After Amazon.com (NASDAQ:AMZN) announced that it will let users download Prime Instant Videos to their smartphones and tablets, Netflix (NASDAQ:NFLX) came back and said that's not really what people want. To the streaming leader's credit, what people really want is the ability to watch their shows and movies wherever and whenever they want. Right now, the easiest way to deliver that is to allow users to download content.
But Netflix now has you covered in the air, if you're flying Virgin America (NASDAQ:VA). It's partnering with the airline to sponsor free in-flight Wi-Fi connections in the airline's new planes for five months. The new Internet connections provided by ViaSat offer speeds up to 8 to 10 times faster than other on-board Wi-Fi systems, according to the companies' press release. Those speeds, unlike other airline system, are capable of supporting video streaming.
Living the stream
Netflix's product chief, Neil Hunt, seems to live in a dream world with ubiquitous high-speed Internet access. In the real world, however, we all know that isn't the case. There are dead spots in cellular and Wi-Fi coverage, and if you're riding a subway you might as well just give up hopes of streaming video.
But Virgin America's new Wi-Fi systems offer a glimpse of what could soon be normal for all airlines. Netflix is getting a jump on the competition by partnering with the airline to offer free access to its subscribers. Those who want to stream Amazon Prime or Hulu will be out of luck unless they pay for Internet service. Flyers will also be able to stream select Netflix original series without a subscription from Virgin America's seatback entertainment consoles.
Still, we're a long way from having fast enough Internet speeds for streaming on every flight. Just 10 of Virgin America's fleet of what's soon to be 63 planes will offer the speedy ViaSat service, and most other airlines don't offer speeds fast enough for streaming video on any of their planes.
Consider the cost
The free Wi-Fi promotion will end relatively quickly, on March 2, so not many people will get to experience streaming Netflix in the sky. After the promotion ends, Netflix subscribers and non-subscribers alike will have to pay to access the Wi-Fi on Virgin America's new planes. The cost for access on a round-trip flight will probably be more than one month of a Netflix subscription.
That makes one question if it's really worth the price. Downloading content to a tablet or smartphone is free and accomplishes the same goal, even if it requires a bit more work on the viewer's part. Some people will certainly pay for convenience (and those are people more likely to fly Virgin America), but at that point Netflix isn't winning; Virgin America is.
Cost-conscious consumers like the cord cutters and cord shavers that Netflix appeals to aren't likely to pay for in-flight Wi-Fi. As a result, Netflix could still lose out on frequent flyers who would rather make room on their devices to download Amazon Prime videos instead of paying for Wi-Fi on flights.
A better solution
Netflix has the right idea in partnering with an airline to enable its subscribers to watch its content during flights. The key is enabling subscribers to watch for free. The best way to do that isn't through Internet service, but via an intranet -- that is, loading a server on the plane with all of Netflix's content.
Netflix already makes its small-footprint open-connect server for use at terrestrial exchange points to reduce the bandwidth necessary to deliver its content. Hunt has suggested placing those servers on planes as a supplement or replacement for in-flight entertainment. It's an excellent solution, but it requires a lot of cooperation from airlines.
Ultimately, enabling subscribers to easily access Netflix on planes and other areas with poor Internet connectivity only increases the value of the service. If Netflix can boast that subscribers can watch all of its content on planes for free, it could justify a future price increase whenever it needs to.