Online Video Price War

Netflix will be announcing unlimited movie streaming tomorrow, according to AP.

http://news.wired.com/dynamic/stories/U/UNLIMITED_NETFLIX?SITE=WIRE&SECTION=HOME&TEMPLATE=DEFAULT&CTIME=2008-01-13-13-19-22

This is effectively the opening salvo of a streaming video price war. Not necessarily the smartest move on Netflix's part for a couple reasons: decreased profits, and a lower bound they cannot break. In other words, there are no more than 480 hours in a month; when you charge a monthly subscription fee, it will always be divided against that number. Realistically though, there needs to be a more accurate base number... 480 hours assumes that a person sleeps eight hours a day, and does nothing but stream movies while awake. This is a highly unrealistic upper bound.

So let's be more conservative and real. Let's take Netflix's highest level of service - 8 DVDs, 48 hours of instant watching time at $48 a month. They probably have the data to show that very, very few people watch more than 1 two hour movie a day, which is why they don't offer a service plan with more instant watching hours. But let's be conservative and assume that 95% of Netflix customers will watch no more than 150 minutes of video a day, or 4500 minutes a month. In fact, let's make the math easy and say it's 4800 minutes a month - that means that the least their highest frequency watcher will pay is $1 per 100 minutes of unlimited streaming online video with their current pricing. But that's their highest level of service... if unlimited streaming is offered to the $17 a month customers, and their movie watching habits increase to the same level as the top level customers, you've now made this number more like $0.35 per 100 minutes. It's pretty unlikely that anyone will watch that much; and it would take over ten years to watch everything in their online catalog at that rate.

This is more likely a reaction to Amazon Unbox and Movielink as much as it is to Apple's alleged online video service. How low will they all go? Where will the market bottom out?

What Did I Do This Weekend?

kitteridge and I went to a new local grocery store - meaning a store that only stocks locally made products! Milk from dairies, eggs from local chicken farms, sweet potatoes from long island, apples from upstate... super awesomeness, and it even delivers!

Cooked a bunch, made fried tofu and sweet potato fries... Then off to see "Happy Days" by Samuel Beckett, performed by Mrs. Dursely!

Today we had brunch at a great place called Egg; I'd post about it in BVBK but it's pretty well known and covered (after that, we went to the Spuyten Duyvil grocery, a magical place filled with beers and gourmet foods, and the Bedford Cheese Shop). Instead, here are two lovely photos taken today by Sylvia:

( Read more... )