Netflix Down Low on the Download

Is Netflix (Nasdaq: NFLX  ) about to enter the digital downloads race? I received an email with an attached screenshot today, showing downloads as a genre page option.

I'm a pretty cynical guy. I've seen some pretty amazing images that Adobe (Nasdaq: ADBE  ) fans have doctored with a copy of Photoshop. I had to kick the tires myself and see.

I went ahead and entered "fitness" into the search box off the Netflix home page. I then clicked on the Genre Matches option. Sure enough, one of the 15 genre categories reads "Downloadable: Downloadable Foreign."

Clicking on it won't help. It simply dumps you off at the general Sports & Fitness category. However, why is it even there? Wardrobe malfunction or software malfunction, something is being coded into the Netflix site and this may have been a premature slip, but something is clearly in the works.

I hope that Netflix doesn't rush its entry here. Just because Amazon.com (Nasdaq: AMZN  ) and Apple Computer (Nasdaq: AAPL  ) announced digital film download initiatives earlier this month doesn't mean that Netflix needs to jump in right away. This is a market that will take years to develop. However, if the company really is just about ready to hit us with its best shot, there's no harm in taking a swing at this point.

Digital downloading will be an interesting situation for Netflix. The present model revolves around the magic of restraint despite a seemingly unlimited rentals model. Netflix is quick on the delivery. With the exception of hyperactive renters or those living in rural pockets, Netflix prides itself on achieving overnight delivery of rented titles through conventional post office means. However, even if it takes two days between the time you drop a disc in your mailbox, Netflix receives it, and you get your next film, we tend to hold on to the DVDs for a lot longer than we think. The typical subscriber in the most popular 3-out plan actually only averages six rentals in any given month. That's a good thing, as Netflix would be losing money on postage and revenue-sharing deals if subscribers were going through a lot more discs than that.

Delivering films through broadband connections would save Netflix on postage and inventory purchases, but this still isn't a service that can be given away. This would not work under the smorgasbord model that Netflix pioneered if a subscriber keeps hitting up Netflix for a new download every few hours.

Sure, I'm jumping the gun here. Who knows how far along this service really is from reality? CEO Reed Hastings probably knows, but he probably wouldn't tell me. All we have to go on right now is a peculiar glitch in the Netflix site and the optimistic expectation that the same company that has been able to win over celluloid buffs on the DVD front is gearing up so it's not a forgotten player in the inevitable digitally delivered age.

Now someone tell me why foreign fitness films are peculiar trial balloons.

Netflix and Amazon have both been recommended toMotley Fool Stock Advisornewsletter subscribers. To see what other stocks Tom and David Gardner have recommended to investors since 2002, sign up for a free 30-day trial.

Longtime Fool contributor Rick Munarriz has been a Netflix subscriber -- and shareholder -- since 2002. He is also part of theRule Breakersnewsletter research team, seeking out tomorrow's ultimate growth stocks a day early.The Fool has a disclosure policy.


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