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As Netflix transitions its focus and subscriber base over to its streaming service, the company hopes to shave off some of the more than $600 million it pays the USPS annually for its by-mail service. According to one analyst, however, Netflix’s projected postage savings will not offset the rising costs of acquiring streaming content.

Wedbush Morgan analyst Michael Pachter believes that digital license fees for TV content alone will cost Netflix 0 to 0 million annually.
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Netflix’s new deal with Disney/ABC alone will be quite costly for the streaming provider. Said Pachter:

“In our view, the Disney/ABC content constitutes around 25% of the total television content Netflix intends to offer . . . And we think the emergence of streaming competition (Amazon) could drive content costs even higher,”

With content acquisition costs spiraling ever higher, will Netflix’s subscriber growth keep pace? Let us know in the comments how you think the company will fare over the next year.
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(via Home Media Magazine)

9 Responses to “Analyst: Postage Savings Won’t Outweigh Netflix’s Streaming Content Costs”

  1. Member [Join Now]

    It seems like Netflix is hoping that once they get the streaming established, they can phase out the by-mail portion of their business and eliminate postage, warehouse costs, etc. entirely.

    Also, as has been noted on this site recently, these analysts don’t necessarily know what they’re talking about.

  2. Visitor [Join Now]
    Jamie [visitor]

    Analysts are guessing and of course when you start guessing you might be right sometimes or wrong sometimes.

    Personally I’d much rather have streaming then waiting on a disc. I just fire up the PS3 and off we go to whatever we want to watch.

    Of course I think that’s still a very small portion of Netflix’s subcriber base. The vast majority still want discs, and there’s still a lot of good content that is only available on disc.

  3. Member [Join Now]
    Wintermute [wintermute]

    To hell with TV shows. Most are too lowbrow to sit through, let alone pay for. Keep the focus on feature-length movies.

  4. Visitor [Join Now]
    Russ [visitor]

    Of course with streaming you don’t get the extras and the commentary tracks, and the IP will throttle download speed when they feel like it, but Netflix will certainly reduce the number of distribution offices and save a lot. If the streaming content costs go up for Netflix, it’ll go up for everybody so at that level it really isn’t a competitive issue unless a competitor surpasses Netflix in quality of service.

    At that point it becomes a question of whether costs go up so much that a monthly subscription costs more than ala carte pricing for the user. But there’s no reason Netflix can’t offer both or also offer an X-hours per month streaming deal. The only way Netflix loses out is if they can’t get the rights to enough content, but at this point the only reason a studio would cut out Netflix is if they could get gobs more money on a long-term exclusivity deal. So far Netflix hasn’t been interested in exclusivity for themselves so they’re not likely to overpay.

    And there’s always the possibility of putting advertising in the stream for the users who want a lower-cost option.

  5. Visitor [Join Now]
    Tony Wagner [visitor]

    My kids watch the streaming stuff but for me Its worthless I have spend over $5000.00 on high end audio speakers & recievers and the streaming junk is nothing but 2 stereo! Worthless for anything but basic kids cartoons. 90% of the standard TV shows on my Fios service are 5.1!

  6. Visitor [Join Now]
    Debbie [visitor]

    The other problem with Netflix is not being able to use ClearPlay or TV Guardian to mute objectionable material: profanity, nude scenes etc. I thought they were going to have closed caption available soon, but I have yet to experience it or be informed it is available.

  7. Member [Join Now]

    Some of us need captioning, and while I enjoy watching streaming video if I can turn it up loud enough, I much prefer to have the DVD so I can turn on the captioning and “get” everything without sharing with half my building.

  8. Member [Join Now]
    PCNetGuy [pcnetguy]

    Sorry, but… no closed captioning and only stereo = NO STREAMING for me!!!