Well put Will.
Just an additional comment about #1 - putting all their efforts behind streaming show that they're really aiming the service to be global very soon. The announced Canada launch is a good example because Canada has a lot of tough distribution and content laws (such as requiring a certain % of physically distributed video content to be Canadian-made) that don't apply to digital distribution.
There are a lot of similar restrictions in Europe as well as other royalty issues where digital has a clear advantage over physical distribution. Your #3 comes in to play here where Netflix will have trouble keeping its same content lineup because of the various delays associated with getting TV content to overseas markets.
For the US, new TV will be of big importance, but its global presence will require a solid set of movies (new and old) and older TV shows that have already proven popular outside the US.

"Netflix availability on 100 million devices is huge competitive barrier"



I have to disagree. My company has developed device interfaces that are comparable to Netflix's (some of our interfaces will be live in the coming weeks). Give me $10M and we'll be on all the devices that Netflix is on. For $5M we could be on at least 95% of those devices.



I believe that Netflix's market cap is around $6B. If a tiny company in Western MA can neutralize one of their competitive advantages for $5M, then that advantage is anything but "huge." I admit that there are a lot of other important factors (e.g., catalog, subscriber base, marketing budget), but getting on devices is simply not that hard. All you need is a little cash, a decent biz-dev person, and a few competent technologists.



The folks at Netflix are very smart and are clearly executing well; however, I believe you're way overestimating the strength of the competitive position that they're headed toward.

"Until connected devices embrace an open, standardized, browser-based model (which will begin with Google TV's launch later this year), Netflix has erected a huge competitive barrier."

I'm with you on open & standardized, but the browser-based model on TV has failed time and again. It relies too much on the device's hardware, which decreases stability, increases costs, and presents legacy/upgrade issues going forward. A true competitive advantage over Netflix would be a service based on an open, standardized & CLOUD-based model.

Netflix may be on many devices, but as you point out, it costs them a lot of money to build, test and certify their application on so many devices. That's a lot of cash burn on Netflix's side, and a lot of profit-margin loss on the CE manufacturers side. They're smart guys though, and I would bet they eventually switch to a cloud-based platform.

$5m is not enought to compete with netflix.

You need to acquire content as well as turn key vod technology from matrixstream or microsoft etc etc. The estimate is about $50m to acquire a similar catalog as netflix and build a decent size cdn network.

@Rich - If you have a Roku player, our new app (EZTakes) went live last night. In my opinion, it's about as functional as Netflix's app. We have nearly 5000 films available. You can browse genres, collections, search, manage titles that you buy/rent, and once you set up a payment profile, you can purchase/rent by using your remote control. Some people might say the Netflix app is slicker, but I think that's more a matter of taste than function.

Most of the heavy-lifting was required to develop a scalable and flexible back-end for managing content, meta data, rights, users, customer support, payment processing and so on. That took years. Getting on Roku literally took about 4 person-weeks. In the near future, we'll release a significant upgrade to our Android app, and we're also working on a Yahoo! Connected TV widget. Perhaps some platforms are much harder to implement than Roku, but even if they all take several times the effort, which I doubt, it's still not a "huge" barrier.

I'll take this a step further: If you took 2k of the top films off of Netflix's app and put them on ours, then my tiny company could probably take customers from Netflix, perhaps in significant numbers. To be honest, there are a lot of big companies that could buy us for a rounding error in their financial statements, and then do exactly that. For a company like Netflix, with a $6B market cap, that should be at least a little scary.

I'm not saying they should be afraid of us (I'm sure they'd laugh at me), and there's lots of ways a competitor could screw up, but the possibility is very real.

@James Pierce - I agree with you. It would take more than $5M to compete with Netflix. I have enough data points, however, to say confidently that for $5M we could get on enough devices to more of less neutralize their "device advantage" (as distinct from their other significant advantages). Your statement that it would take $50M to build a comparable catalog sounds reasonable. But if that's true, it's still a very vulnerable position for a company that's worth billions while their traditional competitive advantages (i.e., hyper-efficient regional physical distribution centers and a great Web site) are becoming less relevant.

FYI - I meant to address my above comment to "Will Richmond," but it was inadvertently truncated to "Rich." Sorry, Will.