Video In The Cloud

In the megatrends post this past week I mentioned that:

A third of Netflix' new subscribers are opting for the streaming only plan

We've been Netflix customers for a long time and we currently have the "4 DVDs at a time Unlimited" plan. But when I went to look at our Netflix account this morning, I saw that we've only ordered one DVD in all of 2011 and we have streamed eleven movies in the past seven days. We are not ready to go to streaming only because the Netflix streaming library isn't complete enough and there are times when we really want to see a film and we order it on DVD. That's happened once so far this year so we probably should cut back our account to 1 DVD at a time.

Last night the Gotham Gal and I decided to make dinner at home and watch a movie. We made that decision around 6pm. There are no video rental stores anymore west of seventh avenue between 14th and Houston that I know of. So it was a pretty easy call. We went with Netflix Watch Instantly. We found a good film we hadn't seen (City Island) and enjoyed it. We could have watched the movie on any one of four devices we have connected our our family room display (boxee box, xbox 360, sony blue ray player, and mac mini via the browser). We went with Boxee for obvious reasons.

In addition to Netflix, there are a few other streaming services for movies worth mentioning. Amazon Instant Video is a great service. They have over 5,000 movies and TV shows available for streaming. And if you are an Amazon Prime member (we are), you get Amazon Instant Video for free. Amazon needs to follow Netflix' lead and get Amazon Instant Video on as many devices as possible. It is not yet on the Boxee Box, for example. And I'm not sure how many blue ray players and game consoles it is on either. But I believe Amazon will be a strong player in this category.

And Vudu is another service to check out. Vudu is now owned by Wal-Mart so it certainly has the resources and distribution potential to compete in this market. I think Vudu has the best library of movies and certainly the largest library of HD content. Vudu is currently a pay per view model and I prefer an subscription model. I hope they move to subscription soon. Vudu is available in HD on the Boxee Box and we use it a lot in our home, particularly for movies that are not available yet on Netflix.

I've written a lot about the end of "file based music" and I believe we are moving rapidly now to that end game. Likewise, I think we will see the end of "file based video" in the not too distant future. One third of new Netflix subscribers are already there. I bet that number of 50% by year end.


Comments (Archived):

  1. Julien

    Streaming is great… but iTunes’s “rent” product is just perfect for long flights. I wish Netflix would have an “offline” mode, where I could sync a couple movies before a trip and then watch them while on the plane. That’s how Spofity works for music and it’s perfect (streaming + offline)

    1. fredwilson

      great point. i don’t watch movies on airplanes (it’s a great time for me towork), but i can see how that is a killer application for both music andfilm

      1. Fernando Gutierrez

        It’s not only for airplanes. Sometimes the signal is not very strong, you are moving or licesing problems will make streaming imposible.

    2. Eric Roach

      I agree, that is something I too would be interested in.

    3. PhilipSugar


  2. Jon Smirl

    Streaming media with off-line caching is the end game solution. This is true for both music and video. Netflix is setting the price for video at around $10/mth. Most people will pay more for video than music so that puts a cap on music in the $5/mth range.As Netflix is showing, making services like this available does a great deal to remove the incentive to file share. If plans like Netflix were widely implemented the copy protection burden could be dropped. It is far easier to pay $5-10 to a streaming service than it is to go through the hassle of file sharing.The content companies have a pricing and business model problem. I am not happy with them using large amounts of lobbying to encourage the legal system and government policing to prop up their obviously flawed business model. The world has changed, it is time for big content to stop fighting progress and instead endorse it. Shame on our government for supporting them.Big content look at your trend lines and do some math! You’re going to have to hurry to get these streaming services widely deployed before you’re dead.

    1. fredwilson

      i agree about this mostly eliminating piracy as a concerni’ve been blogging about that for almost a decade now

      1. Iyinoluwa Aboyeji

        Your comment just reminded me of a thought I had about document/book streaming. If you eliminate the file, the content producer has so much more control over his content and can gather even more useful data on it. I think that’s powerful. Especially in this age of wikileaks, there isn’t much benefit to bundling files to people’s computers in my opinion.

      2. James Dier

        It’s always funny when tech community comments on showbiz. Music biz has entirely different economics vs. film/tv.Film/tv streaming makes sense cause most creative folks are not paid in the same manner as musicians, not to mention the “windowing” of releases.Music streaming does not make sense economically for artists (creative folks) cause virtually none of the money goes to artists because of royalty system. Even if a record company is not involved, there still is little money in streaming as the streaming rates are so small.Music streaming is only viable to record companies, not artists. There will come a day when artists will revolt and stand up for themselves.

  3. ErikSchwartz

    Long Akamai.

  4. Wes Smith

    Audio faces different issues because it’s frequently used in hi-fi as a tool for DJ’s. Majority? No, but we all enjoy a good DJ so let’s not kill their craft just yet…Video I could go with, but we do need to break down the offline and international issues. I’m highly disappointed with Netflix streaming, while sitting in Tamil Nadu, after a 26 hour trip, with nothing but hindi stations and fast Internet, and a Netflix iPad app saying “sorry only available in USA”…then i reach for iTunes and rent or buy. No problems with iTunes, so perhaps Jobs can put that licensing magic to on a streaming service…sweet!

  5. kenberger

    I’m going full force on my home media center project that I’m working with a few brands on. I’ve scored a new 2BR in the east village and I’ve pitched a few companies and services to lend services to test (and evangelize, if they’re good) some of the latest goodies. It will have TWC Wideband and at least 1 other super high bandwidth connection, and a few video and music streaming services. Not to mention some other consumer technologies (mattresses, recliners, vacuums, etc).It will be fun to power-test the video services mentioned, and others to come.

    1. fredwilson

      i’ve got TWC 50mb wideband service in our apartment and it works greatFIOS is nice too but you don’t get the Knicks in HD with FIOS

      1. Aaron Klein

        And this is the key.For most of the country, internet speeds are pretty flaky and make this difficult, and hotel internet is awful, so you don’t get a seamless internet when you leave home.But it’s getting there…

  6. Statspotting

    What about RedBox?

  7. Fernando Gutierrez

    In the case of video streaming is even more logical than for music (except for the offline issue @julien51:disqus mentioned). Most of us are glad to listen the same song many times and may have the desire to have it stored somehow, but very few will watch the same movie more than once, so keeping it makes no sense.

    1. awaldstein

      Fernando…a minor point of clarification from a movie nerd ;)There are probably 50-100 movies that I’ve watched more than once, and many that I’ve watched over a dozen times.I’m not alone here. Movies are like music, part of the language of who we are. We view them repeatedly and become more literate and enriched with each experience.

      1. Fernando Gutierrez

        I agree, I oversimplified ๐Ÿ™‚ I also have a bunch of movies I’ve watched several times. The point I was trying to make is that the need for repeated use is less important with movies than with music.

        1. awaldstein

          Sorry…didn’t mean to jump on you ;)I’m just a movie geek and realize that with streaming, I watch as many a second or third time as I do new ones. This is somehow counterintuitive to what I expected.The social movie recommendation engines/communities need to kick in to help me extend my tastes with an on demand social recommendation network.GetGlue and others are trying to solve this problem. It’s a huge next frontier but still very much the wild west. I’ll know it is moving forward when complete access and freedom of choice starts to build a list of movies that I want to see and haven’t that is bigger than my rerun list. Or more natural to turn to as a reference.Another topic I know.

          1. Fernando Gutierrez

            No need to apologize, you made a great point!!!!Thruth is, we don’t have unlimited streaming services in Spain, so maybe that’s the reason it’s more unusual to me to get a movie more than once. And maybe that’s great because it avoids turning me into a Pulp-Fiction/The-Godfather/Star-Wars quoting machine. My girlfriend is grateful for that!

          2. awaldstein

            Ahh…but you have Galicia and the wines of Ribeira Sacra and even more so, Juan Ponce @

          3. Fernando Gutierrez

            @awaldstein:disqus I can’t reply to you because of Disqus… yeah, when I drunk and fed I care very little about movies! ๐Ÿ˜‰ btw, I’ll try that wine for sure.

  8. Mike Manzano

    Regarding your comment on moving to streaming as the primary way to get music: I don’t think this will happen until there’s a reliable way to stream music to peoples’ cars where there’s likely an intermittent connection and no WIFI. Streaming makes sense for movies, however, because people tend to watch them at home where there’s a a fast connection.

  9. sudkish

    Apple TV is hands down the best player for streaming Netflix movies. I sold my Boxee Box after the Netflix update. I was hoping Boxee Box would provide a consistent UI but Netflix and Vudu have their own UI. What is more disappointing is that when searching for movies or TV shows in the universal search bar, Vudu movies show up but not Netflix.If there is one that would make me a Boxee Box customer again it would have to be because of consistent UI. Till then I’ll use my Apple TV for streaming movies and use Plex on my Mac Mini to catch up on recent TV shows via Hulu!

    1. fredwilson

      i agree about your UI does Boxeethey’d love to do all that you suggesttheir content partners have not agreed to it, yeti think they will come around in due time

  10. paramendra

    Things will move faster than the movie industry realizes. They are not the first to engage in ostrich behavior.

  11. William Mougayar

    As I was just streaming TV on my iPhone (France24), then switching to streaming music now,…I’m thinking that streaming is the future of course.The cable & satelliteTV companies are scared shitless of NetFlix who has been chipping away at their users.

    1. ErikSchwartz

      Netflix is at itโ€™s core primarily a content licensing play. Comcast (and the other MSOs) and DirectTV are licensing AND delivery plays. Unless Netflix starts owning delivery channels theyโ€™re really not comparable.

      1. William Mougayar

        The lines are blurring I think between delivery and content. The Internet is the delivery, no?If a user is happy streaming from NetFlix and other what not streaming on-demand apps, they will be less inclined to subscribe to Comcast or DirectTV.

        1. ErikSchwartz

          The lines are not blurring between content and delivery. Right now Netflix is leveraging a market anomaly of excess capacity. That excess capacity is going away fast. Akamai, CDNs and your ISP (who is often your MSO) will become the new hated entity.There’s no free lunch. Getting the bits there (especially the large number of bits in HD video) is not cheap. As streaming video gets more and more popular bandwidth caps are the only way ISPs have a viable business.

          1. Fernando Gutierrez

            I heard/read recently the % of the internet traffic that Netflix wasresponsible for in a typical US evening and it was scary. I can’t rememberthe exact number and I can’t remember the source, so use with care, but itwas low double digits. And even if it’s not there yet I can see hd videousing most of the bandwith soon.

          2. ErikSchwartz

            20%Here’s the link…

          3. Fernando Gutierrez

            Thanks! That’s brutal and I agree with you that it can’t be maintained overtime. If their streaming only customers go up and someone manages to offersomething similar in Europe or Asia something is gonna break.

          4. raycote

            @ErikSchwartz “As streaming video gets more and more popular bandwidth caps are the only way ISPs have a viable business.”I wonder about this.Is the bottle neck in bandwidth not the last mile neighborhood loops?How expensive per/user is this problem to fix? I am willing to pay a fair price to solve this issue but like most I do not want to gouged by monopoly operators!

          5. ErikSchwartz

            You need to make the fiber nodes smaller so there are fewer households per node. Now you have anywhere between 500 and 2000 homes passed in a fiber node. Then you need to dedicate more 6Mhz channels to data (which bumps off programming that the MSO is being paid to carry in many cases). Each channel is only ~40 Mb/sec, that bandwidth is shared amongst all the users in that node. Then you need to tie the CDN’s edge servers right into the fiber node (or the DSLAM if you’re on DSL). This implies you have real CDNs with edge servers like Akamai not guys like Level 3 who are selling excess backbone capacity as a CDN service (which is what the Comcast/Level3 fight is about).So let’s say you have a 1000 household node with 10 channels dedicated to data, that’s 400 Mb/sec amongst 1000 TV sets. A 720P stream is ~12 Mb/sec. So your 400 Mbs can support ~35 HD streams.The answer is at least tens of billions in upgrades. Of course this HFC cable plant is also amortized over cable TV programming, and that revenue will go away. So even without upgrading to support all the additional streamers your ISP bill will double.The solution to this is to think of local cache (ie a DVR) in the house as the furthest terminal edge server node in a CDN.

          6. Davmatt

            How about innovation in terms of compression methods? Delivery channels need to be a commodity that is not scarce, not because anyone says so, but because once we are there the incremental units of innovation can be made more valuable to end users. Right now it feels like we are driving 40mph with our flashers on.

          7. ErikSchwartz

            New methods of compression will help. Additional capacity will help. If you look at the graph of usage and capacity right now usage is below capacity. But if you look at the first derivative of that graph you will see that the trend is not good. Usage is growing much faster than capacity.Compression and caching are methods of cutting usage. Build outs are a way of increasing capacity. But until those lines get to parallel (at least) we’re in an unsustainable situation.

          8. Dave W Baldwin

            Couldn’t reply to your very infomative reply to Raycote. Thanks for that brief and I encourage readers to reread and think about it.Long term exposure on the side of providing the ‘HDist’ of quality matched with rev return is a big one.

          9. Toks Ogun

            Right on the money. Delivery of the content will play a huge part and once Comcast and ATT start feeling the pinch they will push back in a major way.

          10. Mark Essel

            But we do pay for the bits and the content.Seems prudent to buy those from different sources.

  12. Sebastian Wain

    From the investment perspective, what would guide the growth of Netflix (NFLX P/E ~= 66), Amazon et al is the possibility to offer their services in many more countries with less (or without) restrictions.Also, as in the web radio advertising, there is a huge opportunity adding video ads to the subscriptions and moving the prices down.

  13. ErikSchwartz

    Something else to ponder:Right now Netflix buys a huge number of physical DVD’s. DVDs are still the studios bread and butter as far as post theatrical revenue is concerned. Right now this gives Netflix enormous leverage when negotiating streaming deals. As Netflix streaming business grows they will presumably be purchasing fewer and fewer DVDs.How much leverage will Netflix lose in their streaming negotiations with the studios as they become less of a cash cow on the physical media side?

  14. josieknows

    Jon Smirl– you are so right. I work in the biz in LA, and most recently in Home Entertainment space, and the problem is at the top of the food chain, when the deals are forged long before production ever begins. Nobody wants to change a model that rewards the execs, legal counsel and primary talent so richly. Plus, the rightsholders from deals made decades ago aren’t about to change their greedy ways (and bloated, top-heavy corporate models) and allow their content to flow on new platforms for a mere decent profit.Once again, what the consumer wants is not on the priority list! They didn’t learn anything from the Napster fiasco.

    1. Dave W Baldwin

      ….yes and it is a matter of someone offering something better.

  15. Declan Dunn

    One thing I see confining this growth is the crazy bandwidth limits put up by ATT and others; seems like they are trying to block netflix, which is showing the most growth, but wouldn’t it make sense to find a way to sell this as a service instead of charging for extra bandwidth? Be interesting to see if your 50% of Netflix users projection comes true, because the DVD exists for many of the mainstream consumers who have limits both technically and financially to make this all work. I don’t live in an urban area, so DVDs as pathetic as they are, still work better than streaming.

  16. Sean Saulsbury

    I don’t understand why Amazon isn’t integrating their video services better with IMDb, which they own. Seems like the natural place for such things and I think I’d be more likely to stream a movie after looking it up on IMDb than doing on Amazon.

  17. Mark Gray

    We created @Squrl to address this opportunity, people will need a consistent user interface and access point across their devices as more video is moved to the cloud. There will be many different providers of great video content like Netflix, Amazon, Hulu, the networks etc. and many different types of devices iOS, Android, Smart TVs and set-top boxes. We want to let users have a unified experience not matter what content provider, hardware, or context they choose.

  18. im2b_dl

    Ok. On this I have to say this is where my head is at… these are all cool and all but the future is this… I really believe each film will soon step into there own video platform that is browser/cloud/homehub based. As the browser is implemented into Comcast & Verizon’s converged delivery/boxes (I’d say by June2012) …there will be no need for these platforms… You will type in the film’s name to any search…go to the site the producers have built for it and it will be delivered by a 4 x hybrid (a “quadbrid” synced) model delivering interactivity along with synced involvement between phone/tablet & tv. Most likely synced for interactivity via timecode and something in the form of something like maybe a soundprint tech. The interface layers will be about the layers of hypervideo which will be interoperably synced. The pipes problems will be diminished by a “multi-pipe” structure reassembled via home hub sync. Crazy sounding to some… but I am pretty positive with integrated retail about to break the walls wide open on every model on the internet…this is the future of vide deliv.

    1. Dave W Baldwin

      On the money. Just be patient and push for the better. As in case of those that think all things FB/Twit/Apple, there are even more that maintain the illogical established with the current system.What is nice is the tearind down of that wall is happening… just a matter of the bigger populace to finish it off.Art of War.

  19. Darren Herman

    What I dislike about digital books and music is the loss of the actual album/video art and books. I still buy paperback and hard cover books because I like a formal library. I still buy albums and CDs because of the beautiful artwork. Where does this all go in a digital society?

    1. Eric Leebow

      Good point Daren, and I feel your pain point. That’s the only challenge with this digital world, things become less tangible for people who are on the cusp of technology change. There are companies out there such as MogoConnect and DiscRevolt who are trying to bridge this gap, making the music covers into business sized cards. You’ve probably seen download cards at Starbucks as well, and such. In all seriousness though, where are you going to put these pieces of artwork once you’re done, on the shelf or in a closet. If you’re one who appreciates art, you’re better off getting a nice print or a music poster. These posters are available, just do a search for “music album posters” or “music album prints” and you’ll be sure to find something. Also, my thought is the album cover art should not be the beautiful art you spend your time on, yet rather the music or video content inside is what really matters. Any cloud based service will allow you to see the album cover art when available.There are also plenty of music social networks startups that are getting into this space where you’ll be able to see the artwork of music covers and more beautiful artwork. Below are a few I’ve seen in addition to and I’m sure there are others I’ve missed. There are plenty of cloud music,,,,,, Peopleklick.comIt’s an interesting point though!

      1. ShanaC

        I’m still holding to my opinion that we are under-utilizing the web as a way of expresing emotions through images. I think the time for that will come….

    2. ErikSchwartz

      I always felt the artwork of physical music media died with the end of the LP. A 12×12 inch image is so vastly superior to a 4.75 inch square (behind plastic (that always cracks)) that collecting for aesthetics vanished for me in the 1980s.

    3. ShanaC

      Honestly, from an art background, they don’t do enough to teach how art is changing and expanding with the screen as your new canvas, nor is there enough done in most UX to really highlight images as a hook to buy. If done well, art designed for screens really could hook into the luminosity of a screen.I think there is a place long term for “cover art” etc, if we decided to sit down and understand that yes, we do judge books by their covers. We’re under-exploiting the visual as a mean to sell on the internet from every possible angle.And it is really a pity too.It’s not going to be the same as prints, though. Very different way of looking at colors

  20. leigh

    For anyone who has small kids – all i have to say is – Netflix + ipad = 1/2 hr extra sleep in the morning. The library they have for toddlers is insane – my 2.5 yr old comes to my bed, gets it, goes back to his bed. He can completely navigate to it himself and choose what he wants. The only downside? There is not Barney filter. If they fixed that, it would be perfect.

    1. ErikSchwartz

      We refer to it as the “flat babysitter”.

    2. Dave W Baldwin

      You would like the design not mentioned in my bio. It is meant for girls, 7-13 yrs. but would move backward in age quick.Joked it was one of my “Improve The World” proposals that could do away with Baby Einstein.

  21. Ciaran

    I know that this is a post about video, but seeing as you touch on music at the end, I’d love to hear your thoughts on this post by @rorysutherland:twitter

  22. Sj1

    iPad testing 123

  23. kidmercury

    and just like the music business, i suspect digital sales from streaming/web does not compensate for lost revenue from physical copies. just like music, i think the real opportunity is in the socialization of this media. as that avenue is pursued, a monthly fee is seen as a barrier to entry, and more like a cost than a revenue. the firms that go the subscription route are thus typically not real network economics plays. sure, they have some community elements, but so long as subscription dues are the primary revenue generator and are perceived to be more valuable than the profit potential of the network, we are still in 1.0 economy, old economy — not the new, free economy, the attention economy, the economy of abundance, etcreally we need to see better forms of platform governance, rather than trying to skirt the issue. video cloud competitors, like firms operating in many other niche platforms, will be sorted out by who has a clear platform governance policy — the new basis of competition in the governance/platform management/cloud layer. communicating the intended governance policy attracts a compatible community as a result, and thus sets the stage for the network operator (i.e. firm that owns the cloud) to optimally manage a shared economy for all participants. pretty soon on this journey, though, we run into jurisdictional conflicts with the nation-state system. at which point we are faced with our first test in the quest to build the governance layer: stand tall in service to the truth/moral law/cosmic law……or succumb in fear to the false gods of government.

    1. Dave W Baldwin

      Once again Kid, we get to Fred’s post on Curation. No matter how the old school wants to bully, it is up to empowering the regular folks with the tools to share concept/ideas.In the world of vid, it is a matter of the tide rising in producing/sharing vids that are not controlled by networks of old school minds.At this point, we still have ignorance (convenient) related to production/cost/air where most don’t realize any channel will air your program is you pay for the airtime. But that can change. What is great is our entering the timeframe where you don’t need the local channel to broadcast to an increaslingly wider audience.This brings us to the accerlation of dimunition regarding the current set up. We have already had to go thru the lowering of bar regarding ratings determining price.With the rising tide of minds (age 16-24) who are now wondering why the are expected to put up with the current ‘rules’, we will enter the beginnings of the new dimension.

  24. Create a New Lab

    the absolutely BEST name for this cloud service is that may quickly and easily become as popular as the Apple iCloud service! ๐Ÿ™‚

  25. ShanaC

    Do you think the 5-10 dollars is a sustainable price for content creation? Blockbusters (i think) make most of their money back in theaters, sometimes all. Not every movie is a blockbuster, and some do rely on dvd sales and the licenses to make up their costs/make a profit.Especially as advertising changes, is the cheap way sustainable?

  26. Chris_Kez

    While not technically west of 7th Ave., World of Video is only about 20 paces east of 7th Ave on Greenwich Ave and has an amazing selection.

  27. BuyGiftsItems

    I think it is strong. Especially this Wikileaks, not a lot of people benefit from the grouping of files on your computer, I think.Kamagra

  28. Ed O'Brien

    ย 100% agree.