Leave Netflix Alone!

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I selected this headline thinking of this video classic on YouTube. From the commentary on the Interwebz over the last week, you’d think that Netflix announced they are planning on breaking into our homes and stealing our puppies.

Relax. Netflix doesn’t want your puppies. The company did, however, raise prices. Is this really that big of a surprise? How many Netflix customers does it take to pay for just one Hollywood blockbuster? You know the movies I mean. The ones we all gripe about not being available on Netflix streaming. In many cases, they’re not available for streaming because current pricing doesn’t support the licensing fees the owners are asking.

We can all play the greed card in a variety of places: Netflix, the studios, the Screen Actors Guild, etc. In the end, however, much of the content we want to watch is expensive to produce, and without a profit incentive, it won’t be produced. While current business models, from newspapers to magazines to radio to theaters, are struggling, let me make a bold prediction. The next successful content business model will not be “free” or even “all you can eat” at current prices. It’s simply not sustainable.

Even current business models have the opportunity to re-invent themselves. I recently went to a movie at the AMC Theater in the Power & Light District in Kansas City. It was an amazing experience. Food and bar service, a better recliner than I have in my home, outstanding sound and picture and reserved seating. The ticket was $4 more per seat than a normal auditorium. I paid it. I would do it again and have commented at every movie I’ve gone to since that I miss that theater. Such an auditorium would even be the tie-breaker between two movies I was interested in seeing. I don’t think I’m alone in saying I’ll pay for something if it’s worth it.

If I turn off all my lights and adjust my thermostat, I pay less for electricity than my neighbor who leaves everything on because I consume less. Fair? I think so.

So how about Netflix? What makes any of us think that the company can be profitable — and if they’re not, they’re eventually gone — under the current business model and pricing? Just the content licensing alone has got to be a crushing expense, not to mention bandwidth charges, postage, labor, warehouse space, etc. Just a few years ago, if I wanted to watch a movie, I went to the local video store, paid $3-4 for each DVD I wanted to take home and had to make another trip to return what I rented in one to three days. I didn’t get to pay one low price and take all the DVDs I wanted, and somehow, I was OK with that. When did we start to think that we should be able to consume as much of the world’s most expensive content for less than $10 a month forever?

I recognize that business models are changing, but in any model, we simply have to wrap our minds around that we must somehow pay for what we consume. That might be through higher subscription prices, advertising support, pay-per-view or a brand new pricing model that some entrepreneur is dreaming up at some start-up as you read this. A profitable model for everyone is the only way to incent the entire creative chain to keep producing the content we want to consume.

While I do believe that Netflix perhaps mis-timed their announcement (given the recent loss of many streaming movie titles due to the Starz/Sony situation), I also recognize that the ability to watch any one of thousands of movies anytime I want as often as I want for just a few bucks a month is a damn good deal. The company turned the home video business on it’s ear, and I think they can continue to do so. When it’s no longer a good value — or when another company comes along with a better idea — the market will move along.

But whatever the model, those who create and distribute need to make money. Otherwise, why bother?

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