Netflix, the online DVD rental firm has plans to deliver films via the internet by 2005: “Our strategy is to get huge in DVDs and then expand into downloads,” Reed Hastings, Netflix Chief Executive, said to Reuters.
Netflix’s business model currently operates around the postal service – users browse the Netflix site, selecting titles they wish to view. DVD’s are then delivered to the company’s 1.9 million subscribers by post. Cutting out the postal service will pay for online delivery and allow Netflix to invest in more content. Hastings estimates that a download service will have 5 million subscribers by 2006.
Netflix currently charge US$20 (€17) a month for their postal-delivery service, and are proposing a US$22 (€18.50) per month charge for their download offering.
Netflix don’t want to download to computers, instead using a broadband connection direct to the TV set-top box – rather like Blockbuster’s unique VOD service in the UK.
Competition is going to be fierce – more movie download services are in the pipeline and Netflix will have to go up against strongly-backed groups like Movielink and CinemaNow. Movielink was formed by five major studios: MGM Studios, Paramount Pictures, Sony Pictures Entertainment, Universal Studios and Warner Bros. CinemaNow counts Microsoft and Blockbuster amongst their investors.