Netflix Closes Silo (again) - Forces Jinni To Disable Ratings Feature

June 29th, 2009 Davis

I love Netflix, but more than once their data policies have forced me to reconsider whether or not I should have a membership with them. You see, I believe that when you rate a movie, the data should belong to you. After all, you were the one that spent the time to input the rating and it’s personal to your tastes. In fact, I’d be willing to bet that once you get past 100 ratings, you can’t even find two rating profiles that are identical.

Netflix on the other hand, seems to feel that they own your ratings data and have guarded it closely. This wouldn’t be so important, if Netflix was the only movie site out there, but because they refuse to implement many web 2.0 features, there are many other movie sites that consumers may prefer.

Because I have memberships with about a dozen of these sites, it has created an awkward and cumbersome situation where I’m forced to to maintain a dozen different sets of ratings, instead of being able to sync them all together.

Since even small differences in how you rate a movie can have a big impact on the recommendations that you receive, whoever is able to get a consumer to input the most ratings is given a powerful moat around their subscribers.

For a long time, Netflix kept their silo closed, but about nine months ago, they opened up their API to outside developers. At the time, I saw this as a watershed event because it marked a change in philosophy from one of control to one allowing for innovation, inside or outside of Netflix’s site.

If you go their developer site, you’ll see that they still encourage people to use ratings data to create cool apps.

“The Netflix API allows developers full access to our catalog of movies and actors, and–when properly authorized–subscriber data, such as queues, ratings, rental history, and reviews.”

Regrettably, after opening up this data to outside developers, Netflix has apparently changed their tune and is now trying to take away this feature from their customers. From an email I received from Jinni.com,

“Hi Davis Freeberg,

As always, feel free to get in touch with questions. And stay tuned for new features and improvements that we’re working on now toward our public beta opening!” (Note: Bold added by me)

In the long run, I believe that this will hurt the company. I can understand Netflix’s desire to protect their competitive moat, but as a subscriber this upsets me to no end. Instead of letting me choose the most innovative movie site, they are making it more difficult for other sites to work with their data. This may not seem like a big deal to most, but preventing customers from accessing content in their preferred format, tends to create dissatisfaction. I feel that it also raises questions of anti-trust abuse when you consider Netflix’s market position and the grip that they are maintaining on their subscriber data.

Instead of using their rating silos to stop competition, I’d rather see Netflix forced to compete fairly by creating the best product out there.

I’m not sure that I’ll cancel my account, but taking this kind of a hostile stance against a competitor makes it hard for me to continue to recommend the service to others. I hope that Netflix reconsiders their stance on this issue and allow consumers to take full advantage of the openness of the web.

Update - Netflix responds on their developer forum - “The API Terms of Service don’t allow an application to capture a subscriber’s user name and password, which is required to scrape user data from the site. While we do expose ratings via the API, we do recognized that there isn’t a good way to grab a subscriber’s full rating history. We’re working on the technical and legal details to allow developers to access this info without running afoul of our terms of service nor enabling a unsatisfactory user experience.”

Posted in DRM, Netflix, VOD, Web 2.0 | 3 Comments »

Is DivX Bringing Bookmarking To The TV?

May 6th, 2009 Davis

I was on DivX’s website earlier today and saw a link to an online survey. Since I don’t tend to be very shy about sharing my opinions, these sorts of things are the perfect click bait for me. Most of the questions were about how and where I watch online video, but after answering a dozen or so, one of them caught my eye.

“5. Would you be interested in a free service that lets you bookmark online videos to queue and play back in media center software or on a device?”

I’ve never really been a heavy user of bookmarking services, but being able to bookmark TV would be much more appealing. One of the biggest problems with bridging the computer to TV gap, is the process of finding the content that you want to watch and then getting it to the television set. For downloadable media this is easier to accomplish, but for streaming media you’ll need some kind of a PC or internet connected gadgetry. Once you are juiced up to the net, trying to navigate the vast sea of digital content with a remote is like trying to paddle upstream as you go over Niagra Falls backwards.

So far, Netflix seems to have come up with the best solution, but there is still room for others to build a better mousetrap. Instead of letting consumers use a remote to browse all of their programing, Netflix makes you bookmark your watch now movies via the old fashioned computer. This hybrid tv/computer approach may lack a bit of elegance, but it does create a more satisfying experience to the end user. Sometimes having too many choices can create a paralyzing effect when it comes to finding content.

If DivX were to launch their own bookmarking service, here’s what I think it would look like. Instead of limiting their “queues” to Netflix content exclusively, they would allow consumers to bookmark content from all over the web. While there would be a few notable exceptions, I bet that they could build support for 90% of the sites on OVGuide.com. Using some kind of greasemonkey script or a toolbar button, consumers would be able to click a button and create a playlist of streaming content that they can watch later. As you begin to bookmark more and more videos, the service would get to know you and could make video recommendations to you. Once consumers are at the television, they’d be able to connect to their data stream and shuffle through their own personalized VOD channels. The killer feature would be the public streams that allow you browse through your friends’ queues too.

Throw in some nifty social networking features, support for sites like Twitter, Facebook and Friendfeed to help make it go social and a partnership with StumbleUpon video or Reddit’s bookmarking service to help get others to adopt it and DivX could have a very useful application for their Connected solution. If they’re able to build enough of a critical mass around these types of enhanced video services, it would help differentiate DivX’s features from generic codecs.

This question alone doesn’t necessarily mean that DivX will actually try to launch another social network, but it does suggest that they are at least thinking about it. What do you think, something only a geek could love or would you be interested in bookmarking online videos for playback on your TV?

Posted in DivX, Netflix, TV, VOD | 1 Comment »

Your Movie Wish Is Jinni’s Command

January 26th, 2009 Davis

For those of you who are still not satisfied with the current crop of movie recommendation services, you’ll soon have a new choice available to you. Last week, I signed up for the private beta of Jinni and have been pretty impressed so far. Jinni is a new interactive movie rating website that is trying to do for movies, what Pandora has done for music.

While the site doesn’t stream any of the films that they recommend, they do offer convenient links to places where you can find the films online (Netflix, Blockbuster, Hulu, etc.) Apparently, the company has been live for a few months now, but I only just found out about them last week after seeing a review of the service on Read Write Web.

The site includes reviews, photos and even trailers for each film in their database, but their movie filtering software is the real bread and butter. Most of the content you’ll find on their movie description pages is pretty much available on any of the other movie sites, but their “movie genome” information is exclusive to them.

Through a process of human and computer intervention, they’ve categorized every film in their library using information from the movie’s plot, mood, genre, time period, critic reviews, story type, and attitudes. Viewers are then able to filter their search results by using these definitions.

For example, a search for the term bank brings up 134 movies, but if I filter this list by looking only at the “witty” films that include a heist in their plot and are set in the 21st century, I’m able to narrow my search down to just three films, Criminal, Inside Man and High Heel’s and Low Lifes. Since I haven’t seen any of these movies, it’s hard for me to tell how effective this really is, but by narrowing down broad based searches, it does enable me to discover movies that would have gotten lost in the volume of other search results.

On Jinni’s website you can find more information on the actual genome mapping process.

“The starting point of the Movie Genome is manual tagging by our team of film professionals. Each title has around fifty genes, among thousands of possibilities. Then, using advanced machine-learning technology, Jinni’s system learns from the manual tagging to begin automated tagging. This creates a level of consistency that creative human taggers can’t reach - especially important for similarity matches and recommendations, which won’t work unless you compare apples to apples and battles to battles as often as possible. Users who vote on genes, as well as the Jinni team, constantly check and improve the machine tagging.”

After playing around with the site, I was really impressed with the user experience, but I’m still on the fence about whether or not Jinni’s approach is the right way to go. On one hand, by creating “genome” fields around each film’s “DNA”, they’re able to accomplish a lot more with the data, but on the other hand, by restricting rating population to just their staff, it also limits the number of films that they are able to catalog. As an example, if I do a search for the plot Psycho, I get 270 results, but the same search on the user driven site Spout, gives me 509 movies. Now I’d be willing to bet that Jinni’s quality is better then Spout, but by not allowing their users to tag films, they may be giving up quantity through their process. Some people prefer quality over quantity, but I can’t help feeling like they are missing out on the wisdom of the crowds by excluding users from participating in the genome mapping process.

In addition to their movie filtering technology, Jinni also allows you to share more information about your own movie tastes and they provide personalized recommendations. While I haven’t tested the quality of their movie recommendation service yet, I do plan on putting them through my own blind taste test to find out how accurate their ratings really are. In the meantime, if you’re interested in trying the service, feel free to apply to their private beta or you can leave me a comment and I’ll be happy to share one of my invites with the first 10 readers to respond.

Posted in Disclosure - I own stock in co. mentioned, Media, Netflix, Search, TV, VOD, Web 2.0 | 7 Comments »

Ask Davis: Can Netflix Tell If A Movie Has Been Copied?

January 12th, 2009 Davis

Since one of my new year’s resolutions is to try and post more often this year, I’ve decided to start a bi-monthly column to help stay on top of this goal. Ask Davis is a new feature that will be a cross between Dear Abby and the Mythbusters. You have questions and I don’t mind doing the legwork to find your answers. I’m hoping that it will provide a good place for readers to share feedback on what you are interested in. If you’ve ever wondered what my opinion on something might be, here is your chance. Just contact me through the tip line and I’ll be happy to consider sharing my thoughts.

For my first Ask Davis question of the year, I turned to an anonymous Google surfer from Fort Wayne Indiana who asks Can Netflix tell if a movie has been copied?

Dear anonymous Google surfer from Fort Wayne Indiana. Thank you for choosing the Digital Connection for all of your movie ripping needs. I suppose a better question to ask may be whether or not it’s legal or ethical to copy movies from Netflix, but I’m not here to judge, so here is the answer that you are looking for: it depends.

Netflix has two different movie delivery mechanisms. The first is the traditional DVD by mail. Pretty much all DVDs use a copy protection known as CSS. It was designed by the fat cat studios to limit access to your media, but was cracked several years ago by an underground hero known as DVD Jon. Since then, there have been a number of rouge software companies who have built dvd decryption programs, but their legality lies somewhere in the grey area. Last year, Real Networks tried to launch a program that would legally allow you to make back up copies of DVDs that you owned, but a judge granted a temporary injunction against them, after the big wig studios argued that people might use the program to make copies of discs that they didn’t own, but had rented through Netflix

Now I know that you wouldn’t do anything like that, but to get back to your theoretical question of whether or not Netflix would be able to tell if you did use one of these programs, the answer is no. Because the DVD decryption programs don’t write anything to the disc, there would be no way for Netflix to know that you had sneaked a copy. Netflix does monitor usage behavior so its possible that they might suspend or slow down your account if you abused their service, but by and large they depend on people playing by the rules.

When it comes to the movies that you find on their watch instantly feature, technically there is a way that you can copy them, but it’s a bit more tricky. If you stream rip the watch instantly files, you’ll be able to download a copy of the film to your hard drive, but you need a back ground in tech in order to figure it all out. Perhaps even more importantly when it comes to your question, Netflix can tell when you’ve downloaded a movie instead of streaming it. I don’t think that they lower the hammer on people who do this periodically, but there have been reports of them taking action against heavy users of this hack.

At the end of the day, you may be able to copy a movie from Netflix without getting caught, but my own question is why would anyone want to? The great thing about Netflix is that you can always request to see a movie again without any extra cost. Trying to save money by ripping a bunch of titles in a month may sound like a good idea, but if you’re going to walk that close to the line, you may as well go Bit Torrent. There may have been a time in my life where this sounded like a more appealing idea, but I don’t mind paying $18 a month for all you can eat, virus free film bonanza. I hope that this helps to answer your question and look forward to finding out what else my readers are interested in.

Regards,

Davis

Posted in Ask Davis, Disclosure - I own stock in co. mentioned, Netflix, VOD | No Comments »

Netflix And Walmart Accused Of Illegally Cornering DVD Market

January 7th, 2009 Davis

Netflix Walmart Anti Trust Complaint

Over the last few years, it’s been no secret that Netflix has become the dominant force for DVD by mail rentals. There may be plenty of other ways to watch films, but when it comes to renting through the mail, Netflix’s laser like focus has put them in the enviable position of being able to assert a large degree of control over the economics of their market. While there is nothing wrong with a company being so successful that they become the dominant player through skill, there are laws against abusing that power to prevent competition.

A few years ago, Wal-mart created a copycat DVD rental service in order to try and get their own piece of the DVD rental market. Their results were disastrous and despite significant financial and retail advantages, the service never caught on with consumers. Eventually, Wal-Mart realized that it was foolish to spend as much time and money focusing on such a small part of their core business, so they threw in the towel and essentially sold their membership base to Netflix. While we know that the agreement included some cross promotional advertising, the actual terms of the deal weren’t ever publicly revealed.

While some would argue that Netflix’s agreement with Wal-mart was just another example of their business acumen, nearly four years after this transaction took place, Walmart and Netflix both stand accused of engaging in anti-trust behavior over the deal. While Netflix does see its fair share of bogus lawsuits, after reading through the complaint, I think that this case may end up having more teeth to it then most of the frivolous lawsuits that are filed (warning, I’m not an attorney, just my uneducated opinion.)

Because the overall DVD market is so much bigger then the online component that Netflix pwns/operates in, I think they’ll end up getting past this, but the complaint which was filed by Andrea Resnick, does do a good job of framing the debate and raises some prickly questions for Netflix/Walmart. Had Resnick tried to seek an injunction blocking the transaction back in 2005, most courts would have brushed aside any anti-trust arguments in a heartbeat, but by shifting the focus of their complaint beyond Netflix’s control over the DVD by mail category to Wal-Mart’s domination of the DVD sell through space, Resnick does a decent job of making his case.

According to the complant, “Prior to and at the time of the agreement, Netflix and Walmart.com were actual competitors in the Online DVD Rental Market. In addition, Netflix, on the one hand, and Wal-Mart Stores and Walmart.com were actual participants and Netflix was a potential participant, with the means and economic incentive to sell new DVDs–in the absence of the Market Division Agreement. Defendants shared a conscious commitment to a common scheme designed to achieve the unlawful objective of dividing the markets for online DVD rentals and new DVD sales. The Market Division Agreement allocated the Online DVD Rental Market to Netflix, with Wal-Mart Stores and Walmart.com agreeing not to compete in that Relevant Market. The agreement also allocated new DVD sales to Wal-Mart stores and Walmart.com, with Netflix agreeing to refrain from selling new DVDs in competition with them. In addition to explicitly or de facto agreeing not to sell new DVDs, Netflix also obtained the Market Division Agreement by providing potentially valuable promotion to Wal-Mart Stores and Walmart.com.”

(Note: bold and italics provided by me)

I don’t know whether or not there was specific language in the agreement preventing Netflix from selling new DVDs to their customers, but I am looking forward to finding out more details during the discovery phase of the trial.

Feel free to read through the complaint yourself, but when push comes to shove, it’s hard for me to believe that the courts will side with Resnick on this one. For one, as Techdirt aptly points out, Netflix doesn’t have a monopoly on the market, they just have the fortunate luck of competing with a neutered Blockbuster for that space. I also would argue that Netflix or Walmart for that matter, doesn’t have the ability to corner the home entertainment market as alleged. If Resnick is successful in arguing that the DVD by mail industry is a unique market they may end up having some luck, but the reality is that the home entertainment market is a helluva lot bigger then DVD rentals via the internet. If the FTC didn’t have problems with Sirius and XM combining to create a single satellite radio company, it’s hard to accept the argument that Netflix’s actions prevented competition on an anti-trust scale.

Since 2005, we’ve seen a radical transformation occur in the VOD and video over the internet markets. During that time, we’ve also seen Redbox install over 10,000 DVD kiosk locations throughout the US, including a large percentage of those in Walmart locations. When you consider that last year, Blockbuster had more then four times as much revenue then Netflix, it begins to illustrate how small Netflix’s slice of the movie rental industry really is.

Only time will tell how far this one will go, but I think it’s worth keeping an eye on. While I’m confident that neither Netflix nor Walmart did anything wrong, the suit isn’t as black and white as I would like. If Netflix does end up having to make compromises as a result of their success, it could have a serious impact on their ability to transition to digital delivery without any turbulence.

Posted in DVDs, Disclosure - I own stock in co. mentioned, Kiosks, Netflix, SA | 1 Comment »

Mirror Mirror On The Wall Who Makes The Best Recommendations Of Them All?

January 6th, 2009 Davis

When I was a kid, I grew up in middle of the sticks where my parents didn’t have access to cable TV. When satellite dishes first started to show up, my folks were early adopters and bought a ginormous pirate dish (that you’d actually have to crank by hand when you wanted to jump to different channels), but for the most part, my childhood television experience consisted of two fuzzy OTA choices, NBC and CBS.

Back then deciding what to watch was rarely a problem. If I didn’t like what was on one channel, I’d simply live with whatever was on the other. Of course since then, technology (and my life) have changed a lot.

In thinking about my home entertainment setup today, I’m amazed at how many choices I actually have. It’s as if I’ve overcompensated for my lack of choice growing up, by deluging myself with every media gadget or service that comes out today. Between Netflix, Comcast, Amazon, YouTube, a dual tuner HD TiVo (not to mention my dual tuner media PC) and a little friend I like to call Bit Torrent, there is no shortage of content to watch.

While having plenty of choices is fun, having too many can be just as paralyzing as having too few and as more and more technology companies continue to take their shot at crossing into the living room, managing all of this content is going to become an even more important task.

So far, there have been plenty of efforts to improve content discovery services, but the task is apparently, much tougher then I would have thought. Two years ago Netflix offered a million dollars to anyone who could improve their recommendations by 10% and they’ve yet to award the prize.

Over the years, I’ve signed up for a plethora of movie recommendation services, but last summer I realized that it was too difficult to sync my ratings between them all. Since I strongly believe that TV and movie suggestions is a crucial piece of the new media experience, I wanted to make sure that my metadata activity was giving me the most bang for my click. In order to test out the various movie sites, I decided to create a Netflix challenge and conducted a “blind” taste test to figure out what site actually makes the most relevant recommendations.

To set up my experiment, I randomly choose 5% of the 2,000 movies and TV shows that I’ve rated through the Netflix service. I then set up a new profile on Netflix, Blockbuster, Spout and Criticker and manually entered my ratings for these 100 films, into each service. According to Spout, these ratings represented 11.6 days and 181 minutes of time spent watching TV

After I had setup an identical profile on all four services, I then took a look at the first 50 suggestions from each site and compared it to what I had actually rated the film on my main Netflix account.

If the service suggested a movie that I hadn’t already seen, I disregarded it toward calculating the final scores. Essentially, what I wanted to figure out was which movie recommendation service provided the best recommendations based on my actual real life viewing data. After taking a look at all four sites, it was clear that Netflix easily won this challenge.

Of the 50 recommendations that Netflix made, 28 of them (56%) were for films that I had rated 5 stars on my main account. While they did include two 1 star recommendations (Fight Club & American Psycho), the average rating for their recommendations weighed in at 4.18. Critcker came in second place with an avg of 4 stars per recommendation, followed by Blockbuster at 3.96 and Spout at 3.87.

Perhaps even more interesting then the final scores though, were the services that helped me find movies that I had never seen before. Netflix’s results may have been higher then anyone else, but of the 50 recommendations that they made, there were only 11 films that I hadn’t already seen. This compares to 24 unknown content suggestions (48%) from Blockbuster and an astonishing 44 unknown recommendations (88%) from Criticker. In taking a look at the types of movies Blockbuster was recommending, I wasn’t all that impressed with the list of unknown films. Most of them were kids movies that I simply missed because I had no interest in them at all. Trying to decipher Criticker’s picks was a little more difficult because most of their picks were for indie or foreign based films. At first glance it would seem that while Netflix may make more accurate suggestions, Criticker may actually be the best place for finding films that go beyond mainstream audiences.

I’ve listed the breakdown of my results below, but I would encourage you to take these results with a grain of salt. With a sample size of 1, my survey isn’t very scientific and because the ratings of my Netflix sample profile were 100% identical to the ratings on my main profile, it could have influenced my results from Netflix. Nonetheless, at the end of the day, I was pleased to discover that Netflix appears to be the best place for me to be rating and interacting with movies. While I’m hopeful that their open API will eventually allow consumers to port their data between services, it feels good to know that my primary movie recommendation service is the most optimal one for me.

Netflix

Recommendations I’ve Never Seen - 11
5 star - 28
4 star - 4
3 star - 1
2 star - 1
1 star - 2

avg. 4.1794

Criticker
Recommendations I’ve Never Seen - 44
5 star - 2
4 star -2
3 star - 1
2 star - 1
1 star - 0

Avg Ranking 4.0

Blockbuster

Recommendations I’ve Never Seen - 24
5 star - 9
4 star - 11
3 star - 4
2 star - 1
1 star - 0

avg - 3.96

Spout

Recommendations I’ve Never Seen - 11
5 star - 18
4 star - 9
3 star - 4
2 star - 5
1 star - 3

avg. 3.87

Posted in Disclosure - I own stock in co. mentioned, Movies, Netflix, TV, Technology, TiVo, VOD | 1 Comment »

Why Isn’t There A Redbox For Video Games?

December 17th, 2008 Davis

Considering how much time I’ve spent writing about DVD kiosks, some may be surprised that last week was the first time I ever rented a DVD from Redbox. I was at the grocery store and saw that they had the most recent Indiana Jones movie. Indiana Jones has always been a favorite of mine, so on an impulse I made the rental. I probably would have rented from Redbox sooner, but between TiVo, Netflix and the internet, there has been no shortage of content for me to check out and I just couldn’t justify spending even a measly buck, when I already had too many options for movies and TV shows.

The entire rental process was very easy and only reinforced my belief that Redbox will be wildly successful with their business model. In fact, just this morning I noticed that 7-11 has even begun testing Redbox at their stores. I’m not sure if it was the convenience of using a machine instead of dealing with long lines and surly video store clerks or the convenience of being able to make a rental as I was finishing up my grocery shopping, but now that I’ve gotten a taste, I’m sure that I’ll be back.

While it would be hard to improve on the kiosk experience, in thinking about my own entertainment needs, I realized that there is one area of the kiosk market that is still being ignored. When it comes to DVDs, there have been a number of firms who’ve thrown their hat into the kiosk ring, but so far we haven’t seen anyone introduce a kiosk system that dispenses video games.

As a casual gamer, I tend to prefer purchasing my games over renting, but every now and then I end up buying a bomb and get upset that I’m out $60 for a weak title. When it comes to movies, I have no interest in watching the same one over and over again, but I could play a video game for a year and still get just as much enjoyment as the first time I picked it up. While the cost of video games would be higher, I have to imagine that there would be a lot of people like myself who would love to be able to rent a game and keep it, if it happens to rock. In fact, if Redbox (or Gamefly, Gamestop or even [shudder ] Blockbuster) introduced a rent to own kiosk system, I’d probably start buying 100% of my games from them.

Because video games tend to appeal to a more niche audience, it would be harder to introduce these kiosks in places like grocery stores of coffee shops, but I do think that companies like Burger King would love to have junk food loving adolescent males visiting their stores on a regular basis, so that they can check out (and return) the latest gaming titles. The extra cost of the video games would mean that they’d probably need to be charging closer to $3 a rental vs. the $1 bargain that Redbox offers for movies, so it’s possible that kiosk operators would see less demand for this type of service, but I would have to imagine that the sell through rate would be significantly higher, which could go a long ways towards making this idea economically viable.

Another issue that a video game kiosk would face, would be having to stock multiple versions of a game. When it comes to DVDs, a single standard allows you to play your movies whether your DVD player happens to be made by LG or Toshiba, but with video games, you’ve got Sony, Nintendo and Microsoft all battling for the living room, which would mean that you’d have to carry less titles to handle more formats or you’d need to have a company like Sony build kiosks that would exclusively support just PS3 games, even if it meant reducing the pool of potential customers.

While a video game kiosk would have some challenges, I think that most of these could be easily solved. I’m not sure why we haven’t seen anyone come out with a product like this yet, but I believe that there is a great market opportunity for the first one to make a move. Currently, it takes about 9 months for a Redbox kiosk to completely pay for itself. Even if it took twice as long for a video game kiosk to pay off, it’d still make an incredible investment for most businesses, even before you consider some of the extra benefits like driving more traffic to the retailer. I’m not sure whether or not someone will seize on this opportunity, but if they do, you can bet that I’ll be a customer. While I may have more then enough solutions when it comes to getting movies, getting a video game can still be a hassle.

What do you think, if someone allowed you to rent video games from a kiosk for $3 a day (or buy them for $50 - $60), would you be interested or is this just a niche market for people too lazy to drive to Gamespot?

Posted in Disclosure - I own stock in co. mentioned, Kiosks, Microsoft, Netflix, Video Games | No Comments »

How Netflix Could Make Watch Instantly Even More Viral

September 18th, 2008 Davis

Netflix sent me an email yesterday announcing their latest promotional offer. The offer allows me to give out a one month free membership to five different friends. This is two weeks longer then their normal free trial and is certainly a good deal for anyone who is interested in DVDs by mail, but who still haven’t tried the service. Of course this isn’t the first time that Netflix has reached out to their customer base for referrals, but this time around they’ve added a new twist by giving their customers an extra free disc for referring Netflix the business.

The addition of the bonus disc reminds me of the Columbia House CD programs that I joined in high school and college. Since Columbia House would give out four free discs for a referral, I worked overtime to sign up all my friends for the service. As a music fan, I got pretty “creative” with the promotions and even worked out CD “revenue sharing” deals with my friends. This time around though, I don’t think I’ll be knocking myself out just for a couple of extra free rentals next month.

While it’s hard to fault Netflix for a smart word of mouth advertising campaign, I do think that they could leverage their customer base even better with a little bit of creativity. Over the last two years, Netflix has continually improved their Watch Instantly service. While the initial rollout was restricted to a limited number of films and to watching it on an Internet Explorer browser, it’s been exciting to watch Netflix rollout more movies and devices to support the service. Netflix still has a ways to go before they perfect their VOD product, but everyday they continue to enhance the service and by the end of the year, I think we’ll see 15,000 titles, Mac support and even an internet enabled television set that is capable of tapping into the service.

Even with these improvements though, if all you did was read the press coverage, you wouldn’t know that the service was any better then when it was first launched. Despite the fact that Netflix now has over 12,000 Watch Instantly titles available, they are still frequently criticized for not having a large enough selection. I don’t really feel that this is a fair criticism though, because it ignores the high satisfaction niche appeal of the movies that are already on the service.

It’s true that Watch Instantly doesn’t have a lot of mainstream hits, but because Netflix has been able to spy on gauge demand by looking at their customer’s queues, they’ve been able to fill about 10% of people’s queues with Watch Instantly selections (while still keeping the cost for their movies affordable for the company.) These may not be the mega hits that drive marketing campaigns for new subscribers, but by letting ME see films like Super Size Me and the Inconvenient Truth or British Sitcoms like Coupling, it’s created an experience that I’ve enjoyed just as much even more then the DVDs that I watched this weekend. With over 50 watch instantly films currently sitting in my queue, there’s been no shortage of high quality films for Freeberg despite what you may have heard about poor selection.

The problem is though, that from the outside all that people see are bunch of lousy b-rated movies that couldn’t cut it on the big screen, even if the Watch Instantly consumers love them.

So what should Netflix do?

I would argue that the company is sitting on a potential viral gold mine with the service. There have been times where some of my posts may get picked up on another blog or two, but I know that I’ve written something really powerful when people start emailing it to each other. With all the buzz and marketing campaigns it’s easy to fake legitimate viral demand, but it’s a lot harder to inspire the real thing.

Netflix can continue to send out friendly reminders and bribe their customers into giving word of mouth by giving them a good deal for their friends and a free movie for them, but how much more powerful would it be if you were allowed to send a specific film that you really enjoyed to a friend or family member for free?

What this would do is change the word of mouth emphasis from Netflix’s service and would instead turn every single watch instantly movie into a powerful emotional marketing channel for them. If you saw a film that you knew your Mom would love and was able to share it with her at no cost, no credit cards and no hassle, how much more likely is it that she’d subscribe to see more films?

Netflix already does a good job of personalizing their recommendations, but by leveraging their customer base through this type of promotion, a user could individualize the gift to the unique tastes of their friends and loved ones. Essentially, it would allow Netflix to match up “lousy” niche watch instantly movies with the long tail demand that really does loves them (without having to know anything about the people in your social circle.)

In addition to creating a more favorable watch instantly impression on new customers, this would also provide a convenient way for their current customers to give “gifts” to the people that they know. Growing up in a big family has its advantages, but just about every month, there is another birthday, graduation, holiday etc. to celebrate. While many of my loved ones deserve to be recognized on these events, it would be really expensive to give out gifts to everyone for minor holidays or accomplishments, but if Netflix limited the program to X number of free movies to give out each month, I could at least send a quick email with a free movie link and some words of encouragement for those not as important events. It may not be the same as taking the time to pick out a real gift, but it would be a way for you to recognized a cousin’s wedding anniversary without breaking the bank.

The threat of course would be that this could potentially eat into gift certificate sales, but Netflix could always turn on and off the promotion depending upon its impact on demand.

There would also be an ancillary advantage to using their watch instantly program as a marketing tool in this way, in that it would help Netflix to leverage the popularity of the service without having to promote the juicy details of how successful they’ve really been. Despite all of their hard work, Netflix’s has been very reluctant to discuss any of the metrics associated with the service, even though they are very likely the number one internet delivery movie provider on the net. Some might argue that their reluctance to talk about their success is a sign of failure, but I believe that they are trying to down play the appeal of subscription based VOD while they still have an early edge on the competition.

Some may also point out that I can already give away five free watch instantly experiences through their current promotion, but I believe that a two hour targeted subscription to Netflix would be 30 times more powerful then their current 30 day offer. It’s hard to know if such a program really would be successful without seeing it in action, but hopefully Netflix would at least be open to experimenting with some trial groups and then taking a look at the numbers. I believe that this type of program would be a runaway success and would make Netflix even more viral without having to bribe their members.

If you’re interested in one of my five free memberships that I have to give out, feel free to leave a comment and I’ll be happy to shoot you the promotional code they gave me, and no, I won’t be sharing my extra DVDs with you, even though you could have squeezed me for two free CDs during my Columbia house days.

Posted in Disclosure - I own stock in co. mentioned, Movies, Netflix, VOD | 2 Comments »

YouTube And TiVo - More Than Just A Purrrfect Combo

August 6th, 2008 Davis

I knew it was coming, but I finally received my 9.4 software update. The update includes a couple of UI improvements, but TiVo’s support for YouTube is what I’ve been drooling over.

The way it’s currently set up, you need to hit a lot of buttons to get at your favorite content, but thankfully, TiVo has said that that they are working on a way to sync it with your personal YouTube account.

One of the complaints that I often read about YouTube is that it’s just a bunch a cat videos. While it is true that the feline community has found their special crazy place on the site, I feel that this statement does an injustice to all of the hard working innovative filmmakers who are pushing the boundaries of the web. Don’t get me wrong there is a ton of junk on YouTube, but there are also some really talented people who are redefining the relationship between an artist and their audience.

The beauty of YouTube is that it provides a platform where all kinds of niche communities can develop. Cat videos may not be important to you, but to some people they are more compelling than anything on Prime time TV. The challenge is matching the niche demand with the niche producers.

When I was growing up, I only had access to three TV channels. Cable eventually gave me 100 channels to choose from, but even then there was nothing ever on. When TiVo came out it completely changed how I thought about “channels” and shifted the equation from 100 programs to choose from to 10’s of thousands. Now, by adding YouTube support, TiVo is once again exponentially increasing my access to content. Filtering through the noise will be a challenge, but this partnership will help personalize your television to an even greater level.

To celebrate TiVo’s support of YouTube, I’ve put together a list of 20 of my favorite web video creators. You won’t find many cat videos, but you will get a glimpse of the future of the entertainment industry.

1.) You Suck At Photoshop - The series is dark and twisted, but is very very funny. You get the feeling that sometimes Donnie is pulling his “hypothetical” examples from real life experiences, but his obsession only adds to the comedy. Even if you don’t like photoshop, this is worth watching.

2.) PurePwnage - I discovered PurePwnage about two years ago and was instantly hooked. The show follows a pro-gamer around and films him embarrassing himself and others. While it’s shot in an amateur documentary style, it’s clear that Kyle has a ton of talent. The series is cleverly edited and offers a humorous glimpse at the video game sub-culture.

3.) Pretend We Don’t Exist - Most of the videos on YouTube are filmed for the web, they are quick and funny, but they also tend to be unpolished and gimmicky. The videos that PWDE creates are a breath of fresh air compared to the rest of YouTube. Their clips tend to be much longer and are focused on deep and dark subjects. The humor is much more subtle and is driven by the characters in their films. The filming and editing looks amazing and represents cinematography at it’s finest. There are more popular artists on YouTube, but more than any of the other videos, PWDE’s content deserves to be seen on a big screen television.

4.) ./ Shutdown - If you’ve ever wondered what really goes on in your IT department, ./ Shutdown is the series for you. They celebrate all things geeky and offer an entertaining and humorous look at anything nerd related. Their videos can go from quirky to awkward, to just plain mind boggling, all in a single episode. I don’t know how their videos would do with a mass market TV audience, but I’m not surprise that they’ve built a following online.

5.) Mondo Mini-Shows - Not everyone will appreciate the humor in Mondo Media’s videos, but if you like the itchy and scratchy episodes from the Simpsons, you’ll love these animations. By combining the right amount of cuteness with hair raising violence, they’ve stumbled onto a winning formula for the web.

6. ) Sub Pop - Sub Pop is the only channel on my list that I would consider to be professional content. Most record labels have been slow to evolve to the new media landscape, but Sub Pop hasn’t been afraid to adapt. During the 90’s, they discovered many of the top grunge bands and continue to introduce amazing new artists today. Their videos are better than anything you’ll find on MTV, even if the bands aren’t as popular (yet.)

7.) Kevin Nalts - Love him or hate him, there is no denying that Nalts really is a viral video genius. Between his job and his family, I don’t know how he finds time to create his videos, but his gems are some of the funniest clips on the web. The man knows no shame and isn’t afraid to exploit helpless kittens to get the fame that he deserves.

8.) Gradual Report - When Ze Frank gave up internet video it left a big void on the web, luckily other talented comedians have step forward to help keep you entertained. Daniel Grozdich’s style reminds me a lot of Ze, but his comedy tends to be edgier and more dangerous. His rantings borderline on craziness and brilliance, but it’s a tension that provides a ton of entertainment.

9.) Tom Green - Ten years ago, TV was sorted into neat and tidy channels, but today it’s a fragmented mess. When you tell Netflix what movies you want to see, does it really matter what studio made it? Likewise, who cares what network a show is on, if you are just going to TiVo it? Tom Green was one of the first celebrities to recognize this trend and instead of bitching and moaning about it, he started his own TV channel and now has a successful online talk show that he broadcasts on TomGreen.com His channel isn’t carried on any of the cable networks, but thanks to the magic of the internet, fans can still tune into his bizarre and zany antics.

10.) Charbax - Whenever there is a tech boondoggle in Las Vegas, the press will trip over themselves to cover it, but if the event is held in Europe, you’re lucky to find any coverage. Fortunately, Charbax covers many of these European tech events and provides a unique view into the consumer electronic industry. His questions are focused with laser precision and produce very stimulating discussions on current digital trends. His reporting goes way beyond the sound bites and consistently brings new and relevant information to his audience.

11.) Rabbit Bites - You may have never heard of them, but Buns and Chou are two of the most famous rabbits on the internet. By combining sharp humor with rabbit commentary, they’ve managed to win the hearts of their fans. Their show is a cross between Access Hollywood and Animal planet. They typically skewer pop culture from the rabbit perspective. As their popularity has grown, they’ve been able to use their fame to bring several big name guests on the show.

12.) Videoholic - Videoholic was a betamax blogger, even before blogging existed. Over the years he’s met with other Beta fans, traveled to CES and has even written for Betamax newsgroups. During that time he’s also managed to collect a treasure trove of tapes that literally cover walls and walls of his home. Whether it’s Ray Bradbury selling out to the prune industry or old “cell” phone ads that should not be forgotten, you never quite now what will be coming next. By sharing his life long passion with the larger community, Videoholic is helping to keep history alive.

13.) Noodle Scar - Bonnie hasn’t updated her site in six months, but I’m still hanging onto hope that Noodle Scar will come back. Once a day, she would create a quick 30 second clip filled with random awesomeness. The fast tempo format always left me wanting more. If you haven’t already seen her clips, her archives are definitely worth exploring.

14.) Jeremy Cathey - Jeremy is only 17 years old, but he’s already learned a lot about how to make great films. He doesn’t have access to a big budget, but his clips still look professional. One of the great things about YouTube is that it gives filmmakers like Jeremy, the opportunity to experiment and try new things, without the pressure of needing instant success. As he continues to perfect his art, I have no doubt that he’ll end up making films for even larger audiences.

15.) Improv Everywhere - Most of the practical joke shows on TV tend to make their victims look really stupid, but Improv Everywhere adds a bit of class to the practical joke genre. Through the power of the internet, they assemble random people together, in order to stage elaborate public demonstrations. The events are designed to be so ridiculous that people can’t help but be confused by what’s happening. Just watching the pranks unfold can be fun, but watching the reactions make it priceless. I’m hoping that they’ll come to San Francisco, so that I can take part in the fun.

16.) Vancouver Film School - Even before the internet, I was always a fan of college films. They tend to take risks that big budgets won’t and I like the roughness that they bring to their films. The Vancouver Film School consistently puts out some pretty impressive clips. Their videos do contain an occasional miss, but they’re not infected with the commercialism that is embedded in today’s professional content.

17.) Muggle Sam - Normally, I’m not the sentimental type, but you’d have to have a heart of stone to not be touched by Sophia and Isabella. They are two young girls who are growing up on YouTube. Every episode reminds me of how great it was to be a child. Each day you learn something new about the world. What really makes the series stand out is the quality of it’s editing. Muggles Sam has a special talent for taking small clips and using them to tell a bigger story.

18.) The Gigaom Show - Most of the interviews that I see on TV are usually by a reporter who really doesn’t know all that much about the person they’re talking to. The result is a quick 30 second clip of PR spin. When it comes to the Giga Om show, you can expect a much deeper level of analysis. Because Om Malick and Joyce Kim follow the tech industry so closely, they know the right questions to ask their guests. The show is currently on hiatus for the summer, but I’m looking forward to seeing more episodes in the future.

19.) Reel Geezers - Who needs professional movie critics when you can watch Marcia and Lorenzo share their take on the latest Blockbuster films? This Octogenarian Duo has been broadcasting their own movies reviews for a little less than a year and have already built a respectable following. I don’t always agree with their take on the movies, but, but I still enjoy hearing them.

20.) aniBOOM - aniBOOM helps cartoon and animation creators monetize their content. They use YouTube to showcase some of their best stuff. As a big fan of cartoons for grownups, this subscription is one of my favorites.

My tastes can be a little eclectic, but hopefully you’ll be able to find at least one or two new shows that are of interest. If you know of any good web series that I left out or if you happen to make your own web videos, feel free to leave a link in the comments.

Posted in Disclosure - I own stock in co. mentioned, Media, Netflix, TV, TiVo, VOD | 4 Comments »

There Are Lies, Damn Lies And Then There Are Statistics

August 5th, 2008 Davis

A few months ago, Raghu Srinivasan launched a website named Feedflix that allows you to use your customized Netflix RSS feeds to track how you are using your membership. The site monitors your usage data and can tell you things like how much you spend per DVD rental or the typical number of days that you hold onto your DVDs before sending them back for new ones.

While having someone automatically calculate this data is helpful to me, when I first used the service, it didn’t really tell me anything new about how I use Netflix. Since I enjoy number crunching, I had already been tracking this info and knew that I was spending about $3 for every DVD I rented.

What Feedflix did offer me though, was a way to compare how I used the service with other Netflix customers. When it first launched, I didn’t think that Feedflix would have enough members for a legitimate sample size, but with the service growing over the past few months, I wanted to check back and see what it could tell me about how other people are using Netflix.

How Long Do Customers Keep Their Rentals?

Feedflix doesn’t answer this question directly because they break the data into separate groups, but if you do a little bit of math, it’s not too hard to get an estimate on the average rental. What I found surprising about the results was that, even with 75% of the user base returning their DVDs within 10 days, the drag from the other 25% of users brings the average rental period to 9.55 days. In the past, Netflix has said that people who don’t rent as many movies have a tendency to churn at a higher rate, but this data would suggest that they contribute to the lionshare’s of Netflix’s profits before they drop off completely.

How many users subscribe to each plan?

Netflix has never given a breakdown on the number of subscribers in each plan, but Feedflix can give us a reasonable guess as to what this might be. According to Netflix’s latest earnings report, they currently have 8.4 million subscribers. By extrapolating Feedflix’s breakdown of Netflix service plans to the larger subscriber base, we get the following estimates on where customers are spending their money.

1 at a time - 2.1 million subscribers
2 at a time - 2.4 million subscribers
3 at a time - 3.1 million subscribers
4 at a time - 500K subscribers
5 at a time - 168K subscribers
6 at a time - 84K subscribers

To test the data, I multiplied the number of subscribers from each group by the price points on their corresponding plan and came up with an expected 3 month revenue number of $352 million*. The real result from their latest quarter was $337,600,000, so these numbers may be a little bit off, but not entirely unrealistic.

*My results didn’t include any of the 7 or 8 at a time subscribers because Feedflix didn’t have enough data on them. It’s also worth noting that there are rounding errors to take into account. My analysis also assumes that there is a 3:1 ratio between the $4.99 and $8.99, 1 at a time subscribers and makes a weighting adjustment for the difference between the 8.24 million subs at the start of their quarter and the 8.4 million that they finished with.

What is the average cost per rental for Netflix customers as a group?

Getting at this number is a little bit trickier, but if I multiple the breakdown of each plan, by the number of discs that an average Netflix customer is expected to use each month, then my math suggests that Netflix is earning $1.94 in revenue, per DVD rental. At first this number seemed a little low to me, but it would verify Netfix’s claims that they earn a higher profit on 1 at a time subscribers vs. the higher revenue 3 at a time moviehounds. If my estimates are right, it would also mean that Netflix is shipping 1.97 million DVDs per day or nearly 60 million DVDs per month.

It’s worth pointing out that there are a lot of ways that this data and/or my calculations could be wrong so take it with a grain of salt, but if Feedflix’s numbers are representative of the larger Netflix customer base then it would suggest that if you aren’t getting at least $2 per DVD each month, then you are one of the skinny guys at the all can eat buffet.

If you’d like to view my Feedflix account you can find it here.

Posted in DVDs, Disclosure - I own stock in co. mentioned, Netflix | 1 Comment »