October 30, 2011

Netflix loses 800k US customers in Q3

Some folk see soon-to-launch-in-the-UK Netflix, LoveFilm and other Smart TV services as the future, and there's been a fair bit of press speculation that the traditional cable and satellite TV services' days are numbered as folk look to "cut the cord". But it ain't all rosey in the garden with these new services.
Hot on the heels of LoveFilm's parent Amazon seeing profits fall 73% in the last quarer comes the news that Netflix reported the loss of more than 800,000 subscribers, and admitted its launch in the UK and Ireland in early 2012 will push it to a global net loss.
Whilst revenues rose a healthy 49% year on year to $822m shares in Netflix, which had been trading at $300 in mid-2010, fell 27% in trading last week to $86.84.
Short term expansion pain or a flawed product? Personally, I think these services will struggle here until broadband speeds are faster across the whole country - no-one will be happy with a buffering or pixelated TV service and HD is now a must for those with the larger panels.


Moroboshi said...

Broadband speeds aren't really an issue as you can deliver passable video on a 5mbit connection (720p) and a pretty good HD feed (1080p) with a 10mbit connection. I think the average is 6mbit+ now? So 720p should be doable for just about anyone.

There are much bigger problems though. The first is the issue of caps. A 720p movie will be around 3-4gb, and a 1080p will be around 8-10gb. That will flatten some people's caps in one go.

Worse is the issue of content rights. LoveFilm let it slip that the reason their streaming service is so, to be frank, pathetic, is that Sky have movie rights locked up tight. NetFlix may well run into the same problem when they launch here. It will take a change of attitude from the studios to fix that, which I expect will happen eventually (as it did with music), but perhaps not for a few more years.

An interesting stop gap will be Xbox TV, which is part of the big Xbox dashboard update which is due soon. It will take a bunch of streaming services (iPlayer, LoveFilm etc) and make them all unified and searchable into a single, very pretty interface.

Nialli said...

@Morobishi I think we've got a fair way to go if my neighbour's family's evening broadband usage is anything to go by. The son's gaming on his XBox all evening, the teenage daughter is streaming Glee - doesn't leave much of the Sky "20mb" for any TV service, as they've found trying to watch iPlayer on their new Sony TV. If it was dedicated to TV it would be sufficient, but that's rarely the case with a modern household.