Netflix: Higher prices for high-def a possibility
By Danny King -- Video Business,02/06/2008
FEB. 6 | Netflix hasn’t ruled out raising prices on high-definition rentals if a resolution to the format war between Sony’s Blu-ray Disc and the Toshiba-led HD DVD drives costs up, according to chief financial officer Barry McCarthy.
Blu-ray market share has risen since last month when Warner Bros. said it would release its high-def movies exclusively in Blu-ray starting this June.
“If a winner emerges and we experience some margin compression if a large number of subscribers rent in high-def, we’ll weigh the options of increasing prices,” McCarthy said.
Speaking at the Thomas Weisel Partners Technology, Telecom & Internet Conference in San Francisco this morning, McCarthy said Internet downloading won’t threaten DVDs as the primary home-entertainment delivery method until prices drop and the content is accessible through multiple devices.
A widely adopted downloading device would “need to be real inexpensive and an open system,” said McCarthy, who referred to Amazon.com’s Unbox downloading service as a “closed” system.
Netflix has been fending off competition from Internet downloading systems such as Unbox, which Amazon.com started in September 2006, and Apple’s iTunes, which began offering movie download rentals last month. Netflix also saw subscriber growth flatten after chain-store leader Blockbuster started its online DVD ordering service Total Access in November 2006.
Netflix, whose fourth-quarter earnings beat analyst expectations on an increase in subscribers, said last month that it expects to start offering its Instant Watch streaming service to users with Mac computers this year. The service has so far been available only on PCs because of digital rights management restrictions.
“There are 100 million DVD players in U.S. households,” McCarthy said today. “If you really think people are going to stop renting DVDs, you need to lie down until that thought passes.”
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| Submitted by: | davinleeds 2/9/2008 3:34:51 PM PT |
End of format war will bring higher prices as Sony will be in control. Nobody saw that coming?
| Submitted by: | william gates 2/7/2008 3:32:19 PM PT |
actually it is the blu-ray disk that is the problem. it is not from scratches that the problem exists,instead it is outright breakage. apparantly that hard surface is extremely brittle and the blu-ray disk is no match for the postal service.
| Submitted by: | Aaron Moore 2/6/2008 4:47:51 PM PT |
| Location: | South Carolina |
| Occupation: | Electronics |
Hopefully Netflix will base any price increases off of the cost per format.
They have previously stated that DVDs tend to average 12 rentals before they are kaput due to scratches. The same will happen with HD-DVD as they are the same disk technology.
With Blu-ray however, there is the anti-scratch coating developed by TDK. (search for a cnet news article where they test scratching it with a screwdriver and it still plays)
Simple math makes the Blu-ray rental more cost effective for Netflix even at a higher per disk price than DVD.
Take a $12 DVD over 12 rentals and you have a cost to netflix of $1 per rental they have to absorb.
Take a $24 Blu-ray disk that lasts 36 rentals and you have a cost of $0.66 per rental they have to absorb.
Take a $24 HD-DVD disk that lasts 12 rentals and you get the idea - $2 per rental that netflix has to absorb.
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