This week, Netflix CEO Reed Hastings said that the success of its streaming-only service in Canada has got the company considering testing the option in the U.S., as soon as later this quarter.

Now, Hastings commented on the company's earnings report, saying, "If our results are as strong as we think they will be, then we will look to start this offering later in this Q4. Pure streaming could become our core offering in the USA, and DVD would be offered as a supplement for an additional charge, like we offer Blu-ray today."

For those of us more often on the move than not and those of us living off netbooks and smartphones, the move sounds ideal. If Netflix shaves a couple bucks off the monthly fee, it may even lure in those with DVD players that just want to save a buck. And as the Internet-connected TV becomes increasingly popular, the idea of waiting for a DVD in the mail just becomes silly. We want what we want, and we want it now.

]]> Discuss]]> http://www.readwriteweb.com/archives/we_dont_need_no_stinkin_dvds_netflix_considers_str.php http://www.readwriteweb.com/archives/we_dont_need_no_stinkin_dvds_netflix_considers_str.php News Thu, 21 Oct 2010 07:33:35 -0800 Mike Melanson Apparently, the dam has finally burst and the camel's back has broke - Netflix has begun offering a streaming-only option to its U.S. users. The plan, which will match Hulu's recently-introduced $7.99 streaming video price point, will offer unlimited streaming of TV episodes and movies via any Netflix-enabled device, without the envelopes and mailboxes.

Previously, the cheapest Netflix plan was $8.99 for unlimited streaming with one DVD out at a time. This is no longer available and instead, users can sign up for the new $7.99 streaming-only plan, or for $2 more can get one DVD sent to them at a time.

As a matter of fact, today's press release by the company starts out with an acknowledgement that "its members [are] now watching more content streamed over the Internet than on discs delivered by mail."

"We are now primarily a streaming video company delivering a wide selection of TV shows and films over the Internet," said Reed Hastings, Netflix co-founder and CEO.  "Today's action reflects the tremendous customer value we've injected into streaming from Netflix, our initial success with a pure streaming service in Canada for $7.99 a month and what our U.S. members tell us they want."

For those of you who are like me - who consume the majority of their content on devices like their Roku box, their iPhone or iPad sitting in the airport, or on their netbook - the day has finally come. Say it with me - we don't need no stinking DVDs.

The only question now is, do you choose Netflix or Hulu?

Netflix's roughly 16 million subscribers can access streaming content from a variety of devices - XBox 360, iPads, laptops (and that's just in my household). And that adds up to a substantial increase in demand. A recent study has found that Netflix makes up more than 20% of downstream Internet traffic during peak times in the U.S.

As Netflix weighs increasing its streaming-services, it may well be that no longer do we tap our feet impatiently, waiting for the DVD to arrive. After all, we already have to wait almost a month for new releases to arrive in the mail.

Now, we get to tap our feet, cursing our neighbors and our roomates for sucking up bandwidth while watching Netflix.

According to the report, Netflix has become predominantly streaming, with a majority of its users watching more content streamed online than on DVD.

"In Q4 a majority of Netflix subscribers will watch more content streamed from Netflix than delivered on DVD. With that transition in the business from mostly DVD to mostly streaming, this will be the last quarter the company will report this metric."

Last month, we examined statements by Netflix CEO Reed Hastings pointing to a streaming-only service for the U.S. Currently, streaming-only is only available in Canada. At that time, Hastings had said that "If our results are as strong as we think they will be, then we will look to start this offering later in this Q4. Pure streaming could become our core offering in the USA, and DVD would be offered as a supplement for an additional charge, like we offer Blu-ray today."

The fact that streaming video has overtaken DVDs as the primary form of content consumption for Netflix users seems like a good indication that a streaming-only option is soon on the way.

As McQuivey notes, with users watching Netflix on devices like Xbox and soon Google and Apple TV, streaming video is taking over that same screen real estate once owned by the DVD and "the percent of subscribers that watch instantly is no longer just material to the business, it is the business."

Now Microsoft has sweetened the deal by offering revenue sharing via another one of their services, adCenter. Offering revenue sharing is a smart move from Microsoft. It is hard to imagine that they're really expecting the Silverlight Streaming service to be a big money maker on its own -- i.e., Microsoft shouldn't expect it to compete with YouTube or other video CDNs -- but as a way to push the Silverlight technology to the public, it's a smart idea and revenue sharing should attract more developers to it.

If you're a developer looking for a free place to host your streaming videos, and you're choosing between YouTube and Silverlight Streaming, as long as you can keep it under 10GB/5TB, the prospect of revenue share might tip the scales in favor of Microsoft's service.

That would put Redbox head-to-head with Netflix, which recently announced it had surpassed 20 million subscribers and is also working on shifting its business from the disc shipping to the Internet-streaming business. Indeed, customers are increasingly turning to the Web to watch movies, rather than to DVDs.

Redbox has been gauging its customers' interest in a streaming plan, asking in a survey last year if they would be interested in a $3.95 per month subscription plan. That means that for those who rent four or more movies from Redbox a month (at its current $1 per film rate), that's a good deal - and quite competitive with Netflix's subscription plan.

Despite Redbox's confirmation that a streaming service is in the works, its partners in the endeavor have not been identified. According to the L.A. Times, "several people familiar with the matter have confirmed that Amazon.com is in talks with studios to acquire content for a Netflix-like subscription movie streaming service set to launch soon, making it a likely candidate to be Redbox's partner." Earlier this year, Amazon acquired the European rental and streaming service LoveFilm.

Last week, Netflix introduced a streaming-only subscription plan in the U.S. and this deal is one step in battling a prime criticism of the plan - that content does not reach Netflix's streaming-only subscribers quick enough.

"Under the deal," the company writes in its press release, "major motion pictures that traditionally would have been licensed to premium cable channels will flow instead from FilmDistrict to Netflix for streaming to its members, beginning in 2011."

The first two films to reach Netflix subscribers are "Drive" and "Lockout". The deal, however, is likely just a first step. Film District was formed in early October and plans to "theatrically distribute between four and eight wide release commercial pictures per year."

Netflix acknowledges the need for more streaming content in its release, writing that "Broadening the variety and timeliness of content available for Netflix members to watch instantly is among the company's highest priorities as it rapidly transforms itself into a service focused on streaming movies and TV shows over the Internet."

Will this be enough to quell the calls for more streaming content, faster? Somehow we doubt it, but it's definitely a move in the right direction.

Seeing this success, then, it doesn't come as a surprise that Amazon - the world's largest Internet retailer - is looking to make a subscription-based, streaming-only option of its own to compete with Netflix.

Amazon Prime is a program that gives "unlimited fast shipping" for frequent Amazon shoppers. It's interesting that Amazon would focus so much on the form of content delivery and package it together with traditional shipping. Will Amazon users really have to continue paying à la carte for most content and only get a Netflix-type option if they subscribe to a service meant for traditional shipping fees? The Business Insider points out that, at $79 per year, the service would beat out Netflix at its own game, which comes in at $95 annually "and doesn't include free shipping on purchases from Amazon."

What do you think about Amazon getting into the game? Will the heating-up of the streaming video space only lead to more expensive Internet plans? Or will competition lower the cost of streaming video to make up for it?

The test began at 8 a.m. PT this morning and will feature live-streaming content from four partners: Howcast, Next New Networks, Rocketboom and Young Hollywood.

Right now, live-streaming is in a testing phase, but we have to wonder where YouTube really wants to take this. Is it going to try to compete with the more niche live-streaming players such as Ustream and media blog Beet.TV that it "continues to grow with an average of 32 hours of live video streamed and ingested into the system every minute"? So far, it doesn't seem likely, as the company's release continually emphasized that it would be working with partners. But what good is live for many shows? We tuned in already for Rocketboom's morning talk-show-esque stream and, while entertaining, we wondered why it couldn't be recorded and then broadcast - it would cut out the miscues and bumbled lines, wouldn't it?

Business Insider is reporting rumors from an analyst at research firm Jefferies that Apple has secret licensing deals in place to launch a video streaming service. Jefferies's Peter Misek reportedly said "...we believe Apple has unannounced deals with all/most of the studios/TV networks." If Misek is correct, Apple's play in the space is either a prelude to a deal with the networks for Hulu or a sign Apple was never really interested in the streaming service in the first place, planning all along to create its own streaming product perhaps to coincide with the release of iCloud. Either way, any premium streaming service from Apple will have huge ripple affects across the industry.

If Apple has deals with the networks and studios then the vetting process for buyers of Hulu should accelerate. If Apple or Amazon are not going to buy Hulu (based on their own streaming services and content licenses over the last month) then Google and Microsoft have to seriously consider their roles in the content ecosystem. Google has some premium content available to be viewed through the Android Market and YouTube, but there is no real premium-streaming product it can sell ads against. Microsoft has next to nothing in the premium content department outside of its Xbox streaming partnership with Netflix and Hulu.

If Apple does introduce a streaming service with the release of iCloud in the fall, the company can make a strong case that there is no reason not to buy an Apple TV box (or an actual "iTV, if such a thing ever exists). As we wrote the other day, Apple wants to take over your living room and there is consumer hunger for a true Internet TV, especially one that is emitted from Cupertino. Apple has $76 billion dollars to truly disrupt the television business, which used to be the networks' biggest fear. Yet, with lucrative streaming licenses now being sold (or at least pitched) to every big tech company, the cable box and television as it has been known for the last 20 years may finally become a thing of the past. It just took a bit of Apple to push it over the hill.

Note: there's no way we could mention every single online music streaming service in this poll, but if we happened to miss a major service then do shout it out asap in the comments!

Netflix is certainly aware of that problem, and according to an FAQ posted on its Investor Relations page, it's looking at a number of tweaks to its offerings in order to make its streaming service work better for households - and for households' individual members.

More recently, as streaming has become central to our business, we believe there may be an opportunity to change our focus from a household relationship to an individual relationship, since streaming is viewed on personal devices, such as phones, tablets, and laptops, as well as on shared large screen televisions.

More Streaming Options?

That move from the household-centered TV to individual's mobile devices may require other changes as well. Currently Netflix only allows customers who sign up for the streaming-only plan to stream one movie at a time. Similarly, those who get one DVD a month and have unlimited streaming area also restricted to one stream. You can stream more than one movie at a time if you pay for the higher price packages.

But Netflix alludes in its Investors Relations FAQ that it's looking to change these options, something that will become increasingly necessary as the company focuses more on streaming and less on DVD rentals. "Our $7.99-per-month plan is for one stream at a time, and later this year we expect to be able to offer consumers some account options to watch multiple simultaneous streams."

Having a tiered streaming-only plan would make that option more viable for households, so that someone could watch Man v Food on their Xbox (for example) and not shut others out from watching iCarly on the iPad.

A recognition that consumers are watching videos on different devices this way might also prompt Netflix to make better use of individual profiles, even if under the umbrella of one master household account.

Would you pay more to have access to multiple streams on Netflix?

According to Netflix VP of Engineering Christian Kaiser, this is a key area of focus for Netflix in the coming year, and the company hopes to help define a standard that will bring streaming video to a variety of consumer electronics using HTML5.

Today's blog post addresses this issue, explaining that HTML5 "seems like a natural next step for us to use it for streaming video playback within our HTML5-based user interfaces. However, as of today, there is no accepted standard for advanced streaming through the <video> tag."

For Netflix to use HTML5 to stream video, writes Kaiser, a number of requirements need to be met, from agreeing on protocols to formats to protecting  content. He explains that, with proprietary  technology such as these iPhone and iPad apps, Netflix has solved most all of these issues. The only thing remaining is "a way of exposing all this functionality into HTML5." The result would be a standard that could be used by many services to bring streaming video to nearly any device, writes Kaiser:

But what if we could replace all these proprietary solutions with an industry-wide standard? Then Netflix, or any other video streaming service, could deliver to a standard browser as a pure HTML5 web application, both on computers and in CE devices with embedded browsers. Browser builders and CE manufacturers could support every OS and device they choose, leveraging the same implementations across multiple streaming services instead of building and integrating an one-off implementation for each service. Consumers would benefit by having a growing number of continually evolving choices available on their devices, just like how the web works today for other types of services.
We believe that this is an attractive goal.

To this end, Netflix has said that it is getting involved with the community to devise a standard. It is working to define an "industry standard for adaptive streaming" and to "define the requirements for premium on-demand streaming services like ours"."

Even this description is glossing over the more technical points presented in the post, but the short of it is that this sort of advancement could bring a more device-agnostic standard to streaming video and help put an end to much of the debate over how to get streaming video on different devices.

Netflix, the streaming movie and DVD subscription service, has continued on its march to a streaming-only future by removing the option to quickly and easily queue DVDs from yet another device.

The company announced in January that it would begin removing the option from "streaming devices," but we wonder if users - who were outraged at the idea - realized that the move would extend to devices like the iPad.

According to Netflix, most members use the website to manage their  DVD queue, so the additional functionality should be missed. Except, perhaps, by a vocal minority. The blog post announcing the change in January quickly reached a 5,000 comment max in just over a week's time. (By comparison, the most epic comment thread ever on ReadWriteWeb has garnered just over 3,000 comments in a year's time.)

The point, however, is not that users will disagree with the change. Netflix, like it or not, intends to get out of the DVD shipping business as fast as it possibly can. With DVDs costing 20 times more than streaming, who could blame them?

Now, the only thing we can hope for is that Netflix passes those savings on to its users and gets more streaming content. Then we can all stop complaining about ordering DVDs.

Actually, now that I think about it, I've been streaming only since the day it came out. What's wrong with you folks, cat got your Internet connection?

One more thing - the DVD queue feature is still completely available on the Netflix website, which is available using Safari. On the iPad.

Amazon's new streaming video service has been anticipated for several months, as the retail giant moves to compete with Netflix in the movie-streaming - not simply the DVD rental or purchase - business.

The launch of this new feature comes - so far - without company fanfare, first noticed by The Next Web's Matt Brian this morning. We anticipate Amazon will make a formal announcement with more details.

Update: Amazon just announced the service, adding this key detail: Prime Instant Video Service is available today for Roku customers as part of the Amazon Instant Video Channel on Roku

Currently the service is only available to U.S. customers. If you're not a subscriber, you can sign up for a free trial and give it a whirl.