The Long Tail and Streaming Video

Reading “The Long Tail,” I was reminded of the current conversation around Netflix’s Watch Instantly service and HBO’s new HBO Go streaming service.

The problem in Netflix’s use of the Long Tail is that it’s dependent upon content providers working with the company. Some content providers give access to older titles, but not new releases, which, going on Anderson’s argument, could lead to Netflix having problems keeping consumers if studios have their own streaming services that do offer access to those titles. Consumers have gotten used to the availability of everything all the time, first with the ubiquity of Amazon and Netflix’s mail delivery service, and then with online music and TV services. Being able to access everything without ever leaving your house is becoming something that people expect.

The problem is that you have to work with a lot of people to offer everything, and you have to continually lay out a large amount of money to license everything.

It makes me wonder what the actual cost of distributing movies and TV shows through streaming services is, and if people would actually pay more for it than they do now. Netflix doesn’t charge extra for its streaming service and it is commercial free, which raises the question of how they are paying for it and if that could possibly continue even if they didn’t have to eventually renegotiate streaming rights with studios. If Netflix had another revenue stream to support the service, I could see them negotiating with studios to pay more for content and still operating Watch Instantly at a loss (like will hopefully continue to do now that it has been acquired by Apple), and there is the advantage of having the widest variety of content in one place, which studio-specific streaming services like HBO Go wouldn’t be able to offer. But it still feels like, where Amazon and iTunes have found a way to make money using a Long Tail approach, streaming video services will have a harder time finding a way to make a profit while offering the hits people want.

3 responses to “The Long Tail and Streaming Video

  1. What do you think of RedBox then? This service has shown promising growth and it seems I see a new RedBox at a 7-11 or Walgreens every other day. There are always lines of people waiting to get their $1 movie. What if someone took advantage of the long tail like that and offered streaming one-night rentals of unpopular movies for something like $0.50? Could there be a long tail RedBox model?

  2. As an avid Netflix-er, I love Netflix participation in the Long Tail, but the profiling sometimes frustrated me (sometime it is a little unnerving too), as I’ve noticed that when I do random searches or look at “new releases” they don’t show everything, and the films are stacked there as well with my “profile.”

    Anyhow, Netflix and streaming and the bottom line. How is Netflix making their money? I think one, the streaming collection isn’t terribly big right now, and the Long Tail videos are a little heavy here, so it might not cost that much to license them. Second, Netflix requires you to pay a subscription price, which means they still get their flat fee whether you stream 1 video or 100, and whether you watch 1 DVD or 100. I’m guessing that only a small percentage of people are really taking advantage of the process. I think it’s like an all you can eat buffet. Some people will eat more than the normal restaurant serving of food, but most probably don’t, and so they count on more people who don’t than do.

  3. RedBox-like streaming service: I think that’s actually a brilliant idea. I wonder how iTunes’ rental service does, because I know people who use it, but it always seems prohibitively expensive to me. I don’t pay that much to rent a physical copy of a movie in a video store, so I don’t see why I would pay that much for the convenience of having the movie immediately available. If it were much cheaper, with older movies, it seems like it could be extremely profitable.

    On Netflix: I had no idea it was profiling with the new releases! I’ll have to check that out. About their streaming, I figured that the light users are paying for the heavy users, which seems like the best way to run a subscription service. But with the oncoming fees for Hulu and the continuing advertisements on YouTube, I get the feeling that internet exhibition rights are just going to cost more as the studios realize that they can actually make money off of it, and Netflix already barely turns a profit (I think the one article I linked to said $115 million out of $10 billion dollars revenue.) I mean, for $20, I can have Amazon send ten episodes of SVU to my Tivo, or I can watch those ten episodes and however many more hours I want with a month’s subscription to Netflix. It’s going to my TV either way.