Why Did Netflix Sell Us Out, Mommy?

January 20, in Business

The answer, of course, comes to us in an interview that I found quoted on The Consumerist, who in turn got it from Hacking Netflix.  Without further ado, the word, straightest possible from the CEO of Netflix:

The most practical reason is that the savings derived from this deal enable us to be in stock completely on day 29. Remember that we’re a subscription service and the way that you manage the economics of a subscription service is to manage the demand of any disc, depending on the economics of the disc.

In the case of the most expensive disc, which in this case is a Warner Bros. disc, purchased through a 3rd party, those discs were out of stock for far longer than 29 days for most Netflix subscribers. So what were able to is create a deal with them that gave them a little open running room in terms of creating a sell-through window ahead of rental, for us, and hopefully that they’ll find enough value in that it’ll extend to other retailers and other studios will take note and it’ll extend across other studios as well.

The net savings derived from technically creating a better customer experience have been redeployed in additional streaming content for all customers.

So there you go.  Netflix wanted to get more streaming content in, because it clearly believes that the future is in streaming video.  Of course, there are plenty of people out there who can’t access streaming video because of bandwidth limits and usage caps, but the reasoning is there.

As soon as Netflix can offer me ten meg unlimited (and I MEAN unlimited!) Internet access for under fifty bucks a month, then I’ll believe the whole “streaming is the future” thing.  Until then, it seems that the streaming concept will remain limited.

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