To Stream Or Not To Stream

Remember all the commotion Netflix stirred in July when they announced there would be an increase in subscription fees? Seemingly within seconds of publishing that press release, the social media sphere was ablaze with disgruntled "Dear Netflix" tweets and status updates threatening to jump ship for the likes of a Redbox or Hulu. Now nearly a week removed since the price hike had gone into effect, the response from both investors and subscribers alike has still been largely negative.

As of last Thursday, unlimited streaming content and DVD rentals are now two separate plans, both costing $7.99 a month rather than the $9.99 flat fee subscribers were accustomed. The very same day the price hike took effect, Starz (LSTZA) announced via press release that, starting in February of 2012, they would no longer be supplying Netflix's internet subscription service with premium content from its library of over 2,500 movies and TV episodes. Consequently, Netflix stock slid another 9% as finicky investors dealt away their shares in after-hours trading.

During the month long period before the price change went into effect, shares of Netflix stock fell sharply from around $305 in mid July to as low as $203 in mid to late August. Although such a slide in the face of 435% growth over the course of the past two years should not lead any one to believe Netflix is in imminent danger of imploding, one can only wonder if the restructuring of Netflix's long-standing business model was a necessary evil or a calculated risk.

Since its debut in 1999, Netflix has rolled the dice many a time. Taking on industry giant, Blockbuster Video, was among the first. Netflix's business model did away with the overhead of storefronts and opted for a subscription-based service deliverable by mail. At that time, Netflix's library paled in comparison to that of Blockbuster's catalog, but the convenience and lack of late fees gradually curried favor with consumers. Within ten years of operation, Netflix would surpass Blockbuster, who would eventually file for bankruptcy in 2010.

Today, Netflix is the big kid on the block faced with the inexorable task of setting the bar. There is no longer a benchmark with which to compare progress. As discussed in the last blog entry ("A Byte of the Ultraviolet"), the entertainment industry is shuffling its feet across black ice in search of a sound foundation to start anew. Slowly but surely, consumers are abandoning any notion of owning anything cumbersome. As the market would indicate, advancements in technology have changed consumers demands. They now expect content to be delivered immediately upon demand regardless of where they intend to watch it on their mobile device or from the comfort of their couch.

This recent shift of segregating the physical from the digital has loyal subscribers a bit miffed, but if Sony's Ultraviolet is any indication of what is to become of the home video market, Netflix is merely positioning themselves for the long term. Whether they're going about it the right way or not is yet to be determined. Netflix has no intention of abandoning the DVD market; however, they have no intention of banking their entire future on it either.

Zarr Movies will continue to monitor this story as it is not only in the interests of our endeavors as a media publisher, but also in your best interests. The upcoming years or even months, judging by how fast technology shifts, will determine how we, as filmmakers, publish our works for the world to consume. If you have any insights or even forecasts as to what will become of the film/television industry, by all means, feel free to drop us a comment.