Will Netflix Offer Pay-Per-View Rentals in 2014?

Netflix could be in for a big pop if it offers pay-per-view.

Jan 21, 2014 at 6:15PM

Netflix (NASDAQ:NFLX) reports quarterly results tomorrow afternoon. 

There are naturally going to be a lot of questions answered by then: Will it come in at the high or low end of subscriber-target projections? Will it beat Wall Street's profit estimates the way it has more often than not lately? Will it address the net neutrality situation? 

But one thing the report is unlikely to discuss is Netflix's potential for pay-per-view streams. The company's competition doesn't have a problem offering first-run content delivered digitally. Amazon.com (NASDAQ:AMZN) does it. Cable providers have been offering pay-per-view for ages. But Netflix continues to stick to its tried-and-true model through which it will only serve the content that studios make available to its low-priced buffet, which sets video buffs back just $7.99 a month.

It's working, of course. Netflix topped 40 million streaming subscribers worldwide in September, and the midpoint of the company's guidance suggests that tomorrow we will learn there were 43.6 million streaming accounts by year's end. If stateside Netflix fans want first-run content, they could always sign up for the DVD service, but the popularity of that platform continues to decline with every passing quarter. All but 20% of Netflix's revenue in the third quarter was derived from streaming.

This doesn't mean offering first-run titles digitally at a price is a bad idea. In fact, Netflix almost surprised fans last night on Twitter with a tweet that dangled #Rent and #NowOnNetflix as hashtags.

Obviously this was to promote that Rent -- the movie version of the popular musical -- is now streaming on the platform. But it could be a game changer if Netflix ever gets around to offering actual digital rentals.

After all, today is the day that Captain Phillips hits the retail market. Tom Hanks' performance is naturally going to draw a healthy amount of interest in the rental market. It's available on pay-per-view through cable providers. Amazon.com offers a digital rental for $3.99. Why can't Netflix? Can the leading video service assume that past seasons of TV shows and older titles will be enough? How excited would the market get if Netflix offered its tens of millions of subscribers content that it could purchase beyond the $7.99 that it charges a month? How high would Netflix shares go if monthly revenue per subscriber was no longer capped in the single digits?

We may never know -- or we'll know if Amazon ever gains serious traction with its video platform that delivers both the unlimited smorgasbord of older content and the option to purchase newer releases.

Let's hope that the next time that Netflix's Twitter account whips up the #Rent and #NowOnNetflix hashtags, it means it.

The living room is a pretty tantalizing battlefield
You know cable's going away. But do you know how to profit? There's $2.2 trillion out there to be had. Currently, cable grabs a big piece of it. That won't last. And when cable falters, three companies are poised to benefit. Click here for their names. Hint: They're not Netflix, Google, and Apple. 

Longtime Fool contributor Rick Munarriz owns shares of Netflix. The Motley Fool recommends Amazon.com and Netflix. The Motley Fool owns shares of Amazon.com and Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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