retail news in context, analysis with attitude

The Los Angeles Times reports that as Netflix enjoys a subscriber base of more than 20 million people (including 3.3 million new subscribers in the last quarter alone) and offers more than 20,000 movies and TV shows on its fast-growing online service, one result is likely to be the emergence of a number of new competitors.

According to the story, “retail giants such as Wal-Mart Stores Inc., Amazon.com Inc., and Best Buy Co., Internet television provider Hulu, and satellite broadcaster Dish Network Corp. are weighing plans to launch online subscription video services or expand nascent ones to take on Netflix, people with knowledge of the matter said.

“Such moves would win cheers in Hollywood, where many are worried that Netflix is amassing too much clout. Some also believe that Netflix's fast-growing customer base is buying fewer DVDs and watching less television, contributing to the financial struggles of studios.”

However, the story also notes that none of the potential competitors has yet “started writing the nine-figure checks necessary to secure a library of movies and TV shows to rival Netflix's.” And at the same time, with expansion plans that will include moves into the UK and Latin America, the general feeling seems to be that if Netflix gets to 30 million subscribers, that will give it a remarkable competitive advantage.
KC's View:
It is worth remembering that several years ago, Walmart wanted to create a DVD rental system to rival Netflix’s, but eventually decided to outsource the thing to Netflix because it was just too complicated and expensive to get started.

It also is worth noting that from the very beginning, Netflix founder Reed Hastings has never defined his company in terms of the hardware; he always said that he was only going to be sending out DVDs as long as people wanted them, but was fully prepared to switch to online delivery when broadband technology became more available. (This was long before broadband service became as available as it is today.) Essentially, he was envisioning the post-DVD world at a time when DVDs were a fairly new technology.

That said, it seems certain that the competitive landscape in this segment is due for some significant change ... which makes sense, because a growing market inspires competition. The key will be the innovative muscle brought to the game by the various players, and an understanding that the market is not static, the technology is continually changing, and consumer needs and desires are evolving.