Bye Bye Netflix

Netflix is reeling from shock waves to their business model. But, so far in the media, I've not heard anyone speak plainly on the REAL root of their problems. First, Internet providers aren't openly embracing streaming. In fact, many are scurrying around trying to establish "bandwidth caps" for their customers. This does not bode well for a rosy future in the streaming business. Secondly, the purchasing power of the remaining middle class (and poorer) is eroding. To many in the current economy, high-speed broadband is beginning to sound more like a luxury than a necessity. This also does not bode well for a rosy future in the streaming business.

Never forget that NetFlix became a powerhouse by renting DVDs. It wasn't until they started dabbling with streaming that their business began to turn south. And about this same time, a new kid on the block emerged - Redbox. Along with NetFlix, Redbox helped crush the Hollywood Video brick-and-mortar empire and severely curtail the brick-and-mortar business of Blockbuster as well.

This is just a guess. But it's an educated (or experiential) guess as to why NetFlix raised their prices earlier this year. Until my retirement in early August, I worked in the FSM area of a large postal processing plant. Our area processed their thin mailers through unforgiving metal machines. And I've personally witnessed a number of these mailers (and the discs inside) being damaged or destroyed in those machines. Could it be that NetFlix raised their prices, in part, to defray the costs of replacing discs that were damaged, destroyed, or "lost" in the mail?

And continuing with things postal, there's one more thing to consider, Because of their financial crisis, we're on the verge of seeing changes in delivery times (and delivery days) that will add 2 or 3 days to the trip these DVDs make -- each way!

So, with restrictive bandwidth caps that will curtail streaming ... with the middle-class and poor becoming poorer ... and with delivery delays coming that will curtail rental by mail, I'd say that the days of NetFlix (and other streaming or online DVD rental companies) are numbered. I'd also say that Redbox is probably grinning ear-to-ear over this.

I do know one company that is definitely grinning ear-to-ear - my local mom-n-pop video rental store. Since the demise of Hollywood Video and the severe brick-and-mortar cutbacks of Blockbuster (not to mention the NetFlix price increase), they've had to hire more people to keep up with the new business. And, in the near future, I think that the following scenario will emerge. Redbox will rule in handling rentals of "newer" DVDs with mom-n-pop stores handling rentals of older DVDs. In the farther-off future?

Streaming video will eventually rule the roost. But before this can happen, the entire country (USA) needs to have an expansive fiber-optic infrastructure that will allow high-speed broadband costs to become affordable to the average citizen. However, I don't think anyone is holding their breath waiting for this to happen.