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Netflix has taken a second step towards weaning its customers off the red-envelope delivery of their DVDs with its introduction of the Netflix Player by Roku.
The first step was its “instant watching” capability over a PC introduced in January last year. Subscribers could watch an hour’s worth of online video for every dollar they paid in their monthly subscription for at-home DVDs.
This January, instant watching became unlimited, with access to 6,000 movies and TV shows.
With the launch of the Roku set-top box today, the equivalent of around 10,000 DVDs are now available online for no extra charge and can be delivered direct to the TV.
It seems like a great deal for the one-time $100 cost of the box, although analysts are adamant that Netflix will have to introduce charges at some point for internet-delivered movies.
That would depend on how fast its customers migrate to the new form of delivery. It is a pace Netflix needs to see quicken to combat the threat from cable, telcos and the likes of Apple, who can achieve greater efficiencies and undercut it through digital delivery.
Netflix currently ships around 2m DVDs a day to its 8m members using 50 distribution centres around the US.
A delicate balancing act is required to prevent its revenues being cannibalised. As a Netflix subscriber, I could cut my three-dvds-at-a-time $16.99 monthly plan to one-at-a-time at $8.99 and still be able to watch as many movies as I wanted through the box.
Netflix discourages this by limiting choice - 10,000 is only around 10 per cent of its total library of more than 100,000 titles and most newly-released DVDs are not available through the box.
Netflix is slowly easing up on those limits to make online delivery more appealing and encourage a gradual switch - a few more recent movies are now being added such as The Orphanage, La Vie En Rose and Before The Devil Knows You’re Dead to the online list.
The other flaw in Netflix’s offering is the lack of high-definition. Its DVD rental service suffers similar problems with Blu-ray movie requests usually listed as “long wait”. The Roku box is HD-ready though for when Netflix is ready to upgrade and match some of its competitors.
That could come soon, with Netflix-enabled players expected from LG and other manufacturers in the second half of the year.
David Gelles, Joseph Menn, Chris Nuttall and Richard Waters in the FT's San Francisco bureau upload their views - plus tech insights from writers in New York, London and Tokyo
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