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Five reasons Netflix may become the bargain bin of streaming services

No model for premium content

Assuming Netflix can solve its problems with content promotion and episodic television, it still has no way to prove that it is a great place to promote new and premium films and TV shows. While a subscription-only service worked during the DVD-by-mail era, it may not be enough in the years to come. If Netflix wants to have more than bargain bin titles, it may need to invent new ways to bring in revenue for content holders.

Here are a few ideas:

Ads: Hulu offers a subscription service, but it also has a thriving ad-targeting business. Not all content needs to have ads, and the ads should be short and few, but users will put up with a few ads if it means getting new TV shows on Netflix.

One-time rentals: Apple TV offers new TV episodes for 99 cents a pop. Perhaps Netflix could charge a fee to rent certain TV shows or movies while they are in their “new release” phase. Of course, being that subscribers are already paying $7.99 per month, these fees should be cheap and there should be a universal window of time when many movies and TV shows enter the “free” zone.

Purchasing: Walmart-owned Vudu and Apple both offer digital movies and TV shows for purchase. Though I’m not keen on Vudu’s costly DVD prices ($19.99 to own a new movie), the idea is sound. There is currently no way to forever save a movie on Netflix. Often movies and TV shows pop up and disappear (example: Criterion titles). If users could buy a movie on the service for, say, $4.99, and have it forever (or perhaps download it for local use outside of Netflix), Netflix may get many more new releases.

None of these options will make current Netflix subscribers particularly happy, but if the changes were laid out in an affordable and explainable way, it may set Netflix up as the complete destination for streaming movies and TV. Perhaps the company is content being  a $7.99/mo all-you-can-eat buffet. Some people love buffets. I tend to be more selective and would rather pay a bit extra to get what I want. I don’t think I’m alone.

Amazon, Hulu, and the rise of the rest

Netflix was first to the game and is currently the biggest and (arguably) best streaming service. It has proven that people have an insatiable apetite for streaming content. A statistic was floating around late last year that Netflix alone accounts for about 20 percent of Internet traffic during prime time evening hours. The battle between Level 3 (Netflix bandwidth partner) and Comcast over who pays for Netflix bandwidth is proof that the service is immensely popular. However, the water is bubbling under the streaming giant. This week, Amazon unveiled that it’s Amazon Prime free-shipping service now includes unlimited streaming of more than 5,000 movies and TV shows for $79.99 a year. Though Netflix has a larger streaming library, a quick look at the two offerings show a remarkable number of similar movies and TV shows appear on both. Red Box has also announced plans to enter the instant streaming race. Will its all-you-can-eat buffet look the same?

Amazon On DemandAnd those are just unlimited streaming competitors. Netflix also has Hulu, Apple TV, Amazon OnDemand (now integrated with its unlimited streaming offering), Walmart’s Vudu, and Microsoft’s Xbox Marketplace, among others. These competitors are toying with different business models, something that Netflix has resisted.

The Post-Netflix World?

Last December, Whitney Tilson wrote a detailed article describing the problems facing Netflix. While we don’t completely share his dim outlook on the future, it is becoming clear that if Netflix wishes to remain the most popular Internet streaming service in the years ahead, it will need to revamp its platform and approach. Just as the e-book market has millions of free books, every movie and television streaming service will likely have thousands of cheap or free titles available. But the winners in this race will find ways to distribute the 90 percent of movies and TV shows that Netflix is currently ignoring.

This is an exciting time for film and television. Distribution is finally moving to the Web in a big way, new services are springing up every week, content creators are finding new ways to define success, and old media companies are being forced to adapt to the shifting sands beneath their feet. Over the last decade, Netflix has proven to be one of the most forward thinking companies in the world. But we wonder, is it thinking ahead now?

While I’m sure there are people who love to watch Striptease and BBC shows every day, I’d rather watch The Social Network.

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