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Netflix Didn't Kill the Video Store
On online video subscriptions
July 14, 2011

As you couldn't possibly have missed, Netflix announced changes to their subscription plans this week. Specifically, they separated streaming subscriptions from disc-based ones. It used to be possible to add DVD rental to a streaming subscription for $2 extra, but now you'll have to pay $7.99 more for a single-disc plan.

While many are complaining that the company raised their rates by 60%, it's more accurate to say that Netflix changed their plan offerings, removing the combined streaming/disc option entirely. Reports of a customer backlash abound, with many disgruntled subscribers threatening to cancel their accounts. Of course, people say a lot of things in comment fields on the internet, and I doubt anyone really interested in watching movies via the net will cancel. Thanks to Netflix's massive success, other options are limited.

Dissatisfaction at Netflix's pricing is an insufficient explanation. Instead, I think the problem is this: customers haven't been taught how to think about the process of choosing and viewing streaming movies. It's a complicated problem that has less to do with customer wishes and more to do with the interaction between Netflix's product design and Hollywood's streaming rights licensing process. Instead of treating this limitation a scaffold for the design of a different experience for home video viewing, Netflix has sought to reproduce the old video store model online, and that's what's caused the dissatisfaction.

As Peter Kafka observed, Netflix doesn't really want its customers to pay more, but to drop their DVD plans entirely. For one part, this would save Netflix the trouble and cost of warehousing and shipping discs. But for another part, and more importantly, getting more customers to drop DVD delivery service would allow Netflix to exert new pressures on Hollywood licensors regarding streaming films.

As savvy customers may already know, the DVD catalog is big because Netflix just has to buy the discs and rent them out. But streaming rights have to be licensed individually from the studios, a time-consuming and laborious practice fraught with risks out of Netflix's control.

But better licensing arrangements don't really solve the problem of online video selection. In the context of the changed market for Netflix has done a terrible job inventing a framework for understanding streaming video as something different from video rental.

Think about the architecture of video rental stores. You could wander in and browse the walls of new releases. Every movie that had been out in the theater eventually made it to video, and it was just a matter of looking for an appropriate title you'd missed in the theater for whatever reason. Older films occupied the center aisles of these stores, organized by genre. But most rentals were new releases, not old ones.

Netflix gives customers the illusion that video rental hasn't changed; it's just moved online. But that's not true; the licensing situation for streamed movies means that the entire experience of choosing what to watch is different.

Yet, Netflix has been self-contradictory in their design of this experience. On the one hand, they've created a data-dense collaborative filtering system that's supposed to be able to recommend films based on previous preferences. This feature sits almost entirely outside of the logic of new releases. But on the other hand, the service still primarily presents films and shows in genre categories, including the entirely misleading "new arrivals," which customers reasonably interpret to mean "new releases" rather than "we just got the rights to stream these."

When customers complain that the streaming selection on Netflix is poor, they're right—compared to the disc service or the local video store (if you still have one), Netflix streaming offers less selection. But even if people think they want selection, is it what they really want? Browsing a bookstore is an inherently pleasurable experience, but the same was never true of the video store. Remember how awful and onerous it was to wander aimlessly through your local shop looking for something appealing? Remember the angst and disappointment of undirected visits to the Blockbuster? It was always more like hopeless channel surfing on cable (or for that matter, scouring through the Netflix streaming selections) than it was like discovering something unexpected. Meanwhile, cable on-demand and premium channels continue to offer new films soon enough after theatrical release that the "new release" concept remains predominant in the minds of home movie viewers. When push come to shove, we just want to watch Transformers 3 as soon as possible in our dens.

All of which is just to say, Netflix has clearly failed in their years-long effort to shift video selection to collaboratively filtered recommendations organized in a "queue" of exciting titles ready to be delivered via mail or ethernet. Otherwise we would have realized that the streaming selection is already massive enough to sustain an organic, meandering walk through unknown and unfamiliar films across genres, and they would have realized that the discs they order by mail mostly sit around on the kitchen counter. Instead, we seem just to want a specific film, probably a new release, from an online version of Blockbuster. Netflix didn't kill the video store, it just remediated it badly online.

Comments (10)
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Great article! Will we all become streamers-only in the near future? Is this change an indication that disc-media is dead?

There's another trend in popular opinion about this change, which attempts to redirect the Netflix anger toward the studios. That's also wrong (or at least incomplete), but it allows technophiles to hate a media industry player instead of a tech industry player.

I really liked your post, like many Netflix subscribers I was initially unhappy with the news they were changing their subscription plan pricing. Luckily my wife was wise enough to note while we watch tons of videos on the streaming service we have watched maybe 5 discs in as many years and like your example our disc just sits on the counter. I would say as far as disc services go Redbox really got it right at $1 a day Redbox is one of the cheapest legal alternatives for watching a new to DVD release.

I for one do like the “New releases” section because it may show me an older movie I wanted to see but forgot about, but I would completely agree often I do want to see a list of “Newest” movies and not just new to Netflix. One thing I would love to see added is a “Staff Picks” section. While we do get the “Movies you’d like” sometimes I am in a mood to watch something other than the IT Crowd or Star Trek, but don’t know specifically what I am looking for, or even what genre. I know my local video store used to have employees that had similar tastes in movies and I could always go see what videos they picked for the week as a place to start. Now sometimes I would get a video I did not like but it also might be one I would never pick for myself and who knows I may find a new movie I love, like when I saw Lost in Translation just because I think Bill Murray is funny.

Also I was curious on your thoughts on services such as Gaikai and Onlive or if you think Netflix might become a carrier of onDemand games. I have played a few games on Onlive and I love the idea but I think the execution could use some work.

If, as you say, the purpose of this is to nudge users away from DVD and toward streaming, the timing of this is ridiculously early. You may feel free to consider this anecdata, but with the exception of TV shows, I've been terribly disappointed with Netflix's streaming selection, as 90% or more of the movies I search for are unavailable in streaming. Until Netflix's streaming is available for a majority of titles, they're not going to be able to nudge people away from DVDs to streaming -- because the content simply isn't there.

When it comes to reproducing a video store online, you might be interested in this more literal attempt, which attempts to circumvent the licensing issue by combining two services: 1) renting a physical DVD to a customer; and 2) allowing the customer to rent a remote, physical, but streaming-output-enabled DVD player which they may use to play their rented DVD.

Wow this is the craziest thing I have ever heard as far as streaming technology. I might have to check out this service.

Jay Ratican on July 14, 2011 7:28 PM

Great post. I see some confusion here that exemplifies your point : ). I think the same could readily be said of amazon, no? Meaningful browsing is almost impossible.

Tim, agreed, browsing Amazon is pretty much impossible. One seems to go there with something specific in mind. Then again, the book browsing experience is inherently different than the video rental browsing experience; a book isn't something you look for at the last minute on Friday night.

Ian Bogost on July 15, 2011 3:14 PM

Yes...it strikes me that one problem is that in each case browsing is metonymic. You find "related" books and movies according to logical, temporal or spatial relationships--British movies, TV comedies, action flicks...

What if to the side of that there was a metaphorical search algorithm? Let me try to imagine that:

"movies with the color pink in them"
"movies that remind me of grandma"
"viscous movies"

...then to add another dimension you could have an algorithm that only looks for connections at the signifier level:

"movies whose titles rhyme with the movie you just found"
"movies whose titles alliterate"
etc.

Surely then you could have a joystick or a trackpad to navigate between these dimensions searching. Then you would rapidly turn up a bunch of weird stuff. Maybe there could be an escape or reset button to return you to the level of association you are most comfortable with...

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