Netflix’s CEO, Reed Hastings, declared that Netflix was now “a streaming company” during his Q3 results commentary last week. But Netflix’s transition to a streaming-dominated model has not been cheap, and costs will continue to rise.
Barclays analyst Douglas Anmuth estimates that by the end of 2011, Netflix’s total streaming commitment may reach $2 billion. This cost would include Netflix’s deal with Epix, as well as estimated renewal costs for content from Starz.
A bright spot on the horizon, however, is the fact that as more of Netflix’s subscribers turn to streaming as their primary source of content, the company will be able to save on its enormous postage and physical disc acquisition costs.
It’s a one-way street we’re on as streaming and downloading slowly but surely replace physical discs. Current and potential streaming industry competitors, including Redbox, are no doubt cognizant of the high content licensing costs that accompany a streaming model. Would that be enough of a factor to keep anyone out of the streaming game?