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Roku is pretty cool, but what does it mean for Netflix?



January 07, 2009 – Comments (19) | RELATED TICKERS: NFLX


As a father with one, now two, young children Netflix (NFLX) has been a godsend over the past several years.  For nine bucks a month I can get unlimited awesome movies.  I get to see an occasional children's movie in the theater, but to go out on a date with my wife to a movie it usually ends up costing a hundred bucks between the $20 tickets, popcorn, babysitter, and dinner.  That's OK once in a while, but not on a regular basis.

My brother sent me a Roku for Christmas.  For those of you who aren't familiar with it, it's basically a tiny black box that connects to the your television.  It uses your wireless Internet to download movies onto your TV screen.  Of course, one could basically do the same thing with a laptop and a few wires, but it's convenient.  Using the Roku box one can watch any of the thousands of Netflix on-demand movies instantly on their TV.  The new stuff isn't on there, but it's neat for checking out slightly older movies that I wouldn't have normally ordered on my normal Netflix subscription.

A Roku box

The other day I checked out a movie called The King of Kong.  It was a surprisingly interesting documentary about a battle between two guys for the World Record Donkey Kong score.  I know that it sounds wife was like turn this thing off when I first started it...but by the end we both were completely sucked in.  It's almost a story about the struggle of good versus evil and one man's lifelong quest for perfection.

Anyhow, back to the point of this post.  Today Roku announced that it will enable people who have its box to instantly download movies, the new stuff: Roku to Add Amazon VOD.  People will be able to download movies from Amazon using the box that they already have for anywhere from $0.99 to $3.99.  This is the direction that the industry is headed.  There's no need to ship stuff through the mail.  It's inefficient in terms of cost and the time that one has to wait to get the movie that they want.

Of course, Netflix is going to try to hold onto its movie by mail business model for as long as possible.  Why shouldn't it, the barriers to entry are much larger for that sort of services than they are for a download service.  Still, the death of NFLX's old business model is really only a matter of time.  I can't help but think that Netflix will eventually go thw eay of Blockbuster (BBI).  I am seriously thinking about shorting it in CAPS.  Can anyone out there tell me why Netflix will survive?


19 Comments – Post Your Own

#1) On January 07, 2009 at 12:28 PM, TMFRagan (49.10) wrote:

Becauase Netflix has the exact same thing.

And its being integrated into all sorts of appliances from TVs to Blueray/DVD players.

Sure they are still working on their VOD library... but its still growing. ROKU and Netflix are definitly in a battle, though.

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#2) On January 07, 2009 at 1:00 PM, Saluki89 (66.41) wrote:

Because paying for each individual viewing is a differnet experience than the freedom of browsing a library of choices at will with no real limits.  You likely would not have paid for King of Kong, yet you enjoyed it.  I have found dozens of video's on Netflix using Roku that I enjoyed but would not have gambled a rental fee on. 

Also, I have three children of various ages who are enjoying older series like "Charles in Charge" and "The A-Team", as well as some of the newer Disney Channel series.  There is no way I would turn them loose on a pay-per-view basis.  (As a side benefit, I have noticed that they have become more likely to do other things since they know that they can always find something to watch on TV, without being tied to a network schedule or commercials.  I'd be curious to know if DVR owners have had the same experience.)

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#3) On January 07, 2009 at 1:06 PM, kdakota630 (29.10) wrote:

I'm waiting for King of Kong to come to the movie channels.  I've heard really good things about it.

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#4) On January 07, 2009 at 1:52 PM, DemonDoug (31.05) wrote:

If Roku ever supports bittorrent or surfthechannel/megavideo, I can't think of a reason why any video selling store would survive.

On the other hand, netflix has a really smart management team and is at the top of the game in terms of innovation, so if anyone can do it, it will be them.

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#5) On January 07, 2009 at 1:59 PM, GNUBEE (< 20) wrote:

As a side note, With no investment opportunities for us, there is also the $1/night Redbox movies. They are cheap, convenient, satisfy the "gotta have it now" need, but have limited titles.

On Demand is the future, with monthly unlimited subscription being the ultimate. A la carte cable/satellite, and unlimited movie acess. That's the future of TV

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#6) On January 07, 2009 at 2:28 PM, MrSucrose (< 20) wrote:

Just being in content delivery is a recipe for failure.  I have serious doubt about the viablility of Netflix.  They are going to be in competition with everyone from Amazon to Apple. 

 To me the other people that really need to be scared are cable companies.  They are in the busines of content delivery, pretty soon I am going to be able to browse all the TV shows and pick and download the ones I want.  I have already have had serious discussions with my spouse about canceling our cable subscription. 

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#7) On January 07, 2009 at 2:38 PM, GNUBEE (< 20) wrote:

Sucrose, you would be suprised how many people feel that  cable is a necessity. Co-worker told me they pay $180/month, I couldn't believe it. They said if we cut it off there would be a riot.

Priorities are all out of whack.

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#8) On January 07, 2009 at 4:46 PM, GS751 (26.85) wrote:

From a college student standpoint Netflix has a deal where I can watch movies on my laptop currently it is PC only... If they are smart they will move too make it work on Mac, not sure how this will play out with AAPL and their Itunes stuff, but yeah I know a ton of kids that use it for documentries and tv shows just because of selection...

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#9) On January 07, 2009 at 4:59 PM, anchak (99.91) wrote:

Interesting take....I think the question is how nimble can Netflix be.....They already have the "watch it now". So its a question of expansion/tie-up at a reasonable price.

Deej....didn't you have a post on Netflix during the summer similar to this- or am I having a strange sense of deja-vu?




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#10) On January 08, 2009 at 7:14 AM, TMFDeej (97.76) wrote:

Hey anchak.  Hmmmmm, I don't recall posting on Netflix recently...but I wouldn't be surprised if I had.  This whole Roku thing just reinforces how I already flet about the company.


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#11) On January 08, 2009 at 10:04 AM, MrSucrose (< 20) wrote:


 I know!  I am paying $145 for cable and internet service.  The reason that the canceling talk keeps coming up is that we are paying $145 a month for it.  I am not quite comfortable getting rid of it yet, but with our next computer purchase I am definitely looking at ways to incorporate the system with the TV and stereo to use entertainment downloads. 

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#12) On January 08, 2009 at 10:20 AM, saunafool (< 20) wrote:

This is a big reason why Living in Europe Sucks!

The original Netflix business model doesn't even exist here, and various regulations block access to the VOD services. Try download a movie from Amazon and you will be rejected in Europe.

No wonder illegal downloads are rampant here.

For other things, like seeing castles and eating snails, Europe is alright.

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#13) On January 08, 2009 at 10:33 AM, TMFBent (99.29) wrote:

Netflix + Xbox = teh awesome.

You get streaming video, downloadable movie rentals (high def and standard) plus all those games, plus other pretty good Xbox community goodies (videos, songs, etc.). The xbox makes a very good media streamer for the music library from the main computer, as well as a photo and video viewer from those machines. And you only have one set of cables to plug into the TV.

Sure, I had to run an ethernet wire through the floor to get the best definition video from netflix (let's be honest, wireless networking sub "N" isn't going to stream high-def video, and even then, it can't compete with wire), but it was worth the tinkering.

We haven't had cable for about a year. A decent package, plus internet, they wanted something like $140 a month. Netflix ($22 a month) plus our ultra-fast Cox internet ($40 a month) + Xbox live Gold ($3 per month) = $65, and we're a lot happier than we ever were with 160 channels of nothing we wanted to watch.


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#14) On January 08, 2009 at 11:24 AM, MrSucrose (< 20) wrote:


 I have been thinking this and being able to purchase HBO shows of Itunes I should have most of our TV viewing covered.  I think the spouse is a little concerned with losing the ability to just catch something on TLC when she is bored or trying a new show out on chance.  I think this and the technical aspect is what is holding most people back, but this feels like a small shift.  Gives me another reason to check out a PS3 hmmm....


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#15) On January 08, 2009 at 12:41 PM, axis42 (< 20) wrote:

Netflix will survive and prosper because they have always planned for this change in how we get movies. I have read a number of times the CEO of the company point out that the name of the company is not mailflix but netflix. They always expected this and always planned for it and have their own box for it and already do it well.

That, and they have a large and devoted customer base because they provide a superior product and excellent customer service (for example: instead of forcing those of us who need help to use a froum, faq, impersonal and slow online chat or email,when you click contact us, they give a phone number right up front and do everything possible to make sure their U.S.-based CSRs answer  your call quickly, efficiently and kindly. How long would it take to get an answer to a question from AMZN, do you think?)

 It's an excellently run business.That's why it'll survive.

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#16) On January 10, 2009 at 1:06 AM, FlyByKnight (< 20) wrote:

I strongly agree with axis42 -- Netflix will survive, and prosper, because it's at the leading edge of online movie delivery and completely understands the gravitas of making new ways of doing old things unintimidating to Joe & Jane Everyman.

By investing in, or rather, "spawning" Roku (take note, TMFRagan), as well as being its closest content partner, Reed Hastings (CEO of Netflix) has demonstrated his brilliance: prove the concept with a minimum of investment, get a low-cost platform into the hands of the millions of Netflix subscribers that have loyalty akin to axis42's, then ramp down the costly DVD-by-mail service at whatever rate the marketplace shows itself to find comfortable.

True, the DVD-by-mail service is currently NFLX's bread-and-butter, but you can't hold back progress. Hastings knows that, and rather than fight it or deny it (take note, Hollywood and Blockbuster), has seen the future and chosen to be at its forefront. Silicon Valley visionary pioneer in delivering movies to the home (Hastings) plus Silicon Valley visionary pioneer in solid, dependable, easy-to-use multimedia technolgy and devices (Roku CEO Anthony Wood -- formerly of ReplayTV) equals *match made in heaven.*

Roku will now climb the ladder of success by adding new content partners (i.e. Amazon), thus increasing the value of its already ridiculously affordable and otherwise epic little player. Meanwhile, Netflix will reduce its operating costs while cementing the loyalty of its customers by instilling a sense that they're getting more (instant delivery) at the same price.

Mark my words...

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#17) On January 15, 2009 at 5:29 AM, jeffweico (< 20) wrote:

I would have to also wonder about the viability of the premium movie channels. Why subscribe to them when many of their movies can be viewed for free, and some others can be rented?

 HBO and Showtime have created their own series, but I doubt it will be enough to stop their demise. 

Sometime soon, Comcast and other cable operators will be offering movies on demand either for free, or for a fee. The fees should be low since the cost of distribution will be cheaper. 

Maybe Netflix will survive - I now have a Netflix account combined with the ROKU,and I cannot imagine why I would want to keep my premium channels. 

I get the newest of the new via Netflix, I have access to a substantial library through ROKU's Netflix on Demand, and I can rent movies through Amazon. Even if I rent 5 or 6 movies per month, it will still be cheaper than subscribing to the pay channels. 

In other words, we can all pay only for what we WANT, not for what the cable companies and Hollywood feel that we should want.


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#18) On April 28, 2009 at 9:11 AM, Biergeliebter (98.99) wrote:

I agree with FlyByKnight and just wanted to add one thing:

Reed Hastings said last year before the Roku box came out that he doesn't expect the DVD by mail model to be around in 5 years and that is why he was pushing for online delivery and was working on ways to make it easier for people to watch them on their televisions.

When management has the kind of forsight to see the future and adapt and innovate before it arrives, that company will be around for awhile.

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#19) On April 28, 2009 at 9:45 AM, TMFSpiffyPop (99.82) wrote:

And it's not just about Roku -- I watch my Netflix over my Xbox 360 and Xbox Live -- I haven't actually returned a DVD in 3 months. --David

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