Sooner Or Later, Netflix And Starz To Reunite; MobiTV Has International Appeal

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September 6, 2011 – 12:03 am

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Don’t Cry For Netflix

From the looks of it, Netflix has gone from golden to rusty in a matter of weeks. It suffered immediate backlash when it unveiled its bifurcated pricing plan – pay $7.99 for streaming only if you still want DVDs in the mail, subscriptions range from $7.99 (one at a time) to $11.99 (2 at a time). DVD and streaming? Pay $15.98. And then, on the same day that the new pricing structure took affect, one of Netflix streaming service’s key content partners, cable channel Starz, refused to renew its deal.

Netflix sure looked desperate not to lose Starz. CEO Reed Hastings was willing to pay the cable movie channel $300 million a year for continued streaming rights, according to the LA Times. But Starz was interested in something more than just a higher fee. It wanted Netflix to act more like, well, a cable company, not an over-the-top service that will continue to threaten the current ways cable companies make money. Specifically, Starz wanted Netflix to charge users a tiered rate, where subscribers pay more for "premium" content. Netflix balked.

In the short term, this means that many users will go back to using competitors like Redbox, since the availability of hot new movie rentals won’t be coming to Netflix. Aware of that, and the growing consumer displeasure with the separate pricing for streaming and DVD rentals, investors sent Netflix’s stock down about 9 percent on Friday.

But BTIG analyst Rich Greenfield argues (subscription) that this isn’t necessarily the end of Netflix. For one thing, users are already using Netflix as an easy, TV rerun service. Not having to pay Starz an exorbitant sum for a lot of box office flops that most people can get on cable anyway frees up more Netflix cash to spend on broadcast content.

Sooner or later, Starz and Netflix will be back together. As consumers continue to make the leap to over-the-top services, Starz will eventually find it advantageous to have a toehold in that area. Give it another few months and you might see an announcement of a “reconciliation” between the two media companies.

Konnichiwa, Hulu

Hulu officially launched its new subscription service in Japan this past week, a move that marks the first international expansion for the video service owned by Disney, Fox and NBCU. The move comes amid sale talks are bruited about, with possible buyers including Yahoo, Google and Amazon.

There’s a number of interesting things about Hulu’s international excursion. Unlike the U.S. version, which offers a free site and a monthly subscription plan through Hulu Plus, the new Hulu Japan is subscription only. In exchange for streaming “hundreds” of films and TV shows on most portable devices (but not available for Playstation, Xbox 360 and Blu-Ray players, strangely), Hulu Japan charges ¥1,480 a month or roughly $18.50 – about double what Hulu Plus charges to let U.S. viewers watch on their connected devices and computers.

Secondly, Hulu Japan, which offers only U.S. programming (Japan TV shows and films will come later), also has CBS programming. The "Tiffany Network" has been one of the primary holdouts from Hulu in the U.S., as CBS' Les Moonves has often said that the terms aren’t that appealing. However, CBS has been looking for incremental revenue from streaming services like Amazon Prime Instant Video and Netflix. In any case, it’s doubtful that the Japanese presence of CBS shows means that Moonves will be adding its programs to the U.S. Hulu anytime soon, though that door is certainly open.

Clearly, the Japan move is designed to put Hulu's potential for growth in the best light. By avoiding Netflix's international path of expanding to places like Canada and Latin America, Hulu won't have to worry about direct competition. Furthermore, it’s a good experiment to see how much it can charge viewers to watch its programming. Still, the lack of availability on devices like Playstation and Xbox could hinder its growth – Hulu Japan is coming to the Sony Bravia connected set. paidContent’s Staci D. Kramer has a good overview of the Japan rollout, while International chief Johannes Larcher outlines Hulu’s reasoning and its plans on the company’s official blog.

Oh, Canada: Blockbuster Out, YouTube In

The timing was too perfect: At the same time YouTube introduced a movie rental option for Canadian viewers, rental chain Blockbuster said it would be shuttering all of its brick and mortar outlets in the Great White North, the Toronto Sun reported.

Blockbuster's biggest mistake was waiting too long to jump into streaming video and mail orders as Netflix zoomed past it, making the video chain and its hated late fees (which was a major part of its business model) passé. But beyond the notion that “streaming killed the video store,” Blockbuster was horribly managed. Crushing debt and mismanagement is what damaged the company, not Netflix.

YouTube offers a tremendous contrast. By expanding its Canadian offerings with a rental library of 1,000 films, including new releases like The Adjustment Bureau  and Harry Potter and the Deathly Hallows Part 1, YouTube is gunning for Netflix, not Blockbuster.

It’s a more interesting battle as well. Which model will win: Netflix’s monthly “all you can stream” model for one price or YouTube’s a la carte option.

While YouTube will try to entice users with some free movies (or almost free, as some titles will start at $1.99), most premium rentals will range from $3.99 and $5.99. Like Apple’s iTunes annoying movie rental model, Canadians will have 30 days to view the movie, but once you start watching, they have up to one or two days, depending on the release, for viewing before it expires. Sure, Netflix charges about $8 to watch what you want, when you want, but they’re not going to have the premium new releases.

Given the mix of cable options, it’s hard to say which one users will gravitate towards. In general, the service that offers the hotter titles will win, since users are more willing to pay for something specific, as opposed to another “all you can stream” service, since most people are already paying for cable anyway.

In any case, the most interesting thing about YouTube’s Canadian effort is that it got so much attention this past week. After all, how many people are aware that the Google-owned video site already has a U.S. rental service? Yeah, it’s easily forgettable, but maybe YouTube will remind itself that if it really wants to challenge Netflix, it will have to put more muscle behind the rental program south of Toronto.

MobiTV’s IPO Challenge

Another day, another media company makes a risky bet on going public. MobiTV, a pioneer in the digital TV arena since the Pleistocene period of 2000, has filed a $75 million IPO as it looks to fund its international growth plans. In its S-1 filing, the company lays out the potential and the problems it faces as it looks to the future.

On the plus side, the company’s revenues have been growing nicely as this appears to be the year of cloud-based media. On the negative side, MobiTV, which in contrast to companies like Hulu and Netflix, powers other mobile TV providers’ systems such as T&T, Sprint, T-Mobile and Verizon Wireless, has yet to turn a profit. Still, it’s worth noting that its net losses have been slowly narrowing.

While this should be MobiTV’s time to shine now that the world has caught up to the joys of streaming video on portable devices, it also means that having a head start doesn't mean you’ll finish first. As Multichannel News' Todd Spangler notes, MobiTV faces increasing competition from video content aggregators such as Amazon, Hulu and Netflix. And then there’s pay-TV providers such as Comcast and DirecTV, who are working on competitive services, along with expanded video distribution plans from Apple, Google and Microsoft.

The beauty of MobiTV’s position is that while those companies represent obstacles, they also open up possible avenues for collaboration, which could prove quite lucrative. If MobiTV can get its international goals in order, it may actually be able to surprise its many doubters.

But Wait. There’s More!


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September 6, 2011 – 12:03 am
  1. One Response to “Sooner Or Later, Netflix And Starz To Reunite; MobiTV Has International Appeal”

  2. I beg to differ with Blockbuster’s current status. Now that DISH Network has brought them on a lot has changed for the company. Blockbuster has the ability to bring some new releases 28 days to the consumer before competitors and this is a huge advantage that they have always had in the market, plus their prices have been lowered. My family and I all have various tastes so we went with the 3 months free of Blockbuster from my employer, DISH (http://bit.ly/l2OWJ8). We get unlimited rentals of DVD’s new and old, Blu-ray’s, and video games. We can rent over 3,000 games by mail in addition to 95,000 movies and TV shows, and this suits my family just fine.

    [Reply]

    By nicole.vega on Sep 11, 2011

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