Monday, 16 November 2009

Caught in the stone age

Wired's new September piece on Netflix business strategy is leaving me, well, somewhat shellshocked. Of course I couldn't have expected that the US would stand still since we left there. But wow.

A lot of US debates on traffic shaping suddenly make sense.

Things I didn't know:
  • Tons of media devices, from XBox to TVs, have a Netflix card now built in that let the devices stream movies

  • Netflix uses data from customer DVD rental queues to prioritize movies to purchase for online streaming. It's basically Moneyball applied to movies: Netflix goes for the ones that did poorly in theatre, so streaming rights will be cheaper, but where Netflix expects high customer demand.

  • $9 per month gets you unlimited streaming of 17,000 movies. If you don't already have a Netflix enabled device, their set-top player costs $80.
I'd figured that relatively few folks would be downloading movies: the hassles of downloading and then getting them onto the TV seemed sufficiently large that all the traffic shaping stuff seemed absurd on the face of it. But if it's built into your TV!

Closest NZ equivalent: the newly released TiVO box. You can either pay $200 upfront and then $30 per month on a 24-month contract, or pay $920 upfront. That gets you a TiVO box that'll let you stream old movies at $5 a pop or new(ish) releases for $7 each. If you're a Telecom subscriber, it at least doesn't count against your 20GB monthly data allowance ($60/mth) or your 40GB limit ($80/mth). All of that's in $NZ, so multiply by $0.74 to get the current $US equivalent.

Tyler Cowen warned me that New Zealand would teach me the importance of fixed costs. Fixed cost here would have to be the streaming rights for New Zealand; otherwise, we could just jump onto the Netflix service, albeit at a much higher price to account for capacity issues on the pipes series of leaky tubes that service NZ from overseas.

I'm going to go weep off in the corner for a while.

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