Hacker News Reader

Comment by ilamont | Hacker News Reader

I wouldn't underestimate Netflix. Their business model and viability has been doubted by Wall Street and others for years (see http://www.usatoday.com/money/media/2004-10-17-netflix-dvd-w... and http://www.fool.com/investing/general/2007/12/27/will-apple-...) but the company has always been very clever with their product strategy and partnerships.

As for the drop in subscriber numbers, it's understandable that people don't like price hikes, but losing less-profitable DVD customers may not be a bad thing in the long run. Postage and regional distribution centers are a drag on the company. Reducing those costs frees up funds for content distribution deals.

View on HN

A lot of people seem to think that the recent price changes are done to discourage dvd rentals because they are less profitable.

I see it the other way, the recent separation in prices were done to isolate dvd profits from the rest of netflix. Make no mistake that the studios are already working on deals that will bleed netflix dry. They will look to squeeze every last penny of profit out of the streaming division. By separating the 2 units, netflix is making sure the dvd unit can chug along merrily with their relatively fixed profits that the studios can't bargain for.

I believe the studios will push people back to using streams that are 'free' and see their revenue go down to zero. I hope that eventually they will learn that the 'economic' cost of getting their content is limited by the 'opportunity' cost.

I completely agree, Netflix is about to face the same problem that cable and satellite operators have faced for years, which is having every provider come at them demanding a fixed cut of subscriber revenue. If the top 6 ( http://en.wikipedia.org/wiki/Major_film_studio#Today.27s_Big... ) had their way, they would each demand at least $5 per subscriber for access to their content. The next 5 years are going to see netflix increasingly operating the streaming division on a razor thin profit margin while jacking up prices.

I am not an expert on the industry, but from my armchair I think netflix will live or die by offering productions a better deal directly than the big studios. I expect some sort of anti-trust legal fight in an attempt to limit the lock in measures the big studios can put in the contracts they leverage.

Certainly if I were Netflix I would be thinking along those lines. Clearly the move to lock in some original content was part of the game here. The 'learning' that has to happen for the big content folks is the difference between 'some money' and 'no money.' Hopefully Netflix will help educate them in that regard.

I think CNN is being hyperbolic because Time Warner (CNN's parent company) sees them as a threat.

Isn't Turner Broadcasting (http://www.turner.com/) the parent of CNN? Or am I missing some information?

I think the news program is part of Turner Broadcasting System, but the organization is owned by Time Warner. But I only know this from Wikipedia. https://secure.wikimedia.org/wikipedia/en/wiki/CNN

Turner is an "autonomous" subsidiary of Time Warner.

Reply on news.ycombinator.com