Netflix Secures Streaming Deal With DreamWorks | Hacker News Reader

Netflix Secures Streaming Deal With DreamWorks

nytimes.com

148 pointsallending42 comments

While I'm rooting for Netflix to succeed in the short term, I have doubts about its long-term viability. Currently, in the media-delivery industry, Netflix is elbowing out the un-innovative rent-extracting cable TV industry, which is unequivocally a good thing. Delivering better choices for lower prices, while consigning cable companies to delivering commodity broadband access can only help consumers.

In the longer term, however, I fail to see how Netflix can avoid having its product turn into a commodity. Delivery of digital video to consumers will only continue to get cheaper and easier. Obviously Netflix has gotten amazing deals on bandwidth (see their recent spat with Comcast) but other the prices it pays will only continue to converge with the prices for commodity CDNs.

The only major part of Netflix's business that's resistant to commoditization is having a huge base of subscribers that allows them to cut deals directly with studios like Dreamworks. Obviously Netflix is trying to position itself as a cheaper, better middleman between consumers and content producers than the combination of cable channels and cable companies. This could be very attractive to studios in the medium-term, but ultimately why not cut out the middleman? When (not if) quick, flexible, and easy online payment comes to the internet, what's stopping Dreamworks from simply charging and delivering the movie to consumers directly?

It will become a commodity. That's a problem for Netflix but less of a problem for us. Netflix could still survive by offering better service or lower margins or what-have-you (isn't internet search a commodity? how does google survive?)

The exception to this was their movie suggestion algorithm. But lately it seems to be pointing me to their cheapest-to-consume content, not the best content given my rating history. (I say this primarily because of the prevalence of old, old movies, of which I am pretty much never a fan.)

Netflix often hid high demand movies from customers on the new releases page.

They would showcase new release movies on their main webpage & in marketing, but if you actually signed in to your account & looked at the new releases section you would find those movies either hard to find or missing altogether.

I would not find it surprising that they might tweak their algorithm to direct people to lower cost content.

Lower cost in what sense? I was under the impression that Netflix didn't pay per viewer, but rather, licensed the content to stream as much as they want for a certain time frame. Is that not correct?

edited to add: Here we go. From the Q2 investor conference call -- "For streaming content, we buy like our industry and pay television and network TV buys and cable networks, which is you have to commit upfront, and you have to pay a fixed amount per time period, typically per year, for access to that content on your network."[1]

[1] http://files.shareholder.com/downloads/NFLX/1414867676x0x485...

[Disclosure] I own a bit of NFLX.

I think this was referring only to physical DVDs.

That's where the recommendation system is most prominent due to the high opportunity cost in the movie-by-mail system.

The Netflix Prize, awarded just two years ago, is so irrelevant to Netflix today that they'll probably sell the license to the winning algorithm along with Qwikster.

I am not sure if it's as clear cut as that.

"The disappearance of Sony’s movies resulted from a clause in the Starz agreement. According to people familiar with the matter who spoke on condition of anonymity because contract terms are confidential, it includes an undisclosed cap, which has recently been exceeded, on the number of people who can watch Sony movies online."[1]

So perhaps Netflix could tweak their algo to avoid recommending movies that might have said caps. I have no proof they're doing this specifically though. Though maybe this cap was on total users rather than on number of views per title. I do know they would hide high demand new release DVDs in effort to reduce the demand on the movie, which in theory would allow them to purchase fewer copies.

[1] http://latimesblogs.latimes.com/entertainmentnewsbuzz/2011/0...

I think jinni.com had commoditized this.

Try telling that to Apple. Consumers had been downloading software off the internet for more than a decade, and along comes Apple, puts a bunch of "apps" in one place, takes a huge cut, and totally changes the industry.

Note: The iOS App Store is somewhat different, in that Apple started with a really popular hardware device, then said "if you want to make this thing useful you have to buy from us". But the Mac App Store seems to be doing pretty well too, and thats a much better comparison.

This is already happening for me. NBC and ABC (and Justin.tv and TED and Podcasts and Hulu) all have great iPad apps. I use them more often than I use Netflix.

I had a lot of confidence in Netflix as recently as 6-8 months ago.... enough to buy a substantial amount of their stock. Obviously that confidence turned out to be expensive to indulge.

It would be different if they were merely catching bad breaks like the loss of the Starz content, but they're actively acting stupid. I didn't know WordPress had a 5000-comment default limit until the Netflix corporate blog overflowed with angry messages from customers after they destroyed the Web front end for their instant-watch service a couple of months ago. The movie browser page still hasn't been fixed, and is still completely unusable, but it looks like they have learned how to disable commenting on most of their subsequent blog posts.

And now, the Quixtar/Quickster/Quickstar/Qwikstar/Quicster/Qwickster/... business, and the... interesting way it was announced by Hastings. Not much can be said about this move that hasn't already been said. About all I can suggest, as both a customer and a stockholder, is that a certified laboratory be engaged to check the Los Gatos municipal water system for heavy-metal content.

All snark aside, it's going to take a smart, agile, innovative, and above all, customer-focused company to deal with the Comcasts and the AT&Ts and the Starz and other middlemen who stand between Netflix and a sustainable business model. Unfortunately the events of the past few months are telegraphing precisely the opposite signals. What in the world is going on over there? Either the world's first corporate suicide plan is in progress, or a brilliant and utterly obscure rope-a-dope strategy is being executed. Either way, the MBA program case studies are going to be really interesting when Netflix finally pulls off whatever they're trying to accomplish.

I'm not so sure things are at all bad for Netflix (though I see the stock market is punishing the hell out of them, that may have just been because the stock was ridiculously over-valued based on a number of indicators).

I remember back in the olden days, like a decade ago, the argument about music and media and writing online was that the company or companies that figured out how to curate the vast array of available data would be the successful media companies of the coming decades. Netflix is better at it than anyone. Because I run Linux most of the time when I'm working, and Netflix doesn't work on Linux, I was using Amazon's video service, and Hulu, to keep myself entertained while working on a server migration. The lack of good recommendations is notable for both services. I feel like I find good things to watch much more readily and with less clicking around on Netflix than on Amazon or Hulu. The overlap is relatively large, particularly with the low-budget movies and older TV series, but the ability for me to find the stuff I'd want to watch is vastly different, and I prefer Netflix by a large margin.

I still go to Amazon sometimes for stuff that I can rent there but can't get on Netflix. And I still go to Hulu for TV that is not yet on Netflix. But, when I sit down with a friend to watch a movie, we fire up the XBOX or Wii and browse Netflix. There's no contest about which is more likely to get my viewership when I'm sitting down to actually watch a movie.

What I'm trying to say is that if the "curator" concept holds water, and I think it will for the next few years anyway, then Netflix is the best placed company in the world right now to play that role. Even if HBO and Sho and various networks wanted to deliver their shows online, history indicates they'll suck at it, and it's unlikely they'll be able to deliver to an XBOX or Wii or Roku...and even if they can do so, they'll be tempted to think they can get 20+ bucks a month from me for a subscription to their cable service for the "on the TV" viewing. All around, the old way they've made money is going to prevent them from making the hard decisions to accept lower revenue per customer, in exchange for more viewers. Classic Innovators Dilemma situation.

I may be wrong...maybe some of the Netflix competitors will figure out the recommendation thing. Maybe they'll get a nice UI. Maybe they'll make the deals they need to put it on televisions rather than just computer screens. Netflix just has an awful big lead in those areas.

All things considered, I'm awfully tempted to buy some NFLX while it's on sale. I bought Google when it hit its 52 week low a few years ago, and have been pleased with the return. NFLX isn't as good a company as GOOG (probably), but it's even more heavily discounted right now.

I don't see how any online streaming service can survive longterm.

There is still quite a digital divide (lack of affordable, highspeed internet access in the US in many areas).

By the time this is resolved, storage media will become so inexpensive and dense, it will be possible to store years of tv shows and movies locally and very cheaply.

Personally, I have grown tired already of having certain tv shows or movies available one week and gone the next. I also dislike having to watch Hulu commercials if I decide to watch the same episode multiple times.

It doesn't make sense to spend billions of dollars on infrastructure when cheap, ultra high capacity media can do the job.

While high-speed isn't available everywhere (I know, because it isn't on every street where I live) it does cover a majority of Americans. Netflix already makes plenty of money and doesn't seem to be suffering from not being available to all Americans.

It doesn't matter how dense the media is as you still need to get the content onto it. This will be done by downloading or purchasing it at a store on some other media to transfer to it.

Thing is, I would rather pay $8/mo to stream older movies I will only ever watch once rather than buy them on DVD for $5/ea in the bargain bin. Even if I decide to watch it a few times, my price for it is still much lower.

You also call the media cheap, which it is and will be, but you forget the costs of licensing. I am sure it doesn't cost $25 to make a blu-ray. Streaming services allow a type of collective bargaining for it's users and gives a lower price overall.

Ever been here to Canal Street?

http://en.wikipedia.org/wiki/Canal_Street_%28Manhattan%29 ' Many vendors there are not bothered by licensing costs.

>what's stopping Dreamworks from simply charging and delivering the movie to consumers directly

Infrastructure, I'd assume.

> In the longer term, however, I fail to see how Netflix can avoid having its product turn into a commodity.

One way is by targeting as many delivery platforms as possible and just being there first. My TV for example has a Netflix "app" so I would likely pick Netflix. Many BlueRay players have built-in access to Netflix. Maybe built native apps for all the major mobile devices.

> what's stopping Dreamworks from simply charging and delivering the movie to consumers directly?

Becaus then users would end up having a bunch of hardware/software specific to each studio. Not common way to organize & sort your media queue.

Yes, Netflix already fucked it up by splitting off Qwickster but imagine having a different service for each studio.

Think grocery stores.

Much as content producers may want their own self-focused delivery stores, there isn't a chain of Nabisco Stores or such around. Some stores kinda get there, with heavy promotion of "store brands" or label-focused ones like Trader Joe's and Aldi, but while they win on price their success is tempered by lack of range. Likewise, Dreamworks and Sony and Disney etc. may want to provide direct sourcing of their material to customers, and may succeed to some degree, what most customers want is a centralized "I don't care who made it, I just want it" aggregator & distributor and not have to hunt down "awright, what studio made Shrek...good graphics, so it must be Pixar, which is owned by Disney, check Disney.com...nope, not there...Sony Animation Stuido? they did Open Season which looked similar, check Sony.com...nope, aw crap ya wanna watch my Over The Hedge DVD again?"

So the aggregator/distributor model is key. Publix, Wegmans, Piggly Wiggly, IGA, Whole Foods, etc. make deals with major product/content producers for distribution rights. Smaller ones have to pay for those rights, bigger ones are paid; the supply-and-demand model works out in its intricate complexity. Different distributors provide one benefit or another (ditto deficiencies), which when in competition with other near-identical distributors means innovating and maintaining something which garners more attention. They can exist side-by-side, what with Super Walmart carrying the greatest quantity & variety of most popular stuff cheap, Aldi giving near no variety (but pretty good what's there) stuff dirt cheap, IGA being "it's a grocery store, no more or less", Wegmans selling everything imaginable albeit higher priced, Whole Foods having high-priced premium selection, etc. Likewise, Netflix gets first-there broad-spectrum appeal, Hulu having better TV options, ABC/CBS/NBC/etc. having super-popular but limited offerings, Redbox (assuming they go streaming) featuring broad-range latest big-name short-availability content, etc.

The content producers can't develop enough following to garner customer loyalty to a single streaming source; nobody is a Dreamworks fan to the exclusion of most everything else. An aggregator/distributor can, however, will have to license Dreamworks content because customers want it (even if they don't know who made it). No aggregator can satisfy all customers; improving one feature set will degrade others; a complete slate of new big-budget titles will be limited and pricy, a long-tail library is thorough and "affordable" but lacks the biggest latest cheap, a low-price source may limit to second-tier content, a small distributor may specialize in obscure content for a premium.

NOBODY can provide EVERYTHING with COMPLETE satisfaction; there will always be room for a varying portfolio of content to offer, various delivery mechanisms which will appeal more to some than others, pricing which mirrors demand, etc. Just like grocery stores, each has its limits and annoyances and features and preferences.

> Trader Joe's

TJ's and pretty much all grocery stores just relabel another brand that's out there.

The comparison of virtual good to physical good is not apt. Most consumers would type "rent shrek" into Google. This hardly compares to having to drive to different physical stores.

The browsing experience will similarly be taken over by google. Today if I want to go see a movie, I type "movies" into google and and get a summary of "Movies for City, ST". I click on a movie and it shows me all places nearby that it's showing.

Tomorrow, Google will include a "Rentals" link, which shows a list of movies for rent, with a convenient link to whichever study rents the movie.

Netflix will begin streaming DreamWorks films starting in 2013.

Lovely. See you in two years.

2013 is about 15 months away. Not exactly around the corner, but not two years.

Well, it sounds like it starts sometime in 2013, not necessarily Jan 01. Also, it sounds from the article like Dreamworks will be slowly rolling out past titles, so it could be even longer.

It is every cinephile's dream to instant play the complete Beverly Hills Chihuahua trilogy.

DreamWorks Animation, not DreamWorks. That's a much smaller subset of the DreamWorks catalogue. Link bait.

But it could potentially open doors to the bigger catalog if things go well.

There's a lot of things that could happen before there are any meaningful results from that. Even if it's initially a smash hit (however that might be defined), they'd want to see how it does over a longer time span. A year would be the minimum time before anyone else would be making decisions based on that.

I also don't think it adds a lot of additional information that isn't already there. They already have all the Starz content, which they'll likely be losing. But content owners have a model they can see currently. Adding a few additional animated films won't likely change much, and it will be at least 2 years before any meaningful results are out.

There's a much better chance that between now and 2 or 3 years down the road, that something else more significant takes place. Netflix, upon losing the Starz streaming rights, could be out of business. Individual studios could be doing streaming on their own, and finding success with that.

Got excited for new content on Netflix Instant -- then read further and saw it wasn't taking effect until 2013...I am now less excited.

I am still waiting when I can play Netflix on Linux.

Not the ideal solution, but you could try running VMWare and see how the playback is.

You can use the netflix extension for chrome. Look in the chrome app store.

Edit: According to rglullis, this is wrong. I have left it for context. Sorry - I had read something about it, but it appears to not be true.

I'm sorry, but I will have to call bullshit on that one.

I "installed" the app, which only took me to the website. I selected a movie and got a page showing their requirements page. It mentions "PC", Mac and Chrome OS.

No love for linux, at least not right out of the box.

The Linux Chrome plugin is still being beta tested. Netflix has mentioned that it might be available sometime next year.

In the mean time, buy a Roku and plug it into one of your monitor's other outputs.

Amazon's instant movies play superbly on Linux.

How is the movie selection compared to Netflix?

I would say it probably has fewer movies, but it's selection is more mainstream. However it's model is quite different from netflix's (except if you have a paid for Prime account, with some titles).

I do have Prime account. Does it mean i get free streaming? I couldnt figure from reading.

The free prime streaming is only a subset of their catalog. It's also confusing. You'll click through to a movie and it will give you options to buy, rent in HD or stream with prime for free.

If you've paid for the account (in other words, it's not a free Amazon Student, or Amazon Mom account), then some of the titles will be available for free streaming.

see this: http://www.amazon.com/b/ref=sa_menu_aiv_piv_t10?ie=UTF8&...

Thanks for the link. I've had prime account for over a year, and I am discovering there were free movies.

Well, it certainly is nice to see that Netflix's promise of securing higher-quality content is at least partially coming to fruition.

Also, it is nice to see a content creator finally start talking seriously about internet streaming versus traditional cable as a means of content delivery.

Wow, they're still kicking!

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