Netflix Instant: Gaps In Online Library Likely To Persist

LOS GATOS, Calif. -- Peruse Netflix's catalog of DVDs, and you'll find just about any movie or TV series you want. Look for many of the same titles in Netflix's Internet video library, and prepare to be exasperated.

It's a problem that Netflix is unlikely to solve anytime soon. Despite an expensive expansion, Netflix's online video selection remains inferior. Netflix offers more than 60,000 titles that can be viewed on Internet-connected devices, while its DVD-by-mail service has more than twice that – some 140,000.

Competitive tensions and Netflix's own financial limitations account for the huge disparity.

No matter how much Netflix Inc. is willing to pay for the rights, some online video remains off-limits.

Major movie studios are refusing to license the rights to most of their latest movies at the same time they're released on DVDs. Premium cable channels such as HBO and Showtime also are withholding their most popular series, including "Game of Thrones" and "Dexter," because they are worried about losing subscribers if the content is available on Netflix's less expensive Internet service.

The mere $8 per month that Netflix charges for unlimited online viewing is one of the main reasons the service has attracted more than 23 million streaming subscribers, out of a total of 26 million. The expanding audience, in turn, is causing studios to demand higher fees for video that they are willing to license to the company.

Studios know Netflix is getting a bargain, says Wedbush Securities analyst Michael Pachter. Netflix's streaming subscribers watch an average of 30 hours of Internet video each month, which works out to just 27 cents per hour.

The Internet video library already is far more appealing than it was five years ago, when it opened with just 2,000 titles – mostly obscure TV series and movies that many subscribers had seen years ago.

The streaming catalog now features recent seasons of many acclaimed TV shows, including "Mad Men" and "The Office," and exclusive series such as "Lilyhammer." Coming attractions include "The Artist," winner of this year's Oscar for best picture, and another original series called "House of Cards" starring Academy Award-winning actor Kevin Spacey. Netflix also has struck a deal to revive the critically acclaimed TV series, "Arrested Development," which last aired in 2006.

As it is, Netflix has already agreed to pay about $4 billion in licensing fees during the next few years. CEO Reed Hastings foresees spending billions more.

Netflix might be able to afford to buy even more online video if it raises its prices, but that's a strategy the company says it won't pursue following a customer backlash over last summer's rate increase of as much as 60 percent in the U.S. For now, Netflix is trying to showcase the material already available in its online library by fine-tuning its recommendation system.

Pachter believes there is only so much that Netflix will be able to do to conceal the weaknesses in its Internet library.

In particular, he believes the recent loss of the streaming rights to movies and TV shows from Starz Entertainment will cost Netflix some subscribers. The Starz contract expired Feb. 29, depriving Netflix's streaming library of popular fare that included recent movies from Walt Disney Co. Netflix had been paying an estimated $30 million annually; Starz is believed to have demanded as much as $300 million a year to renew.

Although Netflix downplays the loss of the Starz content, Pachter likens it to a cable-TV system losing the Fox network and such popular shows as "American Idol."

"I think Netflix has underestimated the intelligence of consumers," Pachter says. "They seem to think all content is fungible, but I don't think consumers will see it that way."

Also on HuffPost:

From our partners

Comments

[yozz25]

04:52 PM on 04/22/2012

This seems to be a typical ploy to get people on their subscription list,making them look good with number of subscribers. I am trying it and finding nothing but a lot of garbage and would rather just go back to my regular Redbox vendor for some decent movies.

People will suscribe and eventually unsubscribe from streaming.

Shame that with the streaming technolology you can't get some of the newer more decent stuff

[dvsinla]

01:28 PM on 04/11/2012

i watch a lot of stuff on netflix with my buddy but we are into bad cheezy old action movies... if it weren't for that i'm not sure how nice that service would be

[fairweatherfan]

12:53 PM on 04/11/2012

Just try entering all of the movies nominated for the Academy Award Best Picture category over the past decade in Netflix and see how many come up as available for streaming. 99% of the movies I search for are not available online. Netflix's content is mostly crap.

[LHill76]

11:49 AM on 04/12/2012

Only because you are a mainstream "spoon feed me" type of viewer. There are plenty of great television shows and foreign movies and little heard of movies. Who cares about all that "Look What Award We Won" crap?

[borisgoodenough]

12:22 PM on 04/11/2012

Absolutely right. I found that every one of the movies and shows in my streaming queue were also available on disc. When I checked the reverse, I found that only about half of the DVD queue was available to be streamed. That made it a simple decision to drop streaming and keep my DVD subscription.

[HunterHikes]

12:50 AM on 04/11/2012

It's amazing that Reed Hastings is still allowed to walk in the door of the Netflix office. The stockholders should have voted him out with a nice swift kicking the behind.

Netflix went from one of the most positive brand recognitions to one of the most hated in a little less than a 10 week period. How does that happen? Reed Hastings. That's how.

I don't care if he did start it. He no longer owns it, the stockholders do. The guy should not be at Netflix, period.

[coffeeamust]

08:21 PM on 04/10/2012

Definitely see the change in my queue. I hope Netflix knows it can never raise its price and keep anyone.

[George Cummings]

06:12 PM on 04/10/2012

The bottom line here is the people who actually own the content do not like the streaming model and do not intend to support it and let it succeed at any bargain price. See the pricing on Amazon for a clue..you might as well buy the DVD set, it's the same price when you total up $2 an episode..maybe less.
In the future you will get to pay a premium price to stream it WHILE paying for the high speed internet required for it to work.
Having said that, I love the netflix streaming. There are MANY gems to be dug out of there for people with wider and more mature tastes.. I'm continually surprised in fact.
It's also, to my knowledge, the last place on earth you can just RENT an old movie to watch instead of having to buy it. I'm doing some nice catchup on old favorites I lost access to when Blockbuster went to the 'popular current stuff only' format.

[machiniste]

02:53 PM on 04/10/2012

I view with interest the formation of the Netflix PAC. Ever since cable companies were granted monopolies in their service areas, I have been waiting for a serious challenge. It's clear that a free market challenge has not been allowed, so we must hope for a solution through political pressure.

[Tinkerer13]

02:35 PM on 04/10/2012

This is a case of "you get what you pay for". I can stream many newer things that Netflix doesn't have by using Amazon and paying for the movie. With it's dearth of selections and low price, Netflix is destined to become an oldies stream. It might already be there.

[frank day]

05:13 PM on 04/10/2012

They don't seem to have a clear direction.

Word now is that they are going to focus on TV content.

So now I guess they're in direct competition with HULU.