The Changing Video Landscape

Without looking it up, which company is the leader in the video rental business? The best answer may be that nobody really knows.

It’s possible that Redbox, which puts kiosks from which customers can rent DVDs in grocery stores and malls, may be the leader. Redbox has something like 42 million customers. In 2012 it had revenues of about $2 billion and net income of around $100 million. And they said that DVDs were dead.

By comparison NetFlix, the clear leader in streaming, has 32 million customers and had 2012 revenues of $3.6 billion with net income of $17 million.

Other players in the streaming business include Amazon, Hulu.com (3 million customers, revenues just under $700 million, net income ?). No one outside of Amazon knows for sure how much income the company is generating through video streaming and Amazon isn’t telling. Amazon Prime probably has 10 million customers in its subscription service.

Hulu.com is a joint venture, owned in roughly equal shares by Disney (ABC), News Corp. (Fox), and Comcast (NBC). Comcast has about 24 million cable customers with about $62.5 billion in revenue and net income of $6 billion. It has its own streaming service, Xfinity. Yes, Comcast is in competition with itself.

As of May 3 more than 1,700 movies and television programs from the archives of Warner Brothers, MGM, and Universal will be removed from NetFlix’s streaming service. Warners now has its own “Instant Warner Archive”, a subscription service, and, presumably, the content no longer available from NetFlix will eventually become available there. But it isn’t now. My reading of the site may be wrong but there presently appear to be under 300 titles there. There’s a price point at which their service might be attractive. Ten bucks a month ain’t it. If they were to offer the entire archive, say, from 1920 to 1960, I might consider it but I won’t subscribe at that price point for the opportunity to watch Temple Houston. Not a chance.

The video landscape that’s now emerging is one of the media giants belatedly getting into the streaming business and trying to make life hard for the streaming industry leader and the Internet retail giant. I doubt that they will be successful. ABC, NBC, Fox, and so on are unaccustomed to selling directly to end users or, indeed, in operating in a competitive market. Until relatively recently Hulu.com’s user interface was pathetically bad and its reliability iffy.

There’s more to attracting customers and keeping them than just having the content. You’ve got to make the process of shopping easy and appealing to use and that’s something the media giants have little experience with, and, judging by Hulu.com, don’t care very much about. They may succeed in discouraging NetFlix users with NetFlix’s dwindling streaming library but that won’t necessarily attract those customers to their own competing services.