Netflix Faces Tougher Foes

I'm concerned about the future of Netflix (Nasdaq: NFLX). It isn't that I think the company won't be able to innovate or adjust to changing customer demands. I'm concerned because unlike Netflix's battle to dominate the DVD rental business, in streaming content it will come across some competent foes. And those foes are making me think long and hard about dropping my Netflix subscription.

In the interest of full disclosure, I am a Netflix user but I'm no die-hard. I don't have a three-disc subscription; I use streaming content when it's convenient, but I don't view my $9.99 bill as an essential part of my monthly budget. For this reason I see myself, like millions of new subscribers, viewing Netflix as a decent value but a service I could easily give up if I have other options (and when I run out of movies I want to see). The hold Netflix has on me isn't very strong.

CEO Reed Hastings has rightfully been praised for expanding beyond DVDs and turning Netflix into a streaming company. But we're giving Netflix a lot of credit for streaming content that I always viewed as an added bonus to the DVDs I really pay for. Not once have I been able to "instantly watch" a movie I've been dying to see.

For as much as we hear about streaming, I would expect an impressive list of titles available to watch instantly, but only 10 of the "Netflix Top 100" are available for streaming (and even that short list isn't too impressive).

What really got me thinking about dropping Netflix were some new options coming available. In the short time I have spent on XFINITY from Comcast (Nasdaq: CMCSA) I have been pleasantly surprised with the selection. No, it isn't perfect and is geared more for television series than movies, but the service is much better than I expected and complements my cable subscription nicely, for free. Given the established connections with media providers, Comcast seemingly has plenty of options to expand the service in the future.

And then there's Hulu, which is owned by Disney (NYSE: DIS), NBC, and News Corp. (Nasdaq: NWS). Hulu Plus arguably has a more compelling selection of streaming content for the same price as Netflix's streaming-only option. With content controlled by the owners of Hulu, the possibilities (and conflicts) are enormous.

As opposed to the DVD business, when Netflix had a big first-mover advantage, streaming content won't likely give the same leg up. Even a start-up with a good idea could take share in the blink of an eye.

I don't doubt Netflix will find a way to stay relevant, but competitors in streaming seem to be much more competent than the competitors Netflix beat in the DVD business. That makes the hill a lot tougher to climb in Netflix's next chapter.

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