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NetFlix: America's Most Underestimated Company

164 points by mattrjacobs 16y ago

iamwil 16y ago
Netflix also has a company culture that tends to keep people motivated. They've identified that a great place to work isn't a place with perks, it's a place where you get to work on hard problems with great people. And besides making users happy (which is important), at its heart, it's a technology company, and it shines through when they're able to leap from platform to platform to deliver the movies.
Goladus 16y ago
I won't become a netflix customer until they stop using pop-under advertising.
- jonursenbach 16y ago
  Adblock?
- nzmsv 16y ago
  Speaking of annoying ads, this is the page that helped me get rid of the Meebo bar on Slate: http://www.chizang.net/alex/blog/2010/08/19/block-meebo-bar/ http://www.chizang.net/alex/blog/2010/08/19/block-meebo-bar/
- there 16y ago
  are you sure it's them directly and not someone advertising for their affiliate account?
  - Goladus 16y ago
    No, but that doesn't really matter to me. If netflix doesn't realize it's happening, maybe someone will notice my comment and do something about it.
  - staunch 16y ago
    They're still culpable. It's their responsibility to police their affiliates. They can't rightly turn a blind eye to the means by which they profit.
- jonknee 16y ago
  What browser are you using that you still see pop-under ads?
  - Goladus 16y ago
    It happens occasionally. I haven't used the same browser on the same computer every day for the past four years, and providing a matrix showing the pop-under-exploit-blocking capability of each one over that timeframe would be difficult.
- binaryfinery 16y ago
  Doesn't happen on the Wii, PS3, Xbox, iPad, iPhone and I'm guessing not on the new apple tv either.
  - Goladus 16y ago
    Right, it happens when I visit other sites on a the web with a browser that doesn't block pop-unders. I'll see a big red ad with the word "Netflix" on it.
- breakall 16y ago
  Are you thinking of Hulu? When does Netflix do pop-unders?
  - Goladus 16y ago
    For the past several years I've observed netflix pop-unders at various points on www.reelviews.net, and possibly other sites. (see my comment about using a variety of different computers and browsers over that timeframe)
papa 16y ago
It's too bad there's no way to assign a universal "reputation" score to the various pundits out there so that readers can better assess the value of their published predictions. Michael Pachter, for instance, has been wrong on a number of occasions (he predicted Sony would dominate the current console generation and Nintendo would languish and MSFT would be #2 -- at least he got the last part right). Like the iPad which many pundits couldn't figure out, the consumers never wrote off Netflix and that's pretty much all that matters.
- kiba 16y ago
  A database that list all pundits' specific prediction and give them a rating based on if they succeeded or not?
  - papa 16y ago
    That could be a component. I can't put my finger on the other ones, and it was just a slapdash thought, but I'd just love a scorecard that maybe considered: predictive success, factual error rate/truthyness (e.g. do they make frequent bogus claims?, known biases and employer(s). It's not really realistic to comprehensively log all of this, of course. But it sure would help me assessing the relative quality of some sources, especially now that sources for news are so varied and fragmented. I suppose in the past the reputation of a publication served some of this purpose (i.e. WSJ or NYTimes having stellar reputations). I knew of a couple of databases for equity analyst performance like Starmine and Bulldog Research. So those do exist. Not sure if either are still around since I'm no longer in the finance space.
  - tomjen3 16y ago
    The problem is that you have to take account how unlikely a given prediction would be in comming true - a person who predicts one in a million things but only gets it right one out of a thousand is still way better than somebody who predicts the results of coin-flips with 51% accuracy but in your system the latter would be ranked far higher.
    - joe_the_user 16y ago
noelchurchill 16y ago
I love Netflix. But Apple is gaining on them. At some point I might switch, or just use both. I'll certainly never sign up for cable tv.
- chadgeidel 16y ago
  I think Apple's store has some great ideas, but I'm not going to pay for a "one time rental" type of service when Netflix is an "all you can eat" type of service. I realize their "Instant" offering is still not as large as their DVD offering, but it's growing all the time. I currently have over 100 items in my "play it now" queue. I routinely switch items from my DVD queue to the "play it now" queue, so it appears that they are continually adding more content.
  - noelchurchill 16y ago
    I've stuck with Netflix thus far because nobody can compare with their vast catalog of movies (DVD or streaming). However when it comes to value, there are months when I might watch many movies and really get the value out of Netflix's "all you can eat" structure, but other months I might not watch any movies and still pay the full subscription price. I think it probably averages out to cost about the same as Apple's pay-per-view system, so to me it really comes down to who has the best catalog of movies.
aresant 16y ago
The killer app in this space is studio catalog - that's the competitive advantage. Distribution for NFLX is strong - but given the move for most new hardware devices to include "Apps" integration, distribution is going to be a waning advantage. It's going to be an interesting battle, for instance what does the paperwork look like in Netflix' studio agreements - can they sell to Apple?
- binaryfinery 16y ago
  I agree, with a caveat: Distribution involves an endpoint: me+device. Netflix has me, and millions like me. On any device. I watch on my PC, my Mac, my Wii, my iPad. My 5 yr browses for shows on the Wii and the iPad. So Netflix has the advantage of customers and devices. I spend $20/month on netflix. I have spent a total of $10 for TV shows on iTunes.
- cowboyhero 16y ago
  Astute. I think you're dead right about the studio catalogue. Unfortunately, the studios are still trying to protect what they view as their major customers: Retail chains (WalMart and Blockbuster) and cable companies. They understand those business, they've made money with them, and file sharing and secondary markets are negligible in those environments. I've never thought about Netflix's agreements with third party distributors. That's a good question. Originally, I assumed some money was changing hands but maybe not. Maybe Netflix looks at it as a form of loss leader and a strategic advantage in the long run. It seems like every company that comes out with a set top or mobile device now eventually includes Netflix. For consumers, Netflix is becoming a feature that's just not anticipated, it's expected.
- mmorris 16y ago
  I think Netflix is aware that their advantage with regards to distribution isn't going to last forever and that they need to focus on getting more (and newer) movies. They seem to be making headway in expanding their catalog - e.g., the $1 billion deal with Epix (Paramount, Lionsgate, and MGM) to increase the size of their "Watch Instantly" portfolio. From what I've read, this is a big deal, as they're paying a bit more (relative to the premium cable channels) for the same rights. More info on the Epix deal: http://www.hollywoodreporter.com/hr/content_display/news/e3i4a25a9f106904fc16e41c1c1522dbf3c http://www.hollywoodreporter.com/hr/content_display/news/e3i...
MikeCapone 16y ago
I just wish the would come to Canada.
- igrekel 16y ago
  Actually, Netflix is supposed to be available in Canada soon. http://www.netflix.ca/ http://www.netflix.ca/ Mind you there are existing similar services.
  - jat850 16y ago
    Zip.ca is existing, similar... and awful. Which parallels a lot of tech-oriented services in Canada (cell phones are a great example). Hopefully the Netflix service in Canada nails it.
- riklomas 16y ago
  For UK people, they're planning to relaunch here by the end of the year: http://www.digitalspy.co.uk/movies/news/a200103/netflix-to-relaunch-in-uk-in-2010.html http://www.digitalspy.co.uk/movies/news/a200103/netflix-to-r...
JoelMcCracken 16y ago
I have been a Netflix subscriber since February 2006. It is the only service that I have subscribed to for that long, and the only one I never, ever ponder unsubscribing to.
- mortenjorck 16y ago
  I've subscribed for as long, and Netflix occupies the same place in my lifestyle. It's a testament to just how great the core service is that they could make some very bad decisions, such as removing the entire social subsystem of friends, lists, and notes, yet not once did the thought of canceling cross my mind.
- RK 16y ago
  Netflix is probably the only pay service that almost everyone I know in the US has.
Vivtek 16y ago
Argh, a truly good article marred by one thing: the assertion that BitTorrent is a competitor for NetFlix. This notion just won't die - I use BitTorrent, sure - to get stuff I can't pay for, because nobody is interested in selling it to me. But I'd much, much, much rather toss NetFlix their $9 every month to deliver what I want without the hassle of BitTorrent, and that's the canard that the entertainment industry just can't get past. Just because it's free doesn't mean it's cheap. $9 a month is cheaper.
- brianpan 16y ago
  BitTorrent is a competitor to NetFlix in the same way that it, and P2P, was a competitor to the iTunes Music Store. Even if it's not free or not without hassle, it's still a way that some people get movies/TV shows etc. Which makes it competition.
  - Vivtek 16y ago
    Yes, yes, and the convenience store in the gas station two blocks down is also "competition" for the Meijer superstore with actual produce and food, that I have to drive to. It's not really competition. I never go to that convenience store because they don't have what I want to eat. So in your sense, while they exist in the same market and are therefore "competitors", that viewpoint really distorts the reality of the situation.
    - brianpan 16y ago
      Point taken. In Netflix's view, they focus on a specific market niche so that they effectively compete in a smaller, less crowded space. But in analyzing their business, it's not unreasonable to take into account "nearby" competitors even as they differentiate. Netflix themselves do: http://www.slideshare.net/reed2001/netflix-opportunity http://www.slideshare.net/reed2001/netflix-opportunity (slide 31). Overstating BitTorrent's influence would be a mistake, but ignoring them altogether would be a distortion as well.
- Herring 16y ago
  >hassle of BitTorrent What do you mean? I hadn't noticed.
blizkreeg 16y ago
This is a tangential pricing-related question: Why does Netflix, which is solving some hard and interesting problems both on the technical (delivery/algorithms) as well as business side (licenses etc) only charge $9-$15 a month whereas online services like dating sites and project collaboration SaaS tools that are arguably much easier to build get away with charging anywhere from $30 to $60 a month? If pricing is about supply and demand, shouldn't Netflix be able to charge a lot more (at least double of what they do now) since there aren't any comparable services with the level of user satisfaction as Netflix. I would gladly pay $30 a month for Netflix just because of how great the service is - I mean unlimited instant watching, access to some amazing foreign films, DVDs. Dating sites and some other SaaS services - dime a dozen. When a Match.com asks me to pay $30 a month, I cringe. I'm perplexed by this.
- minouye 16y ago
  I don't think I would pay $30 a month for Netflix. From my perspective the demand for their services is fairly elastic, especially considering the substitutes. However, I do expect that prices will be recalibrated once video streaming makes up more substantial portion of their business. I'd imagine the economics of streaming vs. sending a DVD are quite different.
  - deleted 16y ago
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- danilocampos 16y ago
  Perhaps it's a volume thing? I suspect that "I want to be entertained" is a bit more universal than "I want to find a mate" or "I want to manage my project." So maybe they're finding some kind of sweet spot there? The thing is, I use Watch Instantly sporadically. Sometimes hardcore, every night, for a week when I just need a break from everything, and other times not more than once or twice a month. $9 is such a fair amount of money to ask, I just let them bill away regardless, because I want to have it immediately if and when I want it. So it could also be that <$10 is just the right amount of auto-pilot billing to maximize their revenue for spotty users.
- deleted 16y ago
qjz 16y ago
NetFlix simplified my life. The value of that is what I think is underestimated.
newmediaclay 16y ago
Apple Stock vs. Netflix Stock over past 5 Years: http://www.google.com/finance?chdnp=1&chdd=1&chds=1&chdv=1&chvs=maximized&chdeh=0&chfdeh=0&chdet=1282168239878&chddm=493833&chls=IntervalBasedLine&cmpto=NASDAQ:AAPL&cmptdms=0&q=NASDAQ:NFLX&ntsp=0 http://www.google.com/finance?chdnp=1&chdd=1&chds=1&...
danilocampos 16y ago
I love Netflix. They're a role model for other companies, and for me as a person. Netflix has succeeded on the strength of two things: integrity and ambition. They genuinely care about their customers. They work extra hard to make sure people who give them money are happy to do it. In their call centers, CSRs are friendly and empowered. They're instructed to err on the side of doing things that are most likely to make a customer happy, instead of pissing people off with stupid "it's policy!" behavior. In their distribution centers, they have a hardcore quality control culture that goes to great lengths to ensure that mailed out DVD's correctly match a customer's order. Contrast this with their dying competition, who never once gave a damn about customer satisfaction. Who, indeed, codified policies whose direct result was to enrage customers. As for ambition, Netflix has continually worked hard to make the service the very best it could be, opening more and more distribution centers to minimize the wait between returning and receiving your DVDs. Despite having every reason to rest on their laurels, they decided they'd also be the Netflix to their Blockbuster, going deep on the Watch Instantly strategy that's redefining their business. Instead of waiting for someone else to come along and make them obsolete, Netflix grabbed the bull by the horns. This is one of the rare moments of modern capitalism producing something truly excellent, on its merits, based on the needs of the market. If only we could see similar disruption in larger and even more corrupt industries. Honestly: I love these guys.
- pmichaud 16y ago
  I wasn't so lucky with them. I was a good customer, but they started silently throttling my account, and they wouldn't admit to it either. It's since come out that that's exactly what they were doing. If it's too expensive to send me that many disks, fine, but don't lie to me about it.
  - danilocampos 16y ago
    I didn't know about this. So much for my remark on integrity. Do you know if they still do this throttling? I personally never ran into this -- I've never been more than a light-to-medium user, except in spikes. Like when I when I discovered 24 six years ago. edit: Here's something straight from the horse's mouth: http://money.cnn.com/magazines/fortune/fortune_archive/2007/05/28/100034248/index.htm http://money.cnn.com/magazines/fortune/fortune_archive/2007/... "I stopped my subscription to your service because of your well-documented "throttling" of frequent renters. How can you say you are focused on customer service when you alienate your customers in this way? Bill Greenstein, Seattle When we are short on new releases, which we try not to be, we believe it's fairest to allocate those new movies to subscribers who have not rented much recently. This upsets heavy users because they are not in the front of the line for new releases. We are straightforward about how it works, but not everyone likes that policy." Eh, okay, assuming it begins and ends there, I can see the argument for doing things this way.
deadmansshoes 16y ago
On a recent visit to the states I got to try out Netflix, and on being told you could watch any film you wanted was very impressed. Turned out there are only certain categories of film (i.e. the ones that would be on daytime tv..) you can watch on "freeplay" and anything good you have to wait for a DVD in the post. No wonder its cheap. Was still better than the adverts every 8 mins while watching Rambo on a cable channel though.
ketanb 16y ago
Netflix succeeded because of having right values and great culture. The slides explains their values and culture in detail. It is so much easy to visualize why they are successful: http://www.slideshare.net/reed2001/culture-1798664 http://www.slideshare.net/reed2001/culture-1798664
trunnell 16y ago
Netflix has a great engineering culture, not just a great stock. Shameless plug: we're hiring good hackers. Check out http://netflix.com/Jobs http://netflix.com/Jobs
- staunch 16y ago
  Your use of Silverlight makes me question that assertion :-)
  - trunnell 16y ago
    Why?
    - dhess 16y ago
      For starters, it's a poor choice for streaming technology on the Mac. Can we expect to see HTML5 video support for the Mac anytime soon? It pains me that Netflix HD streams on my iPad look better than on my 1080p projector hooked up to a Mac mini.
      - Terretta 16y ago
        Of course video using only 1024x768 tiny pixels on a bright glossy screen will look better than using 1920 x 1080 pixels from a projector. You simply won't see as many problems with video compression on the small screen with less pixels. Also, just to clarify -- there's not really any such thing as HTML5 video. There's an HTML5 video tag, and browser vendors can decide what kinds of video the tag should handle in their browser on a given OS. How the video looks on your iPad or projector depends on the compression/decompression algorithm ("codec") and how efficiently the playback software and hardware can decompress and render frames of video to your screen. Silverlight and Flash both support the H.264 codec, meaning a given frame of video in either technology should look the same. In desktop Safari, the HTML5 video tag ties into any media the installed version of QuickTime can play, including video compressed with H.264. The HTML5 video tag on iPad and iPhone 3G and later supports H.264 Baseline profile 3.1, while earlier versions of iPhone support H.264 Baseline profile 3.0. Given that Silverlight, Flash, and QuickTime all play back an H.264 encoded video, the exact same file, differences stem from other things besides the video, like excessive CPU usage causing frame drops. For example, Flash 10.0 didn't access hardware acceleration for decompression of H.264, so 720p or higher content would generally drop frames and stutter badly. Flash 10.1 can, with certain video cards, use the video card to decompress the video, letting the video play more smoothly. Safari 5 and QuickTime also can access hardware acceleration. Meanwhile, Silverlight 3 was much more efficient at decompressing and rendering 720p size video on a Mac than Flash 10.0, while also supporting DRM encryption/decryption, making the Silverlight player a natural choice for Netflix. (As of Flash 10.1, on compatible Macs, the situation has somewhat reversed.) On the back end, Silverlight streaming servers and Apple adaptive HTTP servers are close enough that an IIS Media Services server can stream to iPhones/iPads. H.264 video encoded for Silverlight Smooth Streaming or for Apple adaptive HTTP streaming uses generally similar techniques, helping an investment in Silverlight pay off in reaching the Apple iDevice ecosystem.
kh812000 16y ago
Meh. Netflix was great for the first 6 mo. Then everything got stale and nothing is good on streaming nor DVD. C'mon where's the remake of Tron for god sake.... I've canceled.
stcredzero 16y ago
Quite simply, they are in the business of renting video content to people using newly available infrastructure. Put that way, theirs is a good business to be in.

164 points by mattrjacobs 16y ago

Netflix also has a company culture that tends to keep people motivated. They've identified that a great place to work isn't a place with perks, it's a place where you get to work on hard problems with great people. And besides making users happy (which is important), at its heart, it's a technology company, and it shines through when they're able to leap from platform to platform to deliver the movies.

Goladus 16y ago

I won't become a netflix customer until they stop using pop-under advertising.

jonursenbach 16y ago
Adblock?
nzmsv 16y ago
Speaking of annoying ads, this is the page that helped me get rid of the Meebo bar on Slate: http://www.chizang.net/alex/blog/2010/08/19/block-meebo-bar/ http://www.chizang.net/alex/blog/2010/08/19/block-meebo-bar/
there 16y ago
are you sure it's them directly and not someone advertising for their affiliate account?
- Goladus 16y ago
  No, but that doesn't really matter to me. If netflix doesn't realize it's happening, maybe someone will notice my comment and do something about it.
- staunch 16y ago
  They're still culpable. It's their responsibility to police their affiliates. They can't rightly turn a blind eye to the means by which they profit.
jonknee 16y ago
What browser are you using that you still see pop-under ads?
- Goladus 16y ago
  It happens occasionally. I haven't used the same browser on the same computer every day for the past four years, and providing a matrix showing the pop-under-exploit-blocking capability of each one over that timeframe would be difficult.
binaryfinery 16y ago
Doesn't happen on the Wii, PS3, Xbox, iPad, iPhone and I'm guessing not on the new apple tv either.
- Goladus 16y ago
  Right, it happens when I visit other sites on a the web with a browser that doesn't block pop-unders. I'll see a big red ad with the word "Netflix" on it.
breakall 16y ago
Are you thinking of Hulu? When does Netflix do pop-unders?
- Goladus 16y ago
  For the past several years I've observed netflix pop-unders at various points on www.reelviews.net, and possibly other sites. (see my comment about using a variety of different computers and browsers over that timeframe)

papa 16y ago

It's too bad there's no way to assign a universal "reputation" score to the various pundits out there so that readers can better assess the value of their published predictions. Michael Pachter, for instance, has been wrong on a number of occasions (he predicted Sony would dominate the current console generation and Nintendo would languish and MSFT would be #2 -- at least he got the last part right). Like the iPad which many pundits couldn't figure out, the consumers never wrote off Netflix and that's pretty much all that matters.

kiba 16y ago
A database that list all pundits' specific prediction and give them a rating based on if they succeeded or not?
- papa 16y ago
  That could be a component. I can't put my finger on the other ones, and it was just a slapdash thought, but I'd just love a scorecard that maybe considered: predictive success, factual error rate/truthyness (e.g. do they make frequent bogus claims?, known biases and employer(s). It's not really realistic to comprehensively log all of this, of course. But it sure would help me assessing the relative quality of some sources, especially now that sources for news are so varied and fragmented. I suppose in the past the reputation of a publication served some of this purpose (i.e. WSJ or NYTimes having stellar reputations). I knew of a couple of databases for equity analyst performance like Starmine and Bulldog Research. So those do exist. Not sure if either are still around since I'm no longer in the finance space.
- tomjen3 16y ago
  The problem is that you have to take account how unlikely a given prediction would be in comming true - a person who predicts one in a million things but only gets it right one out of a thousand is still way better than somebody who predicts the results of coin-flips with 51% accuracy but in your system the latter would be ranked far higher.
  - joe_the_user 16y ago

noelchurchill 16y ago

I love Netflix. But Apple is gaining on them. At some point I might switch, or just use both. I'll certainly never sign up for cable tv.

chadgeidel 16y ago
I think Apple's store has some great ideas, but I'm not going to pay for a "one time rental" type of service when Netflix is an "all you can eat" type of service. I realize their "Instant" offering is still not as large as their DVD offering, but it's growing all the time. I currently have over 100 items in my "play it now" queue. I routinely switch items from my DVD queue to the "play it now" queue, so it appears that they are continually adding more content.
- noelchurchill 16y ago
  I've stuck with Netflix thus far because nobody can compare with their vast catalog of movies (DVD or streaming). However when it comes to value, there are months when I might watch many movies and really get the value out of Netflix's "all you can eat" structure, but other months I might not watch any movies and still pay the full subscription price. I think it probably averages out to cost about the same as Apple's pay-per-view system, so to me it really comes down to who has the best catalog of movies.

aresant 16y ago

The killer app in this space is studio catalog - that's the competitive advantage. Distribution for NFLX is strong - but given the move for most new hardware devices to include "Apps" integration, distribution is going to be a waning advantage. It's going to be an interesting battle, for instance what does the paperwork look like in Netflix' studio agreements - can they sell to Apple?

binaryfinery 16y ago
I agree, with a caveat: Distribution involves an endpoint: me+device. Netflix has me, and millions like me. On any device. I watch on my PC, my Mac, my Wii, my iPad. My 5 yr browses for shows on the Wii and the iPad. So Netflix has the advantage of customers and devices. I spend $20/month on netflix. I have spent a total of $10 for TV shows on iTunes.
cowboyhero 16y ago
Astute. I think you're dead right about the studio catalogue. Unfortunately, the studios are still trying to protect what they view as their major customers: Retail chains (WalMart and Blockbuster) and cable companies. They understand those business, they've made money with them, and file sharing and secondary markets are negligible in those environments. I've never thought about Netflix's agreements with third party distributors. That's a good question. Originally, I assumed some money was changing hands but maybe not. Maybe Netflix looks at it as a form of loss leader and a strategic advantage in the long run. It seems like every company that comes out with a set top or mobile device now eventually includes Netflix. For consumers, Netflix is becoming a feature that's just not anticipated, it's expected.
mmorris 16y ago
I think Netflix is aware that their advantage with regards to distribution isn't going to last forever and that they need to focus on getting more (and newer) movies. They seem to be making headway in expanding their catalog - e.g., the $1 billion deal with Epix (Paramount, Lionsgate, and MGM) to increase the size of their "Watch Instantly" portfolio. From what I've read, this is a big deal, as they're paying a bit more (relative to the premium cable channels) for the same rights. More info on the Epix deal: http://www.hollywoodreporter.com/hr/content_display/news/e3i4a25a9f106904fc16e41c1c1522dbf3c http://www.hollywoodreporter.com/hr/content_display/news/e3i...

MikeCapone 16y ago

I just wish the would come to Canada.

igrekel 16y ago
Actually, Netflix is supposed to be available in Canada soon. http://www.netflix.ca/ http://www.netflix.ca/ Mind you there are existing similar services.
- jat850 16y ago
  Zip.ca is existing, similar... and awful. Which parallels a lot of tech-oriented services in Canada (cell phones are a great example). Hopefully the Netflix service in Canada nails it.
riklomas 16y ago
For UK people, they're planning to relaunch here by the end of the year: http://www.digitalspy.co.uk/movies/news/a200103/netflix-to-relaunch-in-uk-in-2010.html http://www.digitalspy.co.uk/movies/news/a200103/netflix-to-r...

JoelMcCracken 16y ago

I have been a Netflix subscriber since February 2006. It is the only service that I have subscribed to for that long, and the only one I never, ever ponder unsubscribing to.

mortenjorck 16y ago
I've subscribed for as long, and Netflix occupies the same place in my lifestyle. It's a testament to just how great the core service is that they could make some very bad decisions, such as removing the entire social subsystem of friends, lists, and notes, yet not once did the thought of canceling cross my mind.
RK 16y ago
Netflix is probably the only pay service that almost everyone I know in the US has.

Vivtek 16y ago

Argh, a truly good article marred by one thing: the assertion that BitTorrent is a competitor for NetFlix. This notion just won't die - I use BitTorrent, sure - to get stuff I can't pay for, because nobody is interested in selling it to me. But I'd much, much, much rather toss NetFlix their $9 every month to deliver what I want without the hassle of BitTorrent, and that's the canard that the entertainment industry just can't get past. Just because it's free doesn't mean it's cheap. $9 a month is cheaper.

brianpan 16y ago
BitTorrent is a competitor to NetFlix in the same way that it, and P2P, was a competitor to the iTunes Music Store. Even if it's not free or not without hassle, it's still a way that some people get movies/TV shows etc. Which makes it competition.
- Vivtek 16y ago
  Yes, yes, and the convenience store in the gas station two blocks down is also "competition" for the Meijer superstore with actual produce and food, that I have to drive to. It's not really competition. I never go to that convenience store because they don't have what I want to eat. So in your sense, while they exist in the same market and are therefore "competitors", that viewpoint really distorts the reality of the situation.
  - brianpan 16y ago
    Point taken. In Netflix's view, they focus on a specific market niche so that they effectively compete in a smaller, less crowded space. But in analyzing their business, it's not unreasonable to take into account "nearby" competitors even as they differentiate. Netflix themselves do: http://www.slideshare.net/reed2001/netflix-opportunity http://www.slideshare.net/reed2001/netflix-opportunity (slide 31). Overstating BitTorrent's influence would be a mistake, but ignoring them altogether would be a distortion as well.
Herring 16y ago
>hassle of BitTorrent What do you mean? I hadn't noticed.

blizkreeg 16y ago

This is a tangential pricing-related question: Why does Netflix, which is solving some hard and interesting problems both on the technical (delivery/algorithms) as well as business side (licenses etc) only charge $9-$15 a month whereas online services like dating sites and project collaboration SaaS tools that are arguably much easier to build get away with charging anywhere from $30 to $60 a month? If pricing is about supply and demand, shouldn't Netflix be able to charge a lot more (at least double of what they do now) since there aren't any comparable services with the level of user satisfaction as Netflix. I would gladly pay $30 a month for Netflix just because of how great the service is - I mean unlimited instant watching, access to some amazing foreign films, DVDs. Dating sites and some other SaaS services - dime a dozen. When a Match.com asks me to pay $30 a month, I cringe. I'm perplexed by this.

minouye 16y ago
I don't think I would pay $30 a month for Netflix. From my perspective the demand for their services is fairly elastic, especially considering the substitutes. However, I do expect that prices will be recalibrated once video streaming makes up more substantial portion of their business. I'd imagine the economics of streaming vs. sending a DVD are quite different.
- deleted 16y ago
  [deleted]
danilocampos 16y ago
Perhaps it's a volume thing? I suspect that "I want to be entertained" is a bit more universal than "I want to find a mate" or "I want to manage my project." So maybe they're finding some kind of sweet spot there? The thing is, I use Watch Instantly sporadically. Sometimes hardcore, every night, for a week when I just need a break from everything, and other times not more than once or twice a month. $9 is such a fair amount of money to ask, I just let them bill away regardless, because I want to have it immediately if and when I want it. So it could also be that <$10 is just the right amount of auto-pilot billing to maximize their revenue for spotty users.
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qjz 16y ago

NetFlix simplified my life. The value of that is what I think is underestimated.

newmediaclay 16y ago

Apple Stock vs. Netflix Stock over past 5 Years: http://www.google.com/finance?chdnp=1&chdd=1&chds=1&chdv=1&chvs=maximized&chdeh=0&chfdeh=0&chdet=1282168239878&chddm=493833&chls=IntervalBasedLine&cmpto=NASDAQ:AAPL&cmptdms=0&q=NASDAQ:NFLX&ntsp=0 http://www.google.com/finance?chdnp=1&chdd=1&chds=1&...

danilocampos 16y ago

I love Netflix. They're a role model for other companies, and for me as a person. Netflix has succeeded on the strength of two things: integrity and ambition. They genuinely care about their customers. They work extra hard to make sure people who give them money are happy to do it. In their call centers, CSRs are friendly and empowered. They're instructed to err on the side of doing things that are most likely to make a customer happy, instead of pissing people off with stupid "it's policy!" behavior. In their distribution centers, they have a hardcore quality control culture that goes to great lengths to ensure that mailed out DVD's correctly match a customer's order. Contrast this with their dying competition, who never once gave a damn about customer satisfaction. Who, indeed, codified policies whose direct result was to enrage customers. As for ambition, Netflix has continually worked hard to make the service the very best it could be, opening more and more distribution centers to minimize the wait between returning and receiving your DVDs. Despite having every reason to rest on their laurels, they decided they'd also be the Netflix to their Blockbuster, going deep on the Watch Instantly strategy that's redefining their business. Instead of waiting for someone else to come along and make them obsolete, Netflix grabbed the bull by the horns. This is one of the rare moments of modern capitalism producing something truly excellent, on its merits, based on the needs of the market. If only we could see similar disruption in larger and even more corrupt industries. Honestly: I love these guys.

pmichaud 16y ago
I wasn't so lucky with them. I was a good customer, but they started silently throttling my account, and they wouldn't admit to it either. It's since come out that that's exactly what they were doing. If it's too expensive to send me that many disks, fine, but don't lie to me about it.
- danilocampos 16y ago
  I didn't know about this. So much for my remark on integrity. Do you know if they still do this throttling? I personally never ran into this -- I've never been more than a light-to-medium user, except in spikes. Like when I when I discovered 24 six years ago. edit: Here's something straight from the horse's mouth: http://money.cnn.com/magazines/fortune/fortune_archive/2007/05/28/100034248/index.htm http://money.cnn.com/magazines/fortune/fortune_archive/2007/... "I stopped my subscription to your service because of your well-documented "throttling" of frequent renters. How can you say you are focused on customer service when you alienate your customers in this way? Bill Greenstein, Seattle When we are short on new releases, which we try not to be, we believe it's fairest to allocate those new movies to subscribers who have not rented much recently. This upsets heavy users because they are not in the front of the line for new releases. We are straightforward about how it works, but not everyone likes that policy." Eh, okay, assuming it begins and ends there, I can see the argument for doing things this way.

deadmansshoes 16y ago

On a recent visit to the states I got to try out Netflix, and on being told you could watch any film you wanted was very impressed. Turned out there are only certain categories of film (i.e. the ones that would be on daytime tv..) you can watch on "freeplay" and anything good you have to wait for a DVD in the post. No wonder its cheap. Was still better than the adverts every 8 mins while watching Rambo on a cable channel though.

ketanb 16y ago

Netflix succeeded because of having right values and great culture. The slides explains their values and culture in detail. It is so much easy to visualize why they are successful: http://www.slideshare.net/reed2001/culture-1798664 http://www.slideshare.net/reed2001/culture-1798664

trunnell 16y ago

Netflix has a great engineering culture, not just a great stock. Shameless plug: we're hiring good hackers. Check out http://netflix.com/Jobs http://netflix.com/Jobs

staunch 16y ago
Your use of Silverlight makes me question that assertion :-)
- trunnell 16y ago
  Why?
  - dhess 16y ago
    For starters, it's a poor choice for streaming technology on the Mac. Can we expect to see HTML5 video support for the Mac anytime soon? It pains me that Netflix HD streams on my iPad look better than on my 1080p projector hooked up to a Mac mini.
    - Terretta 16y ago
      Of course video using only 1024x768 tiny pixels on a bright glossy screen will look better than using 1920 x 1080 pixels from a projector. You simply won't see as many problems with video compression on the small screen with less pixels. Also, just to clarify -- there's not really any such thing as HTML5 video. There's an HTML5 video tag, and browser vendors can decide what kinds of video the tag should handle in their browser on a given OS. How the video looks on your iPad or projector depends on the compression/decompression algorithm ("codec") and how efficiently the playback software and hardware can decompress and render frames of video to your screen. Silverlight and Flash both support the H.264 codec, meaning a given frame of video in either technology should look the same. In desktop Safari, the HTML5 video tag ties into any media the installed version of QuickTime can play, including video compressed with H.264. The HTML5 video tag on iPad and iPhone 3G and later supports H.264 Baseline profile 3.1, while earlier versions of iPhone support H.264 Baseline profile 3.0. Given that Silverlight, Flash, and QuickTime all play back an H.264 encoded video, the exact same file, differences stem from other things besides the video, like excessive CPU usage causing frame drops. For example, Flash 10.0 didn't access hardware acceleration for decompression of H.264, so 720p or higher content would generally drop frames and stutter badly. Flash 10.1 can, with certain video cards, use the video card to decompress the video, letting the video play more smoothly. Safari 5 and QuickTime also can access hardware acceleration. Meanwhile, Silverlight 3 was much more efficient at decompressing and rendering 720p size video on a Mac than Flash 10.0, while also supporting DRM encryption/decryption, making the Silverlight player a natural choice for Netflix. (As of Flash 10.1, on compatible Macs, the situation has somewhat reversed.) On the back end, Silverlight streaming servers and Apple adaptive HTTP servers are close enough that an IIS Media Services server can stream to iPhones/iPads. H.264 video encoded for Silverlight Smooth Streaming or for Apple adaptive HTTP streaming uses generally similar techniques, helping an investment in Silverlight pay off in reaching the Apple iDevice ecosystem.

kh812000 16y ago

Meh. Netflix was great for the first 6 mo. Then everything got stale and nothing is good on streaming nor DVD. C'mon where's the remake of Tron for god sake.... I've canceled.

stcredzero 16y ago

Quite simply, they are in the business of renting video content to people using newly available infrastructure. Put that way, theirs is a good business to be in.