So the big news this week is about Netflix changing its prices on its streaming and DVD rental by mail services. Actually, the price of the streaming only service didn’t change (I think), just the price on the DVD rental service (changing from a $2 add on to a $12 separate service). After the price increase went into effect, Netflix announced it was spinning off the DVD rental service as a new company named Qwikster.
Netflix’s strategy is surely to change what it has been into what it wants to become. Some say that it wants to be bought out by Amazon. It could be that, or it could be that the two business models are different enough that it simply makes sense to manage the two separately. In the end, it seems like the things that are similar about the two services are that they both revolve around recommending and allowing people to watch movies they like. The distribution methods are different. The licensing of movies for these two distribution methods is surely different. Perhaps having seen the changes in the market over the last decade or two (remember Blockbuster?), Netflix is trying to allow itself to keep its sights on what it feels is the more developing market (as opposed to a dying market for physical copies of videos–no matter the distribution method).
Apple seems to think that physical medium is becoming dated. For example, OS X Lion was distributed only as a download, and their computers don’t include Blu Ray drives (for perhaps other reasons, as well). Netflix surely wants to grow, and perhaps it feels that this is the best way to focus on what it needs to do to survive. In the old days, if a movie wasn’t available for streaming, you would just fall back to a physical disc. Without being able to provide that option to consumers, Netflix will be forced to negotiate even harder for the licenses it needs to distribute as much of the content people want as it can. It’s trying to focus even more directly on its chosen strategy. The risk for Netflix, however, is the power its suppliers have over it. It needs the content or it has no business. The suppliers seem to feel pretty comfortable with physical media and pay-per-view models.