Can Roku Sustain?

roku stole my dingoSorry. I’m a little slow on the uptake here. Didn’t pay much attention to Roku (a device that allows you to stream videos via Netflix instead of dealing with red-envelope chaos). I used to be a rabid Netflix user, but finally got overwhelmed with the logistics.

But now if I buy a $99 Roku device and activate a $8.99 monthly Netflix account. Now I have unlimited access to 10,000 movies via streaming video.

When it seems too good to be true, it usually is. This doesn’t add up. The unlimited rental system made sense when Netflix was sending out DVDs in red envelopes. But now it would appear Hollywood would have a high incentive to squash this. In theory, I’d have no good reason to buy DVDs anymore, and I’d stop going to Blockbuster. So isn’t there a concern that this could cannibalize DVD sales and rentals? What possible monetization model exists between Roku/Netflix and the film creators?

Sure it’s not terribly convenient because it’s another darned device, it’s not portable, the video quality can vary depending on my bandwidth, and I don’t get the lovely color DVD case. But if I watch 2-4 videos a month, this appears like a relative no brainer.

Am I missing something?

14 Replies to “Can Roku Sustain?”

  1. It’s like a dealer selling crack rock on the corner. The first taste is free or at really low cost. Then after the hook is set and the competition is eliminated the price goes up. Oh..does the price go up. And still no lovely color case.

  2. I think you have to take a step back and look at it from Netflix’s perspective. For someone to rent a DVD, it costs them approximately $1.50 per movie with nearly $1 of this going to pay for postage. By streaming the movie, they’ll have to pay more for the film, but they don’t have to pay the post office to deliver the film. Even if they were paying the studios triple of what they pay for the DVDs, it still makes sense as long as they can keep their bandwidth under control (this is why Netflix uses their own data centers instead of going through a limelight or Akamai.

    At the $9 level, unlimited movies makes less sense for them, but at the $18 level, they get to take advantage of their subscriber’s laziness. Just this last weekend, I didn’t watch any of my Netflix movies which means that they got to keep $4 and change worth of rental fees, even though I didn’t watch anything.

    The whole key to their program is balancing the average number of movies watched with the right monthly price plan. They may not offer the $9 package forever, but until people are watching more than a dozen films per month, Netflix should be able to make some coin on their larger plans. If people start using Roku like a new form of cable, then at some point Netflix will have to raise prices, but with most of their customer base still stuck on the PC, they can get away with an all you can eat movie subscription for $9.

    I’m not sure how the studios feel about the DVD canibalization, but since they are going from making .50 per movies to $1 per rental, they may be willing to ignore this issue.

  3. Planned obsolescence. And also remember that there are MILLIONS of people still content with rabbit ears. Millions more who don’t have electricity yet.

  4. I’m just bummed that the Roku doesn’t work with Mac yet. The Apple TV is eh, okay. Just got that.

    Subscriptions for content might be the future for the industry, don’t you think? I dont’ see how different downloading would be from getting yr DVDs in the mail… saves Netflix a ton of money!

  5. Ohhhh. You need a PC for this bastard? How retro. BTW- Davis. Why on EARTH would anyone pay more than the $9 amount. I don’t understand the incremental value of the higher packages if you’re using a Roku. Do you get to watch them at the same time or something?

  6. I think that the PC is both brilliant and obnoxious. There are lots of people who want streaming video, but don’t have a TV. On the other hand, everyone of Netflix’s customers has to have a computer to use the service anyway. By leveraging the PC, it enables Netflix to make these boxes without the expensive memory that other solutions need. The Roku box is really just a wifi connection and a cheepo video processor chip, but if you take a look at things like Vudu, they have to have higher end processors, a hard drive and all kinds of computer guts that Netflix can skip out on. By harnessing the power of your own computer, Netflix can sell this box for $99 and still have Roku make a profit, while comparable experiences would run closer to $299 in order to make it work. There is talk of a non-computer box being released at some point, but if most of us had to choose between keeping our computer on all the time or an extra $200, I’m pretty sure that we’d cheap out.

    As far as why I use the three at a time . . . I’m not exactly sure. Part of it, is that when I watch films I tend to gorge on them all at once. Having three discs, plus Roku (or Xbox w/ media center) gives me a lot of content to go through. I’m not sure that there would be enough films in the one at a time to satisfy my movie needs. This means that there are weekends like this past one where Netflix wins, but there are some weeks where I’ve been able to watch a dozen pieces of content too. I like this flexibility even if it’s more expensive. I think the other reason why I’m a 3 at a time subscriber is that there are still 90,000 titles that are exclusive to the DVD. The 10,000 Watch Now titles are great for a snack, but it would take me a year to watch an entire TV series if I was having to rent the other discs one at a time. Eventually, Watch Now should have most of their films and this would be a harder decision to justify, but for now I’d rather be able to spend the whole weekend catching up on Oz, then to worry about spending an extra $10 per month.

  7. You don’t need a PC with the Roku device! It hooks directly to your broadband and streams movies from your Netflix instant queue. You load the queue with a Mac, your iPhone, a PC, your local library’s public access computer, anything that has a web browser.

  8. MDJ: I still use rabbit ears. I don’t have cable. I am one of those people that have to buy the digital converter box. I still use and am perfectly happy with it; I can only watch so many movies at once. I have too many other things going on in my life to be watching 3 movies at a time.

  9. Oh my God. Not only is marily illiterate, wears an eyepatch, has only 7 teeth, and is a spelling Nazi, she’s also a neanderthal.

    A Neanderthal Nazi. Obviously, those guys didn’t win their ethnic cleansing war.

  10. You need a computer to specify what movies to put in your Roku queue; Mac, PC, Linux, Cray … anything that can run a web browser.

  11. torrents? oh, I remember those…
    you don’t them any more everything is on web sites.
    the day a dvd comes out it’s an automatic collector’s item.
    the funny thing about this netflex device is the number of movies you can watch in a day rip and stream on a web site

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