Amazon, Netflix aim to fast forward shift to digital media over physical

Amazon, Netflix aim to fast forward shift to digital media over physical

Summary: Amazon is prepping an Android tablet. Netflix freaks its customers out by unbundling streaming and DVD by mail services. The common thread: Both companies are trying to speed up the transition to digital delivery of media.

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Amazon is prepping an Android tablet that is likely to be subsidized by sales of digital media. Netflix freaks its customers out by unbundling streaming and DVD by mail services effectively raising prices. The common thread: Both companies are trying to speed up the transition to digital delivery of media.

The Amazon tablet, which has been rumored and reported for months. The Wall Street Journal confirms an Amazon tablet is on the way. The Kindle turned on the e-book spigot for Amazon, which would much rather deliver a book to you wirelessly than through the mail. Why? It's cheaper for Amazon and you get instant gratification. What's not to love?

And the Netflix discontent, which really shows few signs dying down, ultimately is about aligning DVD delivery costs with what the subscriber pays. And if some of you drop the DVD service in favor of streaming that's just swell with Netflix. After all, the profit margins are much better. The future of Netflix is streaming delivery not DVDs. By splitting up the services---and management of them---Netflix is essentially hiving off the slow growth, costly business. From a numbers perspective, the Neflix move makes perfect sense no matter how much customers scream.

That Kindle effect will be magnified with a tablet. Amazon subsidizes you a tablet then sells you movies, TV shows, music, books and a few apps. That model sure beats packaging up DVDs and hardcover books for delivery. For Amazon, digital delivery of media means higher margins, less overhead and maybe a few redeployed distribution centers that can be used for other goods.

Barclays analyst Anthony DiClemente nails it in a research note. He said that Amazon's tablet strategy has significant risks and loose ends, but the overall business rationale works. DiClemente said:

A tablet should help offset future declines in the physical media business as media shifts from physical to digital (media represented 40% of sales in 1Q11). While hardware is often a lower margin business and the tablet market is becoming increasingly competitive, we believe an Amazon tablet would further boost Amazon's digital offerings and its Appstore. Amazon has had very good success with the Kindle and its app strategy across mobile platforms thus far as it now sells more Kindle books than physical books and the growth rate for Amazon's domestic book business in units and dollars is the fastest in over 10 years.

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Topics: Laptops, Amazon, Hardware, Mobility, Tablets

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63 comments
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  • Maybe they should have something to stream?

    Netflix needs to vastly improve their streaming service if they plan to have customers shift to it. The selection is awful. I plan to cancel the streaming part of my service because I almost never use it due to lack of content.
    chrisbcn
    • Good point!

      @chrisbcn If they expect to go for an "all-streaming" mode then they will HAVE to have more to stream. I suspect they're working on this with the content providers. It makes more sense for Hollywood et al. to abandon all DVD/CD production and go with digital content delivery. Even in places where cable doesn't exist, there are satellite services that can provide the content. And if I can get that on a Wi-Fi tablet, so much the better!
      PC Ferret
      • RE: Amazon, Netflix aim to fast forward shift to digital media over physical

        . My 3 meg DSL is 30% cheaper than cable, 40% less than satellite and 100% more reliable than either. Radio and television from Phoenix and Las Vegas are rebroadcast through community-owned repeaters/translators. Quality of reception drops with temps over 100 degrees and wind - both the norm for this area. When the competing medias can provide the streaming quality of Netflix at comparable prices
        (60 to 70% less than current Netflix), I'll reconsider. Until then, well, my Netflix bill is dropping $2/mo. What do I have to complain about?
        nkfro
      • RE: Amazon, Netflix aim to fast forward shift to digital media over physical

        @PC Ferret <br>When you find out which satellite services they are please let me know! I have Hughes internet (Satellite) and you're only allowed to download 350 MB a day during normal hours. <br><br>But between 3:00am to 7:00am, it's unlimited, but trying to watch a half hour show, I keep getting buffering problems. At first, I thought part of the problem might be my laptop, but took that to me Niece's house and used her DSL, video ran fine.<br><br>But I just don't understand why satellite service is so limited on download, where DSL and cable are unlimited....
        T-Wrench
      • RE: Amazon, Netflix aim to fast forward shift to digital media over physical

        Satellite direct maybe... satellite Internet is not fast enough for reasonable quality video. Netflix is streaming at 2.8Mb/s-3.6MB/s for their "HD", which is only 720/24p anyway (for films, anyway). If you're streaming on satellite internet, you're getting way overcompressed video anyway, not much better than YouTube 720p, but at least HD is better than SD. You can't sustain HD on satellite. T-Wrench... that's your problem. And if you're on the 350MB cap, your download speed may be even slower... I'm on the "SoHo" plan, 500MB daily cap and 1.5Mb/s downlink... about $110 per month.

        Comparatively, Blu-ray video can be encoded in AVC at over 40Mb/s. Netflix uses the less efficient VC-1 (aka Windows Media 9).

        I don't think Netflix or Amazon are really in competition with DVDs and Blu-ray, they're the guys who wiped out Blockbuster, after all. The big point here is rentals, and will be for a long time. Amazon will certainly do download video sales, but on a tablet, they can get away with very low quality, same thing Apple's done with iPod video. Once I see that on my 71" DLP, though, I cringe.
        Hazydave
      • RE: Amazon, Netflix aim to fast forward shift to digital media over physical

        @PC Ferret They will definitely need more to stream, some real quality <a href="http://www.gigsource.co.uk">entertainers</a>.
        mrswilliamson
    • RE: Amazon, Netflix aim to fast forward shift to digital media over physical

      @chrisbcn Maybe they should have something to stream? - I understand the profit motive for shifting away from physical media. Sadly much of the US suffers from limited broadband access which limits the quality of streaming services. I would agree that Netflix needs to update their streaming library. I have both the streaming and Blu-Ray service because on a 56" screen the 720p streaming falls a little short on quality. I use the streaming primarily for "cable network" series that I am unwilling to subscribe to on Showtime,Starz,and others.

      I am not happy about the price increase, but have not yet decided if I will keep both services.
      wadeperry
    • RE: Amazon, Netflix aim to fast forward shift to digital media over physical

      @chrisbcn
      Nice and concise! But I dropped Netflix due to recent cost increases making it non competitive with Redbox and local services. Why bother
      davisthediver@...
      • RE: Amazon, Netflix aim to fast forward shift to digital media over physical

        @davisthediver@... On September 1, if Netflix does not have a change of heart I will be dropping them as well.
        Masari.Jones
      • RE: Amazon, Netflix aim to fast forward shift to digital media over physical

        @davisthediver@... What about TV shows, documentaries, anime?
        MSFTWorshipper
      • RE: Amazon, Netflix aim to fast forward shift to digital media over physical

        @davisthediver redbox is only good for current movies. They do not have hardly any other kind of content indie, docs, foriegn,concerts,classics,tv shows. ..A Netflix streaming only and Redbox is probably best....Well, unless all u want is todays crap.
        patchman
    • RE: Amazon, Netflix aim to fast forward shift to digital media over physical

      @chrisbcn "The future of Netflix is streaming delivery not DVDs" Well then offer new releases for streaming!! Don't make me wait 28 days for a new release and then force me to watch it on a DVD!! I would pay Netflix $15 a month for just streaming so long as I can stream ALL new releases, not just old movies no one is really interested in watching. It's not rocket science guys!
      Masari.Jones
      • RE: Amazon, Netflix aim to fast forward shift to digital media over physical

        @Masari.Jones
        I don't think netflix are holding off on new releases, that would be the hollywood distrabution who don't want you to get streamed or rentals on dvd release but to buy the over priced bluray/dvds.
        Your right its not rocket science its hollywood greed.
        dragonblack
    • RE: Amazon, Netflix aim to fast forward shift to digital media over physical

      @chrisbcn
      I totally agree with you. How greedy can one company be. Their content of streaming is terrible and if they do not offer better selections then it looks like Im going to get a kindle and start to read much more!
      withanie@...
    • Agree, needs more options

      @chrisbcn
      I have severe hearing loss and I like to watch movies with subtitles for hard of hearing. The other missing feature with streaming is the lack of access to the bonus materials on good DVDs.
      sboverie
      • RE: Amazon, Netflix aim to fast forward shift to digital media over physical

        @sboverie@...
        I agree with you 100%, both of my kids are deaf, this is an outrage, I didn't even know about this, I don't use netflix, I did some years back when they first started, than when they got big they sucked, dropped them, plus I did watch a stream on a nieghbors TV, it looked like I was watching VHS, they can keep it.
        FredOneSaid
      • Need subtitles

        @sboverie@...
        Yes, I will be dropping the streaming portion of Netflix also for the same reason. I and my wife both get tired of me asking "What did he say?" I almost never go to the theater for movies or for live plays for the same reason. I feel lost without the subtitles.
        lynnhada@...
      • Yes,needs different subtitles/audio tracks

        @sboverie@... My girlfriend's from China and not so used to English, so she needs to switch to Chinese when watching a movie and I need to go to English. Streaming can never meet our needs for multi subs/audio tracks. Also, we like to watch blu-ray movies on our 65" HD TV, streaming is far away from displaying a quality movie for us.
        sam0403
    • RE: Amazon, Netflix aim to fast forward shift to digital media over physical

      @chrisbcn , I agree their content leaves something to be desired. If they boost content choice, then they should also boost content quality as in audio quality (DolbyDig). But all of this is good only as long as ISPs maintain uncapped bandwidth (as mine does.) When that goes away, the whole digital delivery idea may stall.
      hamio@...
  • It would be OK if all their titles were streaming...

    ...but they're not. From what I can tell in my own account, only a third of the titles I want can be streamed, and the rest are DVD only.

    Netflix basically said, "You can have all the streaming titles you want, but most of our titles aren't streaming." To continue streaming service and DVDs, the plan rose from $20/month to $24/month. Not a big deal, but they did it like weasels in a Dilbert strip, telling me how great it is.
    The Daleks