Category Archives: DVD

Netflix pushes you away from discs

R.I.P., DVD.

Netflix, the former movie discs-by-mail company, has been on a growth tear lately, and now it’s all about streaming and avoiding the Post Office. In 2009 Netflix grew nearly 25% to 12.2 million subscribers, of whom 48% have tried streaming TV or movies at least once. The company makes healthy profits on its $1.7 billion in revenue, but more streaming would jack all that through the roof. Netflix has signaled as much with three major moves:

1. Netflix recently recast its subscription pricing to $8 a month for streaming or $10 a month for streaming plus discs — with streaming included in both options, clearly enticing you to go for the lower price point.

2. In early January, news broke Netflix will be added as a remote control button on Blu-ray players from Sharp, Sony, Panasonic, and other major home electronics manufacturers — putting video subscription by Internet in your hands whether you want it or not.

3. Yesterday Netflix announced it would no longer allow its users to manage their DVD queues via connected devices, such as Wiis — you can only set up DVD mailings via the web site.

Hmm. Pricing enticements, buttons on remotes, and forcing you to walk into the home office to pick a DVD mailing — Netflix obviously wants DVDs gone. The photo above of a Netflix distribution center hints why the company is interested in beaming movies over wires vs. sorting and shipping them by truck — imagine what all that costs.

As with any forced customer migration, there are risks. Analyst Richard Greenfield of BTIG Research told Home Media Magazine that Netflix might damage customer loyalty by pushing so hard away from mail, given that in Q3 2010, mailed discs still accounted for 41% of the home video rental market. But Netflix seems willing to take that chance, eyeing millions in freed up costs and a bet streaming video is the future.

DVD sales horror is a wake-up call for online video

Sales of movie DVDs are expected to fall for the first time ever this year, pointing to the rise of online video. After all, there are only so many hours in the day. Marketers who are not already testing online video ads need to get aboard. More than half of YouTube users, for example, are in the attractive 35-64 demo — online video is no longer just for kids.

Sony tells Forbes that it is jumping in feet first, but even they find the formats confusing. Sony’s Sean Carey sums up the trouble:

There is no consistency around the ad units today. So when an advertiser buys an ad on YouTube, they get an overlay, when they buy an ad on MySpace, it’s an eight-second pre-roll, when they buy an ad on Crackle, it may be a sponsorship that includes some pieces of all of that. And it’s difficult for an advertiser to get a handle on what the delivery is in that sort of environment–not only what the delivery is but how to mass the creative to all those different ad opportunities.

Pre-rolls, overlays, pop-up videos in banners … the best way to sort this out is to take 5% of your ad budget, set up a testing plan, and start using online video to pull consumers to your sites. We’ve found careful use of behavioral targeted ads with video can jack up click-through rates 5 times higher than national banner averages. The future is coming. Don’t be scared.