Wednesday, September 21, 2011 at 3:27 pm.
Netflix is now open to considering selling video-on-demand
Netflix, you’ve likely heard, is splitting off its DVD subscription service, which has a good selection of newer releases, from its streaming subscription service, which doesn’t.
One option for Netflix to add more newer releases to its streaming library — and to keep customers from using competitive services like Apple’s iTunes or Amazon — would be to sell or rent shows and movies on an on-demand basis.
Netflix executives have historically dismissed the VOD model. But based on comments made by Netflix CFO David Wells at Goldman Sachs’ investor conference today, the company now seems more open to the idea.
Netflix has resisted this model in the past, Wells said, because it’s a low-margin business and complicates Netflix’s simple subscription offering. But now, “…in today’s sort of evolving and changing world, we’d look at a number of different options,” he said. “In terms of making it convenient for folks to find that content rather than going to a competitor, to another site, we certainly would look at it.” (See full transcript below.)
If Netflix were to launch a VOD service, it could be a way for the company to offer streaming movies and TV series — such as new releases — that are either too expensive to stream as part of a subscription service, or that studios might not allow as part of a subscription. This could let Netflix keep more business instead of losing those customers to iTunes, Amazon, cable VOD, or forcing people to keep subscribing to the Qwikster DVD rental service.
How might this work? Just guessing: Netflix could potentially call these “Netflix Plus” titles, or something like that, and maybe include one or two as part of a subscription service plan, either at current prices or as a premium tier. Or it could simply offer them as one-off, add-on sales, the way everyone else does.
It doesn’t sound like a new Netflix VOD service is necessarily imminent, but I wouldn’t be surprised if the company eventually added one.
Here’s a transcript of Wells’ remarks at the Goldman conference, when asked about potentially adding à-la-carte VOD on top of regular streaming:
You know, traditionally what we said about VOD was it’s a low-margin business, we weren’t that interested in it because it sort of complicated the simplicity of the offering.
I think in today’s sort of evolving and changing world, we’d look at a number of different options. In terms of making it convenient for folks to find that content rather than going to a competitor, to another site, we certainly would look at it.
I wouldn’t expect us, for that to be, sort of, our reaction right now, but certainly in the evolving competitive set and the evolving market, we would look at other things as well.
Update: At 6:15 p.m., I added a transcript of Wells’ remarks and edited the introduction. To be clear, Wells did not say that Netflix was necessarily going to launch a VOD service, and I hope that no one got that idea from my original post. But he did suggest that it’s something Netflix was open to considering, which seems quite different than Netflix’s hard line against the VOD model in the past.