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Thanks. I so often think I've written something semi-insightful, but it is entirely ignored. Attention seems almost random. I am convinced that Netflix will

Thanks. I so often think I've written something semi-insightful, but it is entirely ignored. Attention seems almost random. I am convinced that Netflix will one day be studied as one of the most astute business strategies of the "internet revolution". IIRC, Hastings wanted to do streaming from the beginning but recognized that (1) the bandwidth wasn't available widely enough yet and (2) licensing content for streaming distribution required being a big player. He wanted to be sure he was well-positioned to be the dominant player when #1 (bandwidth) resolved itself and wanted to be big enough to achieve #2 (licensing deals). Doing DVDs by mail, while perhaps not as good of a business, achieved these goals. IANAL, but I think major laws would have to change to prevent Netflix from buying DVD titles and renting them by mail, so he could operate without the permission of the big boys. This strategy also had the interesting property of being a viable business until bandwidth improved (presuming, of course, that the cable operators did not do what I suggested!). What remains to be seen is whether the studios will still take kindly to this sort of disintermediation. That they did not take earlier action to control this distribution channel is perhaps as big as a mistake as that made by the cable operators.

lotusleaf1987 15y ago
I agree completely, the DVD-mail rentals are a stop gap measure and trojan horse in one---it's training the customer to use Netflix.com, which will ultimately become the front-stage for their business. Netflix is genius. |IANAL, but I think major laws would have to change to prevent Netflix from buying DVD titles and renting them by mail. IANAL either, but I think you're referring to the First Sale Doctrine: The "first sale" doctrine says that a person who buys a legally produced copyrighted work may "sell or otherwise dispose" of the work as he sees fit, subject to some important conditions and exceptions. Section 109(a). In other words, if you legally buy a book or CD, "first sale" gives you the right to loan that book or CD to your friend. Libraries heavily depend on the first sale doctrine to lend books and other items to patrons. Although studios and record labels could side-step this by selling the dvds as 'licenses.' Not sure though, would love a lawyer to explain this more. "What remains to be seen is whether the studios will still take kindly to this sort of disintermediation." I always wonder what's keeping ESPN, Comedy Central, Cartoon Network, HBO, AMC, FX etc from just setting up websites. I realize most of these companies rely heavily on advertising, but why not just charge like $5/month and buy your shows a la carte. I couldn't careless about 99% of what is on cable tv, but I'm railroaded into paying for it. It would seem obvious that someone, especially HBO since they do not need advertising money, could go straight to the customer with quality content and their customers have already shown a willingness to pony up cash.
- meatsock 15y ago
  all of those networks still have to get carried by cable operators in order to remain viable, and losing ground by stepping on their primary distrubuters' toes would risk too much, I think
- sammy214 15y ago
  "I always wonder what's keeping ESPN, Comedy Central, Cartoon Network, HBO, AMC, FX etc from just setting up websites. I realize most of these companies rely heavily on advertising, but why not just charge like $5/month and buy your shows a la carte." The distributors (cable and satellite cos) and media companies both have self interest in preserving the a la carte model (many people mistakenly assume it's just in the distributor's interest). Let's take a look at the examples you mentioned: ESPN (Disney), Comedy Central (Viacom), Cartoon Network (Turner/Time Warner), HBO (Time Warner), AMC (Cablevision), FX (Fox) are all owned either by distributors or by media conglomerates that own multiple channels and have an interest in pushing 'packaged content' so that when ESPN is placed in the standard package for DirecTV, DirecTV can also be forced to take ESPN2, ESPN3, Disney Kids, etc. into the same tier and pay an incremental per sub fee for each add'l channel. That's a big part of what's keeping media cos. from going a la carte; they've decided that jamming additional channels into lower tiered satellite packages makes them more money than offering individual over-the-top subscription access.
- gcheong 15y ago
  The most recent filing of Netflix's annual report goes over some of the inherent risks they see to their business. Potential changes to the applicability of the First Sale Doctrine and ways studios may try to limit its affects is one of the risks they mention. http://ir.netflix.com/secfiling.cfm?filingID=1193125-11-40217&CIK=1065280 http://ir.netflix.com/secfiling.cfm?filingID=1193125-11-4021...
- billybob 15y ago
  "it's training the customer to use Netflix.com, which will ultimately become the front-stage for their business." Yes. It's telling that they didn't call it "MailFlix" or "DVDQueue"; they chose a name that focuses your attention on the internet aspect.
deleted 15y ago
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lotusleaf1987 15y ago

I agree completely, the DVD-mail rentals are a stop gap measure and trojan horse in one---it's training the customer to use Netflix.com, which will ultimately become the front-stage for their business. Netflix is genius. |IANAL, but I think major laws would have to change to prevent Netflix from buying DVD titles and renting them by mail. IANAL either, but I think you're referring to the First Sale Doctrine: The "first sale" doctrine says that a person who buys a legally produced copyrighted work may "sell or otherwise dispose" of the work as he sees fit, subject to some important conditions and exceptions. Section 109(a). In other words, if you legally buy a book or CD, "first sale" gives you the right to loan that book or CD to your friend. Libraries heavily depend on the first sale doctrine to lend books and other items to patrons. Although studios and record labels could side-step this by selling the dvds as 'licenses.' Not sure though, would love a lawyer to explain this more. "What remains to be seen is whether the studios will still take kindly to this sort of disintermediation." I always wonder what's keeping ESPN, Comedy Central, Cartoon Network, HBO, AMC, FX etc from just setting up websites. I realize most of these companies rely heavily on advertising, but why not just charge like $5/month and buy your shows a la carte. I couldn't careless about 99% of what is on cable tv, but I'm railroaded into paying for it. It would seem obvious that someone, especially HBO since they do not need advertising money, could go straight to the customer with quality content and their customers have already shown a willingness to pony up cash.

meatsock 15y ago
all of those networks still have to get carried by cable operators in order to remain viable, and losing ground by stepping on their primary distrubuters' toes would risk too much, I think
sammy214 15y ago
"I always wonder what's keeping ESPN, Comedy Central, Cartoon Network, HBO, AMC, FX etc from just setting up websites. I realize most of these companies rely heavily on advertising, but why not just charge like $5/month and buy your shows a la carte." The distributors (cable and satellite cos) and media companies both have self interest in preserving the a la carte model (many people mistakenly assume it's just in the distributor's interest). Let's take a look at the examples you mentioned: ESPN (Disney), Comedy Central (Viacom), Cartoon Network (Turner/Time Warner), HBO (Time Warner), AMC (Cablevision), FX (Fox) are all owned either by distributors or by media conglomerates that own multiple channels and have an interest in pushing 'packaged content' so that when ESPN is placed in the standard package for DirecTV, DirecTV can also be forced to take ESPN2, ESPN3, Disney Kids, etc. into the same tier and pay an incremental per sub fee for each add'l channel. That's a big part of what's keeping media cos. from going a la carte; they've decided that jamming additional channels into lower tiered satellite packages makes them more money than offering individual over-the-top subscription access.
gcheong 15y ago
The most recent filing of Netflix's annual report goes over some of the inherent risks they see to their business. Potential changes to the applicability of the First Sale Doctrine and ways studios may try to limit its affects is one of the risks they mention. http://ir.netflix.com/secfiling.cfm?filingID=1193125-11-40217&CIK=1065280 http://ir.netflix.com/secfiling.cfm?filingID=1193125-11-4021...
billybob 15y ago
"it's training the customer to use Netflix.com, which will ultimately become the front-stage for their business." Yes. It's telling that they didn't call it "MailFlix" or "DVDQueue"; they chose a name that focuses your attention on the internet aspect.

deleted 15y ago

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