Netflix: No, We Won't Stream New Releases


Netflix (NFLX) is the undisputed champ when it comes to streaming video. It has more than 25 million domestic streaming accounts, and those users are collectively consuming more than a billion hours of Netflix content a month. A recent third-party study found that Netflix was serving 20 times as much video content during peak primetime viewing hours as its nearest competitor, (AMZN).

Netflix has the premium streaming market just where it wants it, but it may not be able to hang on to its lead for long. Amazon -- and now Redbox Instant -- are doing something that Netflix has refused to do: stream newer releases.

Will that refusal be the undoing of Netflix?

A Dark Night Rises

Batman fans can pay $1.99 for a 48-hour digital rental of "The Dark Knight Rises" through Amazon Instant Video. Netflix subscribers have to drive out to the local Blockbuster or Redbox kiosk. Or they can pay to rent physical DVDs, though the popularity of that plan has fallen sharply over the past year.

Redbox Instant by Verizon -- a new service from Coinstar (CSTR) and Verizon (VZ) that's rolling out in beta testing this month -- also offers pay-per-view digital rentals for new releases that aren't part of its digital catalog.

Netflix argues that it doesn't want to follow its competition here. Instead, it wants to stick to the low monthly rate of $7.99 for unlimited streams of its growing library of second-run movies and TV reruns. When studios have held back on newer content, proposing that they would only make it available if Netflix introduces a tiered pricing strategy so they're not belittling the value of their hotter titles, Netflix haspassed.

It could be arrogance. It could be the company watching out for its growing number of customers. Either way, as long as Netflix is the runaway leader it's not going to be in a hurry to fix what isn't broken.

That could be a mistake.

One Stop Shop

Netflix isn't afraid to go after original programming deals, hoping that it can compete against the pricier HBO and Showtime premium movie channels. Netflix also isn't afraid to admit that it's wrong, as it did last year when it undid the Qwikster fiasco within weeks of announcing that it would split its operations into two distinct websites.

However, Netflix is playing hardball on new content, even though bestseller lists show that it's what customers crave the most.

Netflix has spent the past few years making sure that its content is easily accessible. It was the first service to strike deals with all three video game consoles. Some Blu-ray players even have a "Netflix" button on their remote controllers. Netflix has the credit card information on file for its 25 million streaming users. It would seem to just make sound financial sense to try to sell them individual rentals of new retail releases.

But for now, Netflix isn't budging.

Motley Fool contributor Rick Aristotle Munarriz owns shares of Netflix. The Motley Fool owns shares of and Netflix. Motley Fool newsletter services recommend and Netflix.

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