computers? Then let the different providers compete on actual services provided? That would increase adoption, and let these companies do what they do best, rather than fighting a can't-win battle against too many other competitors.

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Netflix Changes Its Mind, Will Keep Profiles

from the listening-to-customers-is-good dept

A few weeks back, we were one of many who questioned Netflix's decision to take away its "profiles" feature, that allows a single account holder to have separate queues for different people in his or her household. For the folks who used this feature, it was quite popular, and our main complaint was the bogus language that Netflix used, claiming that removing this feature was somehow a benefit to users. Obviously, most folks who used that feature regularly thought it was somewhat obnoxious to take away a favorite feature and to tell them it was for their own good -- despite not having any plans for a replacement.

However, Netflix surprised a lot of folks by actually listening to the complaints from many users and agreeing to keep the feature, though it won't promise to do any more enhancements to it. It's so rare to hear of companies actually listening to their users, that it's nice to see Netflix actually do so. Of course, Netflix could potentially make even more fans of the company by somehow opening up the profiles platform so that others could develop for it -- now that Netflix doesn't want to do so. That may not be possible depending on how things are set up, but that could really turn what was a negative into a strong positive for the company.

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How Does Taking Away A Popular Feature 'Improve Netflix'?

from the please-explain dept

I am not currently a Netflix customer, but one of the features of the service that I thought was quite useful (and I know plenty of people who use it actively) was the "profiles" feature that let a single family/household set up separate queues of movies they wanted. So, for example, a husband, wife and kids could each get their own list of movies with separate logins, rather than having to manage a single queue. This made the service a lot more useful for a household. And yet... Netflix is eliminating the feature, and doing so with the bizarre Orwellian explanation:

Why? While it may be disappointing to see this feature go away, this change will help us to continue to improve the Netflix website for all our customers.

Can someone explain how eliminating a feature that many people use improves the Netflix website? You see, Netflix, if you're going to remove a feature and say that the website is better because of it, it would actually help if you explained how or why it's better (i.e., you're replacing that feature with something better). To simply say that removing a well-liked feature makes the website better without any further explanation, you're basically calling your customers stupid because you think they'll believe what's clearly bogus.

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Virtual Video Store Clerks Take On The Geeks For Netflix Prize

from the wisdom-of-the-movie-geeks dept

We've been fascinated with the Netflix Challenge for a while now. That's Netflix's offer of $1 million to whomever can improve on their system for recommending movies by 10%. While there were a lot of early success stories in making improvements, all of the attempts seemed to bog down, making much more gradual improvements, but not getting close enough to hit that 10% mark. Earlier this year, we wrote about the surprising run up the leaderboard by a (previously) anonymous individual who approached the problem from a very different perspective, that of a psychologist, rather than a coder, which apparently was quite helpful in getting good results through a very different method.

Now some other folks are trying something completely different, relying on more of a "crowdsourcing" system, combined with a gaming element. They've set up a virtual video store, called Video Store Clerk, and set it up as a game for movie buffs. The game players act as a video store clerk, and can see how particular users rated three movies, and are then asked to predict how they would rate a fourth movie, with points given to correct answers. The idea is that they'll be able to use these crowdsourced predictions to create an even better model than the purely algorithmic model being worked on by various teams.

This reminds me of the research work by Luis von Ahn to do things like tag images via the "ESP Game." von Ahn has had numerous successes in creating fun casual online games, where the output data is actually very useful for taking on some sort of problem that is quite difficult to do algorithmically (such as identifying what's really in an image). The real question, though, is if movie recommendations really work that way as well. Perhaps I need to be a bigger movie buff, but so far, I'm not particularly good at figuring out how others would rank a movie. And, unlike the ESP game, frankly, the Video Store Clerk game isn't all that fun as currently designed. After playing it once, I had no desire to try again. Still, I'm intrigued by the different approach, and wonder if a more advanced (and more fun) version might be much more effective.

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How Wall Street's Short Term Thinking Can Destroy Tech Businesses

from the gotta-look-to-the-long-term dept

For whatever you think of either Amazon.com or Google, one thing that's worth giving both companies kudos for is their ability to ignore the short term questions raised by Wall Street in favor of much more strategic long term thinking. It's been less clear with Google, who has consistently done well. But Amazon has, for years, faced numerous questions from Wall St. analysts who consistently seem to get upset by the company's willingness to invest in big long-term projects. Other companies, unfortunately, get swayed too easily. For example, last year, Sprint gave in to short-term thinking from investors who got upset that the company was spending so much on its next generation wireless strategy -- despite it being an absolute necessity.

The latest place where that may be happening is with Netflix, which has been investing heavily in its digital download strategy -- causing some Wall Street folks to complain that the company is spending too much, and it won't make sense until the majority of users switch over. However, as Greg Sandoval points out, if Netflix follows this path, it'll be dead. That's because these projects take time. If you wait until the majority of your customers will switch over, they've already switched over... to your competitors who didn't wait around for Wall Street's short-term thinking to catch up.

This same issue comes up all too often, by the way, in discussing the various business models that the entertainment industry can adopt -- with people insisting that the record labels and movie studios should wait until the model is proven and everyone else is doing it. The problem, at that point, is that the laggards have lost all relevance, and their brand and reputation are worthless at that point. Betting on the long-term means not being a follower -- because in waiting for others to create the new market, you'll be left too far behind.

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Hollywood Shoots Itself In The Foot Yet Again With Netflix Set-Top Box

from the customers-are-the-enemy dept

When I started reading CNet's write-up of Roku's new Netflix set-top box, I was beginning to think that the movie industry might finally be getting its act together. The price ($99) seemed reasonable, and the subscription rate (as little as $8.99/month) seemed about right. After years of missteps, I thought, maybe they were finally starting to figure out this Internet thing. Then I read this sentence: "Thanks to Hollywood's byzantine licensing system, less than 10 percent of Netflix's 100,000-plus library of titles is available for streaming to the Player." Even worse, only two of Netflix's 100 most popular movies are available for streaming. It's almost as if Hollywood doesn't want its customers' business.

Apparently, three other manufacturers, including LG, are working on competing set-top boxes. They should be careful not to put all of their eggs in the Netflix basket, given that Netflix may or may not succeed in getting the studios to release more of their titles. And as we've said before, the last thing the video streaming market needs is yet another pointless standards battle. What's needed is an open platform that supports free and paid downloads from a variety of different sources. Some of the Netflix boxes will reportedly include DVD or Blu-Ray drives, which is a smart move. Device makers should also be exploring more open content-delivery options, either in conjunction with existing video sites like YouTube, or developing a new, open platform where anyone can share their videos. In the long run, a lot of video business models will likely involve giving away free content, and a company that provides the set-top boxes for delivering that free content is likely to make a bunch of money. That market will grow especially fast if Hollywood continues its campaign to make its content as difficult to purchase as possible.

Timothy Lee is an expert at the Insight Community. To get insight and analysis from Timothy Lee and other experts on challenges your company faces, click here.

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