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Can Movies over the Internet Succeed?

February 12, 2009 | Author: Ibex Marketing

If you want to watch a movie at home, you probably put a polycarbonate plastic disc in a player that’s connected to your TV. You may own the disc, or you may have rented it from Blockbuster or NetFlix or some other service. But companies are starting to use the Internet to distribute movies for sale or rent. It saves a lot of money; there’s no postage, you don’t have to staff a retail store in the local shopping center, and you don’t even have to stock and track all those little plastic discs. The question is, however, whether consumers will be satisfied getting their movies over the Internet instead.

Well, the data points are beginning to accumulate. The latest news comes from NetFlix, whose Internet streaming service lets subscribers watch all the movies they want at no additional cost. Last year, Microsoft teamed with NetFlix to offer streaming movies on their XBox Live service. The companies announced this week that more than one million XBox users have downloaded and activated the NetFlix application. And they are using the service; they have already used their XBoxes to watch more than 1.5 billion minutes of movies and TV shows from NetFlix. If you figure that the average movie is 90 minutes long, then that is about 17 million movies.

Now, that sounds like a lot of movies, but keep in mind that Netflix ships about 2 million DVDs a day, so the XBox volume is just a bit more than a week’s worth. Still, it’s a strong start and does not include all the customers using their PCs or the Roku box to stream movies. And other companies are adding NetFlix streaming to their products, such as LG and Samsung’s new Blu-ray players, or new Vizio and LG TVs that can connect directly to the Internet and get NetFlix movies.

Most other Internet movie rental services still charge by the movie, but some are being swayed by the NetFlix “all you can eat” fixed price subscription model. Verizon is now offering Starz Play service to its FiOS customers for just $5.95 a month. The Starz service only has 2,500 movie and video titles, compared with more than 12,000 for NetFlix, but it’s still a good start.

So can the idea of streaming movies over the Internet succeed? I think maybe it already has, and that the days of those little plastic discs are numbered.