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The idea that people are quitting now because of theoretical price hikes in two years is... ludicrous. Remember that Netflix is month-to-month. People will leav
by cletus 15y ago
The idea that people are quitting now because of theoretical price hikes in two years is... ludicrous. Remember that Netflix is month-to-month. People will leave when they no longer get value from it now.
Netflix movie selection doesn't seem to be great. In my case I subscribe to it for the TV shows more than anything else and for $8/month, the cost is easy to justify. YMMV.
I see Netflix's problem as this:
- Hollywood increasingly sees Netflix as a problem rather than an additional avenue for revenue. The studios may be concerned about creating another iTunes (virtual monopoly);
- Studios and distributors increasingly want to go on their own, which is really bad for consumers and seems to be driven by simple greed of cutting out the middleman without realizing what that middleman is actually doing for you;
- Netflix uses Amazon for scale. This is a problem. As much as burst architectures have theoretical advantages, the costs just don't add up beyond a certain size. I cannot believe that Netflix isn't at the point where they'd be better off owning their own servers;
- There's no offline viewing. IMHO Apple will increasingly address this market. Netflix needs to as well. When people are mobile they usually don't have a sufficient data connection, particularly if on a train or plane.
Netflix seems to want to go the HBO route of creating original content. This is an incredibly dangerous game to play with them forking out big bucks [1]. At least AMC's content in comparison is relatively cheap to produce and they have a relatively stable income due to cable bundling (although they're struggling with rising costs of Mad Men).
EDIT: Let me clarify. 2012 price hikes don't drive consumers. Current value and current price hikes drive consumer behaviour. The recent price hike in DVD+streaming will no doubt have caused some to drop the service. They could drop either streaming or DVD or possibly both.
I'm inclined to believe that DVD is an ever-smaller piece of their business but it may yet be significant to have a real impact on subscriber counts (in terms of subscriber loss).
[1]: http://www.reuters.com/article/2011/03/21/idUS176332428720110321 http://www.reuters.com/article/2011/03/21/idUS17633242872011...
- timr 15y ago"The idea that people are quitting now because of theoretical price hikes in two years is... ludicrous." It's not a theoretical price hike in two years. My bill goes up at the end of this month.
- unexpected 15y agoit's not a theoretical price hike in two years - Netflix just raised the prices on 9/1/2011. Prices have jumped significantly over the past two years. My costs have gone up over 50%!
- josefresco 15y agoYour local cable TV provider will be happy to slowly boil you into paying 50% more over the same time period with small increases in your monthly bill. Netflix could learn a thing or two from big cable about how to rip off customers without them even realizing it.
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- sliverstorm 15y agoNetflix uses Amazon for scale. This is a problem. As much as burst architectures have theoretical advantages, the costs just don't add up beyond a certain size. I cannot believe that Netflix isn't at the point where they'd be better off owning their own servers I would guess they believe the capitol to be gained through continued growth (or the capitol to be saved in a decline) eclipses the added cost of relying on Amazon. In other words, owning your own servers is good for a stable market. They probably believe their market is still too volatile to depend on their own servers.
- gwright 15y agoNetflix uses Amazon for scale. This is a problem. As much as burst architectures have theoretical advantages, the costs just don't add up beyond a certain size. I cannot believe that Netflix isn't at the point where they'd be better off owning their own servers I'm guessing that Netflix has probably spent a few minutes more than you analyzing their infrastructure costs. Sure they could have made a mistake and are being less efficient by using Amazon over their own data centers but I have a hard time believing that the mistake is as obvious as you seem to think.
- 0x12 15y agoThis is true, but it may come down to the hidden cost of switching rather than the actual cost they pay every month.
- ghshephard 15y agoI'm intimately familiar with the decision pattern that took place at Netflix, and what analysis they did, as I know some of their sr. operations staff. The net-net is that Netflix could have saved 20-30% on their infrastructure costs by not going with Amazon, but then they would have to hire smart operations and infrastructure people. They wanted to focus on Software, and had no Operational leaders in their organization, so they walked away from that 20-30% infrastructure savings - likely because they realized that over time - infrastructure costs are not going to be particularly material to their overall cost of business - which will be dominated by the cost of the content.
- gwright 15y agoThat is a strange way to look at the decision. Clearly the costs of staff have to be included if you want to compare operating your own data centers to using Amazon. It is pretty easy to say that Amazon is more expensive by x% if you are willing to exclude certain costs from the alternative. What is the difference after adding in staffing costs?
- sp332 15y agoAmazon really is that much more expensive. Even among "cloud" providers, they are expensive. Their competitive advantage is extreme flexibility with large amounts of servers (spin up a few hundred instances in a few hours, spin them down again a few hours later). If you do it yourself, you don't just have to worry about money, but also how to hire good operations people, and what effect all those extra people are going to have on your organizational structure, internal culture, etc.
- awm 15y agoAs per using amazon to scale, it depends on the services they use. EC2 is expensive, but you don't need that many ec2 instances to handle the streaming, outside of permission handling etc. As for transcoding videos, they probably have a far more burst-like intake of movies, yet not a very large burst at that. How many tv shows are released per day? How many movies come out per day? Not too many, compared to a service like youtube that has to transcode huge amounts of information all the time. EC2 at least lets them turn on machines until they finish, at which point they can easily scale down after the burst is handled.
- slillibri 15y agoNetflix uses AWS just for data and analytics. Here they talk about their move from their own data centers for that http://blip.tv/silicon-valley-cloud-computing-group/netflix-s-move-to-aws-4271610 http://blip.tv/silicon-valley-cloud-computing-group/netflix-... Netflix uses LimeLight, Level3, and Akamai for streaming, and you probably need a bigger footprint then you think for that. Building out a usable global streaming network is going to take more then a handful of EC2 instances.
- elq 15y agoNo. Netflix uses AWS for nearly everything (including transcoding videos) other than streaming bits and a subset of other processes (PCI type stuff).
- ww520 15y agoFor hosting, isn't bandwidth for movies delivery their biggest cost? I would imagine the servers and storage are relatively cheap. If they struck a low cost bandwidth deal with Amazon, hosting in AWS won't be too bad.
- whakojacko 15y agoStreaming doesn't come from AWS, they have agreements with CDNs for that