Amazon.com (NASDAQ:AMZN) pulled a fast one on Netflix Inc (NASDAQ:NFLX) earlier this month. The e-commerce giant announced that it would make most of its Prime Instant Video streaming catalog available for downloading onto mobile devices powered by Android and iOS. Amazon had already equipped its own Kindle Fire devices to do such months before.
Netflix subscribers would be remiss for not wondering why they can't do the same when they wish to watch on a plane, in the car, outside, or anywhere else that a wi-fi signal may not reach. Here's Netflix's Chief Product Officer Neil Hunt's attempt to explain why his company doesn't allow downloading:
"I feel like what consumers want is not the download model. What they want is the ability to consume anywhere they happen to be. And that might be on a plane, on a train, in a car or outside."
"I think the download model is fairly complex. You have to plan ahead; if you're planning for a long flight you're going to need quite a lot of storage to hold maybe several titles and a lot of time to prep that download. And I think that's challenging."
Hunt's point seems to be that the problem with downloading a movie or TV show before a flight is that its subscribers would have to remember to do so. It's true you would have to do it ahead of time, but if those customers are capable of remembering to bring a book to read, or pack a toothbrush, or put underwear on that day, it's not a leap to ask them to download a movie when they're waiting at the gate. The statement also seems ridiculous for a company that began as a DVD-by-mail service, which inherently requires its customers to plan ahead, waiting two days or more for their video.
Netflix is correct that downloading is a backwards-looking technology that may be less desirable as Internet availability expands, but, like cell phone coverage, there will always be places where the Internet doesn't reach.
There are a few more realistic explanations for why Netflix would eschew downloads.
It undermines the business model
Amazon has the luxury of using Prime Instant Video as a loss leader. According to Jeff Bezos' hopes, you'll be downloading Transparent today, buying a truckload of diapers on Amazon tomorrow, and be flying in space with him next year. Videos and now downloads are just an entryway into Amazon's ecosystem.
Netflix doesn't have that luxury. It's a pure play entertainment company -- the movies and shows are its product, not bait to sell something else. It needs to keep its current subscribers and add new ones at the same time. Downloading, while it would certainly be appealing to some of its customers, gives Netflix subscribers a reason to leave the ecosystem rather than stay in it. Users can download movies and shows to entertain them for months, relieving them of the need to keep their membership, and considering the company's already had problems with password sharing, it's easy to see how someone would borrow a friend's password to download all the movies their heart desires.
Agreements may not allow it
Netflix is set to spend $5 billion on streaming content next year, and adding the ability to download would likely make those movies and shows more expensive. The company likes to rotate licensed content in and out of its library in the hopes that users will be enticed by "new releases." The counter to that is each month the service loses dozens of titles. Its agreement with the cable network Epix is set to expire at the end of September, and with it, Netflix customers will no longer be able to stream such hit movies as "Hunger Games" and "Transformers." If downloading were available, many users would likely store these movies on their devices, making Netflix's strategy of rotating content more problematic.
The paradox of choice
A more convincing answer Hunt once gave for his company's unwillingness to allow downloads is that consumers are sometimes overwhelmed and turned off by too many choices. He said Netflix has tested adding other such features and found that they don't always lead to the desired outcome.
The difference with downloading would seem to be that it is more of a back-up option rather than an equal choice. Customers would continue to stream movies as a first option, but download them when streaming was unavailable.
Ultimately, I don't see Netflix's decision to forego downloading as something material to its future performance, even in light of Amazon's decision to go ahead with it. But it's disappointing for a company that's normally so good at pleasing its customers and so clear in its communication to give such a ham-handed response to say that downloading isn't something its subscribers want. Maybe it's not worth it, but certainly some of its 65 million members would take advantage of it.
Jeremy Bowman owns shares of Netflix. The Motley Fool owns and recommends 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.