In what the Associated Press is painting as a preemptive strike against Apple, Netflix is ditching its quota/hours system for streaming movies online. As of today, all subscribers except those on the most basic two DVDs per-month plan will be given unlimited access to the 6,000+ movies available as part of Netflix’s Internet streaming option, dubbed “Watch Instantly”. Previously, subscribers were offered a limited number of Internet viewing hours based on which DVD rental plan they were on.
During tomorrow’s Macworld keynote speech, Steve Jobs is expected to announce that Apple will also begin offering online movie rentals, through the company’s iTunes Store. Rather than being priced via a monthly “eat-all-you-want” subscription plan, it’s thought that rentals will cost $3.99 per film and will be viewable for up to 24 hours after being downloaded.
Netflix vs Apple
The biggest issue facing any online movie rental service is securing content from the major film studios, under terms which will allow them to compete with traditional DVD rentals (release windows and territorial rights). This is where Netflix appears to have an advantage over Apple.
Not only does the company have long standing relationships with the big four studios, but is also able to offer a “hybrid service” to customers, mixing DVD rentals by post with Internet streaming: “… since a good deal of content will be available only on DVD for some years, a hybrid offering like ours is differentially compelling to consumers in comparison with any online only offering”, argued CEO Reed Hastings during the company’s recent Q3 earnings call with investors.
In contrast, Apple has managed to antagonize studios through what they see as an inflexible approach to pricing, and their fear that the company could become too powerful a player in the burgeoning online video market as it has done for digital music. For as long as Apple struggles to secure enough premium content, current Netflix subscribers will have little reason to defect.
For moderate to heavy movie watchers, Netflix’s eat-all-you-can subscription model offers better value for money than a per-download price plan. Additionally, Netflix users don’t have to deal with the inconvenience of movie rentals expiring after a 24-hour viewing period.
In terms of getting online video onto hardware other than the PC (television sets and mobile devices) Apple is way ahead of Netflix. The company practically owns the Portable Media Player (PMP) market with its iPod/iPhone lineup, and with the AppleTV, offers a way to view content downloaded from iTunes, on a television.
Despite having ambitious set-top box plans of its own, Netflix’s online streaming option is currently only accessible using a Windows-PC. However, the company recently announced a partnership with LG to develop Netflix-compatible set-top boxes and Internet-enabled televisions. The first such products aren’t expected to hit the market until the second half of this year at the earliest.