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The Netflix Box Bombshell

May 27, 2008 | Author: Ibex Marketing

Okay, there are still dozens of stories from SID that I could write, but it’s really time to move on. And to play catchup, I need to cover the biggest story from last week; a week ago, Netflix announced the Netflix Player by Roku. This box is simple; it connects your TV to the Internet so that you can watch movies and recorded television shows. It gives you access to the same 10,000+ titles that you can stream to your PC if you’re a Netflix member. The big difference is that after you pay $100 for the Netflix Player (and your monthly Netflix subscription), you can watch as many movies and TV episodes as you want… for free.

According to the Netflix Player site, Netflix is working to provide HD content in the near future, and the player will be able to handle it when it becomes available. It has component video and HDMI connectors that will support high definition images. The box also includes a remote control that makes it easy to start, stop, fast-forward, and rewind as you watch; just as you would with a DVD. The image quality is affected by the bandwidth of your broadband Internet access; according to the Web site, you need at least 1.5 Mbps download speeds, but 4.0 Mbps is recommended to get DVD-quality images and sound. And you also need a Netflix subscription that offers unlimited DVDs; currently, this starts at just $9 a month.

The Netflix Player is big news, because it signals a big jump in delivering commercial content over the Internet. The “marginal cost” — how much it costs Netflix — to send one more movie after it has the infrastructure established is essentially zero, which is why they can provide the movies for free. They’re counting on the subscriptions to cover the costs and provide a profit, and if they don’t have to manage the physical inventory and pay all the postage required for their DVD service, you can see why they might be eager to move all their customers to the Internet service.

Now the big question is “how will Blockbuster respond?” Not to mention whether or not this is the beginning of the end for DVDs in general, and Blu-ray in particular. Stay tuned….