Felix Salmon discusses Netflix’s new “dual charge” subscription rates in terms that had not occurred to this satisfied (lazy) customer:
Up until now, it seems, Netflix has paid the studios a flat monthly fee, linked to the number of subscribers it has with access to their content. And when that got too expensive, it wound up cutting off streaming from its DVD subscribers to save on its own library-subscription costs…
It makes sense, under this model, for Netflix to unburden itself of DVD customers who barely stream any movies but who still cost Netflix itself lots of money in subscription fees. But that just means that everybody would be better off under a different model — for instance, one in which studios got paid every time one of their movies was streamed. (That kind of system would also be wonderful for independent filmmakers, who could upload their movies to Netflix at no charge and then get a stream of payments as and when Netflix’s subscribers started watching their film.)
Such a system would probably be better for the movie studios, too, since it would align their incentives with those of Netflix: they would get more money when people watched more movies and used Netflix more. As the studios and Netflix teamed up to persuade people to stream their movies, everybody would win.
So why isn’t this happening? Because the media business is calcified, and has to be dragged kicking and screaming into any kind of new business model. The studios have a reliable revenue stream from Netflix right now, and they have no real incentive to swap that for something less reliable, even if that would make them more money. It’s short-sighted, but Netflix certainly doesn’t have the power to make them change their minds. And so we end up with Netflix removing the streaming option from a large proportion of its subscribers — something I’m sure it absolutely hates to do. People are blaming Netflix here, but it’s surely more likely that the real villains of the story are the studios.
And here I had assumed, without bothering to research, that the new dual-stream program had something to do with the much-discussed factoid that Netflix downloading “was responsible for 20% of all broadband usage in America during prime viewing hours”. Blaming the cable owners, rather than the content providers.
Are people really up in arms about “removing” the free-streaming option? I’m one of those top-tier users whose monthly bill will actually go down slightly when the new system is implemented. Discovering (at Netflix’s solicitation)that I could Instant-Play some of the titles in my queue, even on my underpowered desktop, led me to reduce my sub from 8 discs to a “mere” 6-at-a-time. But I was prepared to keep both options, even if my costs went up, because there’s lots of stuff I want to watch with the Spousal Unit (anime, recent BBC series) that isn’t available on-line.
Then again, we use Netflix as an alternative to cable/satellite. Discussion among my IRL friends whose personal-technology goods are high-end enough to qualify as home theatre systems is that a lot of them will use this as a reason to “finally” drop their physical DVD subs and go on-line only. And one or two people have said they may replace their increasingly-onerous cable services with a new Netflix streaming-only sub (these are not sports fans).
How is the new system going to affect your Netflix habits, if at all?