The Future Is Now for Netflix

When you think of Netflix (Nasdaq: NFLX  ) , does your mind's eye see a DVD-mailing service or an online video site?

If you are like most Netflix subscribers, you'll see a little bit of both. But the DVD and Blu-ray disc portion of the service will become an afterthought within the next couple of years.

According to data from FeedFliks, a third-party service that uses public programming interfaces from Netflix to help subscribers calculate their average cost per rental among other things, Instant Watch views already outnumber DVD shipments and will grow even more in 2010.

The FeedFliks data is based on that service's user data, which is admittedly a small subset. In addition, the kind of people who sign up for third-party online applications to juice the value of their Netflix subscription seem like a likely early adopter crowd of bargain hunters, so streaming could very well be over-represented here. (According to FeedFliks, I pay $1.32 per rental. Yeah, I'm a cheap nerd.)

Still, Netflix management says that 48% of its customer base watched at least 15 minutes of streaming Netflix media last quarter, up from 42% the previous quarter. At the same time, Netflix added over 1 million net new subscribers. In other words, there is no doubt that streaming is an important part of the Netflix experience for many users already. Since Netflix drops you onto the Watch Instantly homepage every time you pop in to update your DVD queue, the growth should not be surprising.

And there's much more to come as the addressable market for streaming views continues to flourish. Personally, I plan to do more streaming when the Netflix disc for my Nintendo (OTC BB: NTDOY.PK) Wii drops in, which should be any day now. It's getting harder to find a TV set or Blu-ray player that doesn't support Netflix streaming these days. The Wii completes the hat trick of modern video game consoles since the Sony (NYSE: SNE  ) PS3 and Microsoft (Nasdaq: MSFT  ) Xbox 360 already handle the service, and every recent TiVo (Nasdaq: TIVO  ) box is on board as well.

Blockbuster (NYSE: BBI  ) is fighting for survival and dipping its badly burned toes into the streaming waters, but it may be too little, too late.

For Netflix, the future is already here -- and the company is pushing hard to keep the instant video hits coming, courtesy of a cut-rate delivery deal with Akamai (Nasdaq: AKAM  ) . The rest of the field is playing catch-up.

Fool contributor Anders Bylund owns shares in Akamai and Netflix, but he holds no other position in any of the companies discussed here. Microsoft is a Motley Fool Inside Value recommendation. Akamai Technologies is a Motley Fool Rule Breakers choice. Netflix and Nintendo are Motley Fool Stock Advisor recommendations. Motley Fool Options has recommended a diagonal call position on Microsoft. Try any of our Foolish newsletters today, free for 30 days. You can check out Anders' holdings and a concise bio if you like, and The Motley Fool is investors writing for investors.


Read/Post Comments (3) | Recommend This Article (14)

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  • Report this Comment On March 29, 2010, at 3:12 PM, toopersent wrote:

    I probably get about 4 DVD/BluRays a months through the mail. I watch about 20 movies a month from Netflix. So yeah, the streaming is very important.

    My wife and I have PS3 with the Netflix disk, and we dropped another $200 for a NetFlix Blu-Ray player just for our bedroom, and all we use it for is streaming NetFlix movies. With the ability to stream HD movies, it just gets better and better.

    NetFlix is one of the only consumer reliant companies that never fails to deliver an excellent product. I've been a customer for years and I have not had one single complaint.

  • Report this Comment On March 29, 2010, at 4:55 PM, jimrice57 wrote:

    Everyone seems to jump to the conclusion that every person will have some type of streaming media device in the near (2 years) future and NetFlix will be a the head of the line. I love the streaming but I don't love the old movies and not one for HD yet. I feel that having the DVD in hand is alot better than depending on my cable company network. The beginning of throttling the network from several companies makes having the DVD much more important. Netflix beat Blockbuster at price - I could look at 8 Netflix DVD's for the price of four blockbuster DVD's and no late fees to contend with and that is how they won. Streaming replacing DVD's -not it the movie industry has anything to do with it.

  • Report this Comment On March 30, 2010, at 9:45 AM, BioBat wrote:

    Online streaming (via Netflix or Hulu or whichever service you prefer) is to movies, TV, and Hollywood is what iTunes was to music and the music industry. It's a game changer. Companies can either get on board early in the process and figure out a viable pricing strategy or be left behind in the dust and have to settle for what the market leader in streaming video demands.

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