One of the reasons I believe that Netflix should last for years, is because they are dealing with what is now, rather than what may be in the future.
Yes, there is a demand for video-on-demand and eventually (who know how many years it'll take) it will arrive. I know there are some rumblings in that direction and it is slowly being introduced; still it is years away before it will reach critical mass and have the types of offerings available that Netflix has now.
They stock almost every one of the 60,000 movies, how-to videos and television shows that are available on DVD. How many of those are rented out on a typical day? Try between 35,000 to 40,000. In other words, every single day two out of every three offerings ever put on DVD are rented out by Netflix. This is a sampling nobody else can compete with at this time.
Another strength that Netflix has is their empowering of users to rate movies on a one- to five-star scale and then are enable to make online recommendations to their friends. This is another form of user-generated content that is exploding on the Internet. The company then uses the system to present other movie choices to you based upon your previous picks.
All of this sound simple and easy, but it also takes time to put into place and receive the type of feedback that adds value to the experience.
Why am I so bullish on the company? As I've already mentioned, it will take years to put systems in place to offer real competition to them. Another reason is that Movielink is only able to offer a tiny selection of 1,500 movies at this time and another competitor Comcast, only has a selection of 800 movies. We probably all know this intuitively as who doesn't say that there's nothing of interest on TV? This is the reason why: they only have a tiny amount of shows to offer.
The other major problem that is out there is that studios have sold most of the exclusive digital rights to movies already. The kicker is that they don't apply to physical DVDs. These agreements are in place for years, and since they bring in millions, they aren't about to be dropped anytime soon.
What is giving Netflix such a long lifespan, is the failed business model of Hollywood itself. This is why Netflix will survive and thrive for a long time even though the technology and business model to supplant it are already in place.
The more important thing is that it will give Netflix the time to create its own download business model that will eventually be the only one that will survive. What will help Netflix is that they are already branded in the minds of DVD watchers, and it will be a simple transition from envelopes to downloads.
The only question in the whole mix will be how user-generated videos will impact the number of movies people will rent. Other than that, Netflix will have clear sailing for years to come.
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