Netflix made a name for
themselves when they re-invented the traditional movie rental
model, replacing the traditional video rental store with a
postal delivery service, and innovatively costing it with no
late fees or rental periods.
After almost a decade of
growth through this model - a decade that saw them vanquish such
seemingly invulnerable dominant retail outlets as Blockbuster -
they have re-re-invented movie rentals with a new product for
the internet age; instant internet streaming of movies.
Remarkably, not only does this
product offer instant gratification, but it is also provided for
much less cost each month, and allowing you unlimited viewing
all month long.
What's the catch? Well,
yes, maybe there are a few minor issues, but in general, we
consider this to be a triumphant success and a 'must have'
feature for your own home.
A Quick History of Netflix
Netflix was established in
1997 and opened for business in April 1998. It was the
inspiration of one of the co-founders, Reed Hastings, who was
annoyed at being charged a late fee when returning a regular
rental DVD to the store.
Initially it was an online
version of more or less the regular DVD rental store, charging
$4 per movie rented plus $2 for postage. As such, it
struggled for much marketplace excitement or acceptance.
In September 1999 Netflix
profoundly changed, when it introduced a totally new type of
charging for movie rentals. You now could pay a flat fee
per month, allowing you to rent as many movies as you wished,
with no extra cost per movie, and with postage costs included.
The only 'catch' to this
model was the number of movies you could have out from them at a
time. The more movies you wanted to simultaneously have
out, the greater the monthly fee. And, of course, the lead
times for movies to be mailed to you and then for you to mail
the movies back to them provided limits on how many movies a
month you could turnaround and view.
This was a paradigm shifting
approach to video rental, but - initially - it was still lacking
one essential ingredient of a traditional 'in store' renting
experience - the ability to browse through movies and find
movies you might like. Netflix developed an extremely
sophisticated video recommendation system based on each person's
personal preferences and how they rate other movies they have
seen, and then suggest movies to you, telling you how much they
think you'll like each movie. This recreated the 'random
browsing' experience of being in a store, and actually enhanced
After some rocky times
financially, Netflix grew to a more solid financial foundation,
and steadily added more and more members.
In late 2008, Netflix
released a new service that allowed its members the ability to
stream some movies off the internet and direct to their
television or computer. It was not an unlimited service,
and there were - to start - not a lot of titles available
(Netflix has over 100,000 titles in its DVD by mail service).
Additionally, back then, fewer people had truly fast internet
connections, which also limited the quality and convenience of
But internet speeds
continued to increase, and Netflix signed up more and more
studios to provide content, and their members showed positive
interest in the new service.
In late September 2010
Netflix released a new 'streaming only' type of membership, in
Canada, and then in late November, they added the service for
their US customers too. Details of this
special offer can be found on their site. Best of all,
you get a free one month trial before having to pay for it.
They would undoubtedly like
to provide a similar service in other countries too, but doing
so requires additional rights from the movie studios and Netflix
is working slowly on securing these additional rights.
An indication of the
popularity and success of the Netflix streaming is the
incredible statistic that back in October 2010, Netflix was
already accounting for more than 20% of all downstream internet
traffic in North America in the peak evening hours between about
8pm and 10pm.
New data for
'Spring 2010' shows that Netflix now takes 29.7% of peaktime
internet traffic. The growth of Netflix streaming service
users seems to be continuing at a huge rate, and/or the amount of
streaming 'value' enjoyed by current users is also increasing.
What the Netflix Streaming
Service Is and Does
To start with, you will
probably use your computer (or even your iPhone or iPad) to
browse through the Netflix catalog and choose movies to add to
your 'queue' of movies that you want to watch at some future
Next, from your television
and whatever device you are using to connect it to the internet
and the Netflix service, you will look through your pre-selected
queue of movies and choose which one you want to watch.
After having selected your
movie, you wait a short couple of seconds, and then - in less
time than it takes a DVD to start playing - you're watching the
If you want to pause it at
any time, you can. If you stop it, when you return, you
can restart it from where you were before. You can also
fast forward or rewind through the movie.
After you've watched the
movie, you can either remove it from your queue, or leave it
there if you expect to watch it again in the near future.
It is as easy as that.
And - just as importantly - as quickly as that. The
Netflix streaming service is truly simple, and as close to
instantaneous as you can ever hope for.
Variety of content available
There are currently (May
20,000 titles to choose from with the instant streaming service
- a mix of movies and television shows. This is a huge
number, but nowhere near as many as the 100,000+ different
titles available for mail delivery.
Some of the television
content is available as little as 15 days after first showing on
tv. Some of it is the previous season or earlier.
Not all studios have
embraced the concept of digital streaming of their movies.
Like all other new methods of showing their products, the
studios remain very resistant to change - remember that the
movie studios tried to make VCRs illegal when they first came
out, claiming that VCRs would destroy their business.
The reality has occurred,
and these days most movies earn much more money for the studio
from non-theatrical distribution than from selling seats in
theaters. But even so, most studios remain terrified of
each new technology, seeing it as a threat, whereas it
invariably ends up as an opportunity.
As evidence of that, in
August 2010 Netflix signed a new agreement with one studio group
comprising Paramount, MGM and Lions Gate Entertainment that
committed it to pay $1 billion over five years to stream content
from their libraries. That's a huge additional source of
revenue for the three studios.
In the case of these movies,
Netflix can stream them 90 days after they appear on the premium
Epix pay channel offered through Dish Network and Cox
Netflix has deals with other
studio groups too, of course, including a new announcement in
May 2011 with Miramax. The range of movies available on
Netflix seems to be steadily growing.
The net winners and losers
from Netflix Streaming
Clearly, we are the net
winners, getting the ability to watch a huge number of good
quality movies every month for only $8.
Netflix obviously believes
it can make a profit too, and the studios are clearly doing this
in the hope of boosting their ongoing revenue from the movies
So what is the catch?
There are two parts to the hidden catch.
The biggest loser at present
is the United States Postal Service. Netflix has been
paying an annual postage bill of $600 million, and clearly when
it offers internet streaming, it saves the postage cost.
The other part of the
'hidden catch' are the internet streaming costs. As
discussed in our two part article series
- The End of the Internet as We Know It at present the
movies are streamed more or less 'for free'.
This is a dubious business model
for the internet service providers, and the growth of services
such as Netflix, services which consume huge amounts of internet
bandwidth and resource, threaten to change the entire charging
methodology of the internet.
The appeal of watching unlimited
movies would reduce if we had to pay an extra couple of dollars
to our ISP for data streaming costs, wouldn't it.
But until such time as that
happens, there's no reason you shouldn't rush to join in this
amazing new service.
Pluses and Minuses of Netflix
Overall, the Netflix video
streaming service is excellent, but it will not completely
replace renting or buying your own DVDs and Blu-rays, and/or
going to see the movies in the theatre too.
Here's an analysis of the
experience offered by the streaming service so you can see what
trade-offs will be required.
The biggest plus has to be
that for only $8 a month you can watch all the movies you want,
as many times as you want, on your own television at home.
This is remarkable value.
It is little more than half the price of a single movie ticket,
half the price or less of a regular DVD mail delivery membership
from Netflix, and about the same as you'd pay for three or four
movie rentals from a local video store.
And unlike all these other
ways of watching movies, you have the luxury of being able to
choose instantly from about 20,000 different titles. No
need to get up from the couch, and no need to return DVDs.
No extra charge for watching more movies, and so on. This
is a brilliant value proposition.
The good news is that the
video quality is almost always better than what is now almost
forgotten - old fashioned standard definition analog television.
The quality will almost
always be better that VHS tapes. Some of the time it may
not be quite as good as DVDs. Some of the time you'll be
getting quality comparable/indistinguishable to DVDs, and
occasionally you might get lucky and have some 720 line video
(better than DVD's 480 line video) streamed to you.
It will never get close to
the sharp vivid quality of a Blu-ray disc however.
This is probably the
Achilles' Heel of the service at present. It is generally
held that the overall quality/experience you get from a movie is
influenced equally by the quality of the sound and the quality
of the picture.
Whereas Netflix scores
satisfactorily in video quality, it earns a big fat fail for
those of us with surround sound systems. For most of us,
all we'll be able to get out of our Netflix movies is flat
stereo sound, which sounds massively less engaging that good
surround sound these days.
The only exceptions are if
you are using a Play Station 3, and possibly a Google TV box
which can decode the Dolby Digital Plus surround sound stream
that Netflix is introducing to some of its streams.
We have also been advised by
Roku that very few of the movies Netflix serves have any
surround sound encoding on them at present, so maybe you don't
yet need to rush out and buy a PS3 or GTV.
This is a strange and
disappointing decision on Netflix' part. Noticeably
enhancing the audio quality would require very little bandwidth,
whereas each noticeable enhancement of the video quality
requires massive bandwidth.
I'll guess that perhaps
160kb of their maximum 4800 kb bandwidth is given over to audio.
If Netflix were to simply double that audio bandwidth, taking a
thin sliver out of the video bandwidth, the improvement in sound
quality would be massive while the offsetting loss of video
quality would be almost invisible.
We are unaware of any plans
for Netflix to add 3-D video streams. And thank goodness
for that - once the novelty wears off, most people realize 3D
movies to be nonsensical gimmickry that detracts from rather
than adds to their viewing experience.
There are no advertisements
on a Netflix movie. And you don't have to struggle to get
past all manner of ridiculous nonsense and copyright/do not copy
notices at the start of the movie either.
Generally you push play and
within a few seconds, the movie starts.
Slow and Fast Motion
You can speed through the
movie forwards or backwards at a very fast rate, but this is a
bit imprecise, meaning you might overshoot or undershoot the
part you're trying to reach, and you have to wait a few seconds
for the stream to re-align to the new point in the movie you
have skipped ahead (or jumped back) to.
There are no facilities for
There are on chapter stops
on the presentations.
Extra Features and
There are no extra features,
no deleted scenes, no 'The Making of ....' type featurettes, and
no extra channels of audio commentary. You get the bare
bones movie, and nothing else.
So - Should You Get Netflix
There's not a lot of
downside and an incredibly amount of upside waiting for you to
enjoy with the $8/month Netflix video streaming service.
Because you're not locking
yourself into any length of contract - and doubly because they
are offering a
free one month trial to new users - you're not risking
anything at all to try out Netflix.
If you don't already have a
Netflix capable entertainment system, you can try it out on an
iPad or a computer. This won't give you the full 'home
theater' experience of course, but it will give you a taste, and
if you like the taste, you can then upgrade your home theater
system for less than $100 to make it Netflix capable.
How to do all this is
explained in the next part of our two part series.
This follows on from
our two part article, 'Warning
- The End of the Internet as We Know It'.
Part 1 of a two part article about Netflix - see also
part two 'Details of how to get Netflix working on your home
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18 Feb 2011, last update
26 Jun 2019
You may freely reproduce or distribute this article for noncommercial purposes as long as you give credit to me as original writer.