Netflix has com out and announced that they intend to deliver movies to the home via the Web by next year. The CEO of Netflix, which has around 2 million subscribers, expects his service will have around 5 million members by 2006 all paying $22 per month. While he didn't break out what percentage of subscribers will be watching movies via their download service, Netflix clearly has been betting on the download business for a long time now... just look at the name, it isn't "DVD by mail".
The real questions to ask around this service are the following: Will the 5 major studios, who all own CinemaNow, license their content to Netflix to deliver via the net? Whose DRM software will Netflix choose? Will companies like Comcast and Time Warner kill netflix via VOD? What distribution deals (if any) will Netflix need to pull off to make this successful?
Let me propose an interesting partnership. What if Netflix and TiVo partnered together to deliver Netflix videos on the TiVo service? The two companies could bundle their service fees together, and for maybe $25 per month consumers could get both the TiVo service and the Netflix service on a single bill? Both companies have loyal user bases who adore their services. Each offers the same value proposition, "Get the entertainment you want to watch conveniently, and watch it when you want to." I would also be willing to bet there is a decent size overlap in the user base. Even better will be opportunities to cross promote each others products to users who don't subscribe to both services.
TiVo's recent acquisition of Strangeberry signaled their intention to get into the home networking space that will allow users to pull content off of various sources and watch it on the TV. This is exactly the functionality that Netflix will need until all TVs have direct internet access. Additionally, it doesn't appear that TiVo is going to pull off a distribution deal with any of the major cable companies, so this partnership will give TiVo some VOD features that cable companies will promote via their DVR enabled boxes.
And now for the kicker: TiVo's CEO Mike Ramsey is on the board of Netflix and we can be certain they are talking about this opportunity frequently.
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