Netflix competes as a delivery pipe for content with Cable providers.
Cable providers already get ~$50/month for your Internet connection, and spend (collectively) $32 billion/year on streaming content, aka "cable TV".
Netflix wants to build on top of the network infrastructure of Cable providers while paying far, far less for the same content. This is their business strategy.
Verdict? Sell your Netflix shares. They are trying to operate a toll booth on a road they don't own. Furthermore, the actual toll operators (the Cable providers) are already getting 3-4x the $$$ from users, are already paying for the streaming content, and they show no history of being as stupid as the music companies (Tivo anyone?).
I don't see how Netflix can compete. That streaming was Hastings' personal vision for the company means nothing without a way to get there, and as far as I can tell, short of legislation, there is no way to get there.
For those wondering why Netflix was allowed to stream content at low cost so far, here's the reason: marginal consumers.
Currently, the content industry gets $32 billion/year for content. There are still a few people ("marginal consumers") that aren't paying for content now, but at a much subsidized price, are willing to view it.
These are the customers Netflix has right now for streaming.
Now here's the problem: marginal consumers are only marginal when the represent an insignificant portion of users. When they grow numerous enough, the pricing terms have to change. That's why Netflix is jacking up prices.
Eventually, Netflix will have to pay the same price as Cable providers for content (and it's nowhere as close to as cheap as what Netflix is charging now).
Your argument implies that when you pay ~$50 for an internet connection, you also get access to all the streaming content ("aka cable TV") from the Cable company.
This is not the case. Getting access to the content will cost you an additional 70-100 per month, depending on the content package. That's significantly more than Netflix wants to charge, and the delta is a huge part of Netflix's appeal.
Your "toll booth on a road they don't own" comment sounds alot like Ed Whitacre's "my pipes" argument, and could be applied equally accurately to any non-free service that operates on the internet ("road they don't own.")
That sounds right to me. Honestly, worded that way, I'm a bit dumbfounded at their audacity.
I mean, on the one hand, the cable companies are tied up with the old "channel" model and many of their subscribers are paying for shows they never watch. But, if the content companies are going to charge Netflix customers for shows they don't watch too, it is going to be very difficult for Netflix to compete.
Netflix competes as a delivery pipe for content with Cable providers.
Cable providers already get ~$50/month for your Internet connection, and spend (collectively) $32 billion/year on streaming content, aka "cable TV".
Netflix wants to build on top of the network infrastructure of Cable providers while paying far, far less for the same content. This is their business strategy.
Verdict? Sell your Netflix shares. They are trying to operate a toll booth on a road they don't own. Furthermore, the actual toll operators (the Cable providers) are already getting 3-4x the $$$ from users, are already paying for the streaming content, and they show no history of being as stupid as the music companies (Tivo anyone?).
I don't see how Netflix can compete. That streaming was Hastings' personal vision for the company means nothing without a way to get there, and as far as I can tell, short of legislation, there is no way to get there.