For more than a decade, Netflix has been seen as the leader in movie rentals. More recently, the company has started focusing on online rentals so much so that it is now believed that internet streaming via Netflix alone contributes close to 20% of bandwidth in the United States. Netflix recently launched in Canada and is learned to be ramping up for an international roll-out.
So how does all of this compare with Apple’s iTunes service? According to Gleacher & Company analyst Brian Marshall, it may be a tad unfair on Netflix to even get compared with iTunes. And that’s because the volume of purchases over Netflix is extremely large compared to those over iTunes.
Marshall points out that the average number of rentals per day over iTunes could be in the range of 475,000. On the other hand, Netflix is known to handle as much as 5 million rentals on a daily basis. Netflix appears superior in value terms as well. Marshall notes that over 90% of TV episode rentals on iTunes are priced $0.99 widening the gap between the two services even further.
Netflix co-founder and CEO Reed Hastings has, on many occasions, made it known that he sees the company’s future in streaming content and not in the mail-in DVDs that is exactly how the company got popular in the first place. Now perhaps in a move towards incentivizing people towards the company’s digital offering, Netflix has now released a streaming-only subscription plan that will let users watch unlimited number of movies and TV shows without an alternative DVD rental.
The price for this new subscription service will be $7.99 a month. Along with this new offering, the cost to rent a DVD has risen too. Now the cost for renting one DVD in addition to unlimited streaming will cost the user $9.99 a month instead of the earlier $8.99. The marginal difference between the old and new plan steadily rises with the number of DVDs rented with an 8 DVD subscription service now costing $55.99 instead of the older $47.99.
Check out the complete pricing list below.
Like Netflix, RedBox too has made its name as a DVD rental company in the United States. And like Netflix, the company too plans to slowly move away from DVD rental to movie streaming. The company has announced that it will be entering the movie streaming business starting 2011. There is no word on who the streaming partner will be and whether RedBox intends to pursue a subscription plan model like Netflix. But from the looks of it, the company could well offer a subscription plan. A survey conducted by RedBox among customers in April this year had asked for their opinion on a $3.95 monthly plan that would include unlimited streaming in addition four free DVD rentals.
RedBox could be exploring a competitive offering to take on Netflix. The latter has been working on a streaming-only future for its business in the US. By offering a cheaper monthly subscription that additionally offers free DVD rentals, RedBox could drastically rise its competitive advantage over its rival.
Rumors of Amazon being interested in Netflix are not new. There was talk about this as early as June of last year though at that point, it seemed more unlikely since Netflix’s strategy of staying with physical goods did not fit Amazon’s core philosophy of selling digital content.
However, a lot of things have changed since then. Netflix now allows video streaming and according to its latest quarterly report, 48% of its users at least streamed 15 minutes of video in this quarter. Besides this, Netflix’s subscription model has seemingly been received better among its registered users compared to Amazon’s pay-per-view model. Nearly 97% of the company’s 12.2 million registered users are paid subscribers. All this has given the DVD renting company an overall market value of $3.4 billion.
Collins Stewart analyst Sandeep Aggarwal says Netflix’s recent online streaming model along with newer market dynamics can mean Amazon will be flirting with the idea of acquiring the Los Gatos, CA based company. “There is now even a higher possibility. If someone is a category leader and it is still growing rapidly, they go ahead and acquire it”, he says referring to Amazon’s recent acquisition of online shoe retailer, Zappos.
What do you think? Will a Netflix acquisition be a good fit for Amazon? Let us know in the comments.