Wednesday, May 1, 2013

Netflix

The video streaming giant has impactful changes happening.  As of today, they are losing about 2,000 classic titles from their archives.  It also plans to offer 4 streams on one account (instead of 2, currently), for $12 (over $8).

The classic titles come from Warner and MGM, who are planning to put them on their own streaming service.  CEO Reed Hastings seems unfazed by both changes.  "Netflix is a dynamic service... this ebb and flow happens all the time." 

The 4 simultaneous streams is targeting children and parents using one account, but is certainly exploited across larger family or friend ties.  A Bloomberg report estimated that some 10 million users are "leeching" from the service in this fashion.  The personalized plan hopes to address this, in part: individualized queues and recommendations will be a new standard.  And yet, Hastings does not expect more than 1% of subscribers to make the switch.

I'm surprised Hastings is not more concerned (on the inside, he may be).  I imagine this type of sharing to be prolific.  Even at $8/month, there is little incentive to not share the profile.  I think Netflix could monitor this better; they have perhaps the most click-through data tied to user profiles.  They can surely see what IP is using the account; if it's two different IPs, that should be an alarm.

Of course, if they are remaining profitable, then lack of concern may not be abnormal.  While I'm not sure if this qualifies under the "Shared Value" that Porter and Kramer speak of, supposedly 10 million people are benefiting from now having to pay for the service.  Whether this $8 savings creates opportunities for the viewers, I cannot say, but can guess not so much.

Alternatively, educational programs that would not have the market penetration or distribution without Netflix, would certainly be of value to viewers.



Sources:
http://www.pcmag.com/article2/0,2817,2418392,00.asp
http://finance.yahoo.com/news/netflix-just-lost-almost-2-130857613.html
http://www.usatoday.com/story/tech/2013/04/23/netflix-ceo-password-sharing/2106261/
http://www.wired.com/gadgetlab/2013/04/netflix-subscription/

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