Commentary

Does Netflix's Success Spell Hope for Hulu?

Netflix

Well, at least I know that I am not alone.

Netflix reported this week that it had a net increase of 1.7 million subscribers this year in the first quarter of the year.

I was one of the 1.7 million.

Netflix got me from all angles this quarter. The streaming Watch Instantly service was on my Xbox 360 and then on the PS3. But it was the iPad that sold it to me. As I wrote here last week, seamlessly synching my movie experience across screens so that I could take my movie to bed with me, is revelatory. I admit it. I am in the tank for them now.

And I am not alone.

The company also announced that the Watch Instantly service is leading the charge to new sign-ups. According to industry analyst Will Richmond's reporting at VideoNuze reports, a disproportionate number of subscribers were picking the $8.99 plan that lets you keep one DVD rental out at a time but more importantly lets you access the back catalog library of Watch Instantly films on various connected devices. That is precisely what I did. I am not even bothering with the DVD. I am already ahead of the game. A lot of the films and TV episodes I can just load in an instant here were costing me $1.99 and up on Apple TV. I haven't purchased a thing on that box since I joined Netflix...and I was one of Apple TV's few real fans.

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The share of Netflix customers now accessing streaming media is 55%, up from 48% in the last quarter of 2009 and from 36% in Q1 2009. How many are using their connected PCs or laptops and how many are using TV-connected devices (laptops included) is not clear. But the habit of streaming clearly is there and I am sure the connection from Web to TV is gelling in consumers' heads. Netflix knows what it is on to. It just cut some DVD windowing agreements with Hollywood that opened up more content for the Watch Instantly library. I saw reports that Blockbuster's CEO sniffed at this the other day by insisting that his competition's on-demand library essentially was filled with junk. He obviously hasn't spent much time browsing films on set top devices. The choices you make in the end often are serendipitous and not driven by a hunger to see the latest release.

Netflix's good fortune (or good business sense) has to be good news also for all digital video. Netflix is giving millions of people good reason to figure out on one device or another how broadband can deliver longer form content across screens. Anything that decouples video content from a specific device at this point seems to open up the market and has the potential to raise all boats. Another major player in the fee-based video arena, MLB.TV announced today that it would start streaming the service to Playstation 3 machines. The stream is about to become a rapid, I am sure.

But I wonder if Netflix has also greased the tube for Hulu's reported pay plan. Netflix executives say that TV content makes up a substantial amount of the viewing on Watch Instantly. And TV-centric Hulu is supposed to be preparing a subscription service to launch next month. Netflix and MLB already seem to have proven that all-you-can eat streaming media models will work with the right content. But I wonder if Hulu, laden by their content supplier/partner/owners with rights restrictions, will be able to execute the same kind of cross-platform blitz that is at least as much a part of Netflix's forward march as the content itself.

2 comments about "Does Netflix's Success Spell Hope for Hulu?".
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  1. David H. Deans, April 23, 2010 at 5:06 p.m.

    Steve, I'm a Netflix subscriber and use the video streaming service with a Roku Player that's connected to our primary TV set. The video-on-demand (for a flat monthly subscription fee) offering from Netflix is hard to beat -- because of the quality of the user experience and the vast array of TV series and appealing movie content. Frankly, the Hulu paid subscription offering would likely attract only the "uninformed" consumers -- meaning, why pay more for Hulu when you clearly get a superior value with Netflix?

  2. Steve Smith from Mediapost, April 23, 2010 at 5:37 p.m.

    David

    Good point. My understanding of the Hulu model is that it will focus on older episodes, which puts it right in Netflix's market. And then given the owner stakes that the studios and networks have in hulu it raises questions about how these Netflix suppliers will respond when the two services are directly competing.

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