Reed Hastings has seen the future, and there are no polycarbonate discs in his vision. You might find this surprising, given that he’s the CEO of Netflix. Is there life for Netflix after the DVD? That’s the question that was explored in an article in the Wall Street Journal last month.
Hastings co-founded Netflix, and expects that revenue from the rental of physical DVD discs will start to decline in as little as four years from now. Faced with a certain end to the business that now generates the bulk of the company’s revenues, he has the opportunity to set a new course for Netflix, and he’s working hard at it.
Clearly, the answer is to replace sending physical discs through the US Postal Service with streaming electronic versions of the movies across the Internet. (What will the Post Office do without those half-billion DVDs to deliver each year?) The company is already well on its way with its online service, offering subscribers on-demand access to about 12,000 movies and other videos at no additional charge. According to the WSJ article, about 20% of the 10 million subscribers now use that service on a regular basis.
But Netflix has more than 100,000 titles in its physical collection. Why can’t it just digitize them and start streaming? The answer is that the company does not have the rights to do that. So the current task is to negotiate with the movie studios and other content products. The problem is that the cable and satellite networks already have agreements for the electronic distribution of movies, and it may be hard for Netflix to generate enough revenue to compete with the licensing deals offered by these competitors.
Maybe one way to apply some leverage is to generate some pull. Just search the HDTV Almanac and you’ll find lots of entries about new devices — from set top boxes to flat panel HDTVs — that can connect to the Internet and stream the Netflix titles. Even Windows Media Center now includes a Netflix option on its menu. As more and more of those 10 million Netflix subscribers start using the service, it may create revenue opportunities that will help the company put together an offer that even the studios can’t refuse.
I’ve received a lot of promotional emails in recent weeks about new 24″ and 25″ 1080p LCD HDTVs at pretty astounding prices, some under $200. This would have been an appealing price for a 15″ LCD computer monitor just a few years ago, and now you get a widescreen and a TV tuner in the bargain. I’ll set aside the question of what quality panels go into these displays for the moment (though I would expect to find less-than-state-of-the-art technology), and focus instead on how these might be used.
The key point here is that a widescreen 24″ LCD panel has pixels that are about 0.27 mm across. That’s about 94 pixels per inch. How small is that? The Apple iPhone has 163 pixels per inch, so the dots that make up the image on these TVs are only about 70% larger than on the phone.
So what does that mean in terms of how you use it? In order to see the detail available on this screen when it’s showing high definition content (and assuming your vision is good), you’d need to sit no more than about 70% further from the TV than the viewing distance you use for the iPhone. I estimate that most people hold their phone at about 20 inches or less when viewing detailed content on the screen. 170% of that distance is about 34 inches. (In my book, Professor Poor’s Guide to Buying HDTV, my formula recommends about the same distance for a 24″ 1080p HDTV.) That’s less than 3 feet away. Sure, you could get one of these for the kitchen or to put on the wall at the foot of the bed, but you won’t be able to see the available detail. It would be like trying to read a newspaper from 15 feet away. Or your cell phone.
The bottom line here is that these are personal TVs, to be viewed by one person at a personal distance. A TV like this might be an excellent choice for a dorm room where they can serve double duty as a computer monitor (and if the computer is connected to the Internet, you can also gain access to lots of great video content that is available there). But don’t expect to get a high-def experience viewing a screen of this size from the couch across the living room.
Last week, I posed the possibility that cable providers would have to choose between providing the pipes or the water (connections or content) for the Internet. It’s too soon to know if they will have to pick one or the other, but it’s clear that Comcast definitely wants to be in the pipe business. Yesterday, the company launched its new Comcast High-Speed 2go service in Portland, Oregon. Atlanta is slated to be the next market in the nationwide rollout.
This new service is fourth generation — or “4G” — will be offered with a 4G-only card in the “Metro” package, or in a “Nationwide” version that includes a card that works with both Comcast’s 4G and Sprint’s 3G network, using the slower connection for coast-to-coast coverage when out of range of the faster connection. The 4G service provides up to 4 Mbps download speeds, nearly three times faster than the 1.4 Mbps offered by 3G service. Comcast will offer bundled wired and wireless service starting at $50 a month; existing “triple-play” customers will be able to add the wireless service to their subscription for as little as $30 more per month.
There are no signs that Comcast is planning to abandon the content delivery side of its operations, but this move to provide high-speed wireless Internet connections in major markets shows that it’s serious about the “pipe” side of the business. It has also stolen a march on its competitors that could translate into a lasting advantage. If people start to depend on the Internet more and more for their entertainment content, Comcast may be in the best position to meet the demand for mobile connections.