So, the Netflix results are in, and they’re doing great. Streaming-only plan seems to be attractive enough to provide rapid subscriber growth and more than a third of new subscribers pick it. The remainder goes for 1-at-a-time plan (but probably because other plans are simply no longer visible on the home page) and a small number of their current subscribers downgraded to streaming only.
What is interesting is that Netflix also predicts that DVD shipments are about to start to decline this year. Specifically, they do want to drive mail customers away to the Red Box which confirms my earlier conclusions. Plus having more high-margin streaming customers should allow them to buy more content, which is then attracting more customers and so on.
Of course it also means that movie studios will demand that much more money. Aside from HBO which pretends to be “special” and simply doesn’t want to license its content into Netflix’es bucket, there’s a simply chance that everyone will say “pay more money, please”.
Plus there’s that pesky wrestling match with ISPs, where ISPs also want to charge for getting one fifth of their bandwidth consumed by Netflix alone, and it’s not clear if this problem will be easily resolved. As most high-speed providers are either monopoly or duopoly in the area (cable is the fastest, DSL limping behind – you can see the throughput performance chart on Netflix’s tech blog) there’s not much choice but to negotiate. Unlike US Postal Service, private companies can charge whatever they want, plus turn around and switch users to low-cap-high-extra-charge plans, and FCC won’t do anything about it.
So, for now I agree that Netflix will continue to grow, thanks to streaming plans, but by the end of the year it should be a bit more obvious what will happen to mail subscribers, and if net neutrality and traffic exchange problems will go away.