Netflix – Your Broadband Content Provider

Newsweek wonders if Neflix has what it takes to survive with the coming of the “Broadband Age.” The answer, as always, is who knows. Here is their take on the Netflix story:

As a tech company, Netflix was a contrarian play. Even at the height of the dot-com boom, when Silicon Valley buzzed with the promise of “transformative technologies” and “fat pipes” that would allow consumers to quickly download all manner of content, Hastings built Netflix on two disarmingly retro technologies: the DVD and the United States Postal Service. For a monthly subscription fee averaging $17.99, consumers would be treated to an unlimited number of rented DVDs, most delivered within a day of being ordered online. “People were talking about beaming movies to wristwatches,” [Reed] Hastings says. “We tried not to get drunk on the future, but actually to predict it accurately.”

While they continue on in the article to write about how eventually the current content distributors will be able to control what you receive and they imply that the Long Tail customers will get shut out unless Netflix evolves to meet these challenges, they miss a fundamental point in Netflix’s story only hinted at above.

Netflix has already always been about selecting and downloading movies online. You choose a movie online and “download” it to your mailbox. Given even a nice moderately fast 2 Mbps connection and an equivalent upstream connection, an 8 GB DVD would take 10 hours to download – hardly a practical improvement over next day delivery. What if you order three 8 GB movies at 12:00 PM and they arrive at 12:00 PM the next day? You would have received 24 GB in 24 Hours or roughly 2.4 Mbps. This is a typical DSL or Cable Modem speed given today’s technology.

The conclusion here is that Netflix is already a Broadband Service Provider. At what point will home broadband speeds, digital compression technologies, upstream bandwidth availability and on-demand streaming technologies evolve to the point where next day delivery can finally be beaten? Again, who knows, but my guess is quite a while and by then Netflix has as good or better a chance as anyone of leveraging these new technolologies to deliver the same service they do today.


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