Netflix streaming service continues to evolve

It seems like just yesterday that I started talking about the new “Watch it Now” streaming service from Netflix (you can read that original article here).  In fact, it’s been about 5 years since that article first appeared and, like everything else in the world of technology, things in the world of Netflix streaming have changed dramatically since then.  Let’s take a look at how things started, how they’ve changed, and where they may be headed.

Availability

Back in early 2007 the ability to stream Netflix videos was a bit of a novelty and was only available using Internet Explorer while sitting in front of a PC.  Now, just a few short years later, that software is embedded in practically every television set, DVD or Blu-Ray player, and gaming console that you can buy, as well as in stand-alone products like the Roku.  I took a quick inventory of my own living room and came up with this list of the ways that I can watch Netflix streaming on my TV right now:

• Built into my Sharp TV
• Sony Playstation 3
• Microsoft XBox 360
• Nintendo Wii
• Roku video player

Not long ago I was limited to using Internet Explorer on my PC if I wanted to stream Netflix and now, 5 short years later, virtually every device hooked up to my TV (not to mention the TV itself) can do the job.  That’s amazing.

And Netflix is now also available on platforms which didn’t even exist or were just in their infancy 5 years ago: smartphones, tablet PCs, and “pads” all have the ability to stream Netflix video.  That’s even more amazing.

Content

Back in 2007 the Netflix streaming catalog was much smaller than it is today and mainly consisted of older-catalog movies and 20 or 30 year-old television shows.  Netflix has been hard at work over those intervening years trying to shore up its service and has added newer, even if still not the newest, content.

While they’ve added content on both the television series and theatrical release sides of the service they’ve had much more success in getting the streaming rights to more recent television shows added to the lineup than they have in getting the streaming rights to newer movies.   I’m sure that has to do with the fact that the big media companies simply didn’t anticipate the amount of interest that there would be in streaming videos through Netflix and, as a result, sold the streaming rights to those shows to Netflix at a price that Netflix could afford without raising the rates they were charging subscribers.

In fact, I think Netflix’s ability to get their software onto so many different devices so quickly has made the streaming portion of their business much more popular than it would have otherwise been and that fact has gotten the attention of those same media companies that originally sold the streaming rights to Netflix at a reasonable cost.  Once those original streaming contracts ended the content providers decided to charge Netflix much more for the rights to their content, to the point that Netflix was backed into a corner.

Pricing

In 2011 Netflix had a difficult decision to make.  If they wanted to keep the same amount of content available to their users they would have to pay the content owners much more, and if they paid the content owners much more they would be forced to raise their prices.  The alternative would be to not pay those higher prices for streaming rights and watch their streaming catalog get smaller and smaller.  Netflix chose the former.

In hindsight the decision was probably the correct one but they way that it was implemented was an unmitigated disaster.  Instead of simply explaining the situation and slowly raising their rates to handle the added expenses Netflix decided to suddenly double their rates and tell the users that they had simply been paying too little for their streaming service all along.

As if the price increase wasn’t problematic enough they also decided to split the business into two separate entities: the streaming service would still be called Netflix and the DVD-rental service would be an independent entity named Flixster.  Users could choose one or the other for the price they had been paying or they could choose both services but pay double the price they had been paying.

Needless to say those choices haven’t gone over well with users.  Netflix has since abandoned the idea of splitting the service into two entities and has tried, at least a bit, to explain the reasoning for the price increase but the damage which those decisions has caused is going to be difficult, if not impossible to repair.

The Future

So what does the future hold for Netflix?  Well, I think it’s a pretty safe bet that the content providers are going to try to squeeze more and more money out of Netflix for the rights to stream their services.  They simply point to the number of Netflix users streaming videos and the prices that those users are willing to pay as examples that their content has been undervalued.

Netflix has said over and over again that their future is going to be more and more about streaming and less and less about physical DVD rental business so they are going to have to try to find some happy medium that satisfies the content holders, their streaming service customers, and their bottom line.  Maybe they can convince the content holders that they’re being fairly compensated for their content.  Maybe they can convince their customers that they need to pay more money for the same amount of content that they get now or pay the same as they do now but receive Iess content.   Meanwhile, the shareholders are grumbling as Netflix loses subscribers and is spending a lot of money to get into markets in other areas of the world.

They say that the future is going to be televised.  Netflix is betting that it’s also going to be streamed.  I think that, for Netflix, the next 5 years are going to be even more interesting to watch than the last 5 years have been.

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