Netflix: The Future Is Streaming
Netflix expects its DVD-by-mail business to peak in 2013, at which point it believes its Watch Instantly streaming service will be driving its growth. That's the gist of a slideshow posted on the company's jobs site that details its plans to transform itself …
Context & Ripple Effects
Netflix has spent two years wiring its streaming service into hardware: its 2008 partnership with LG put Watch Instantly directly on televisions, and this spring the company shipped an iPad app at Apple's tablet launch, showed a red-themed Windows Phone 7 prototype, and hinted at iPhone and Android versions. The slideshow on its jobs site makes the strategic logic of that device-building explicit.
The company is stating a timeline for its own transformation: DVD-by-mail peaks in 2013, and Watch Instantly takes over as the growth engine. Publishing that forecast in a recruiting deck signals confidence that subscribers will follow the screens Netflix has been embedding itself in since 2008.
First-order effects
- Netflix's own hiring and investment priorities shift toward streaming infrastructure and apps, since management expects the mail business to top out in 2013 rather than keep compounding.
- The mobile push gives Watch Instantly a footprint beyond the living room within weeks: a confirmed iPad app, a Windows Phone 7 prototype, and rumored iPhone and Android versions turn every new screen into a potential subscription endpoint.
Second-order effects
- Consumer-electronics partners like LG, which built Netflix into its TV sets back in 2008, now have a direct incentive to market their devices as Watch Instantly endpoints, making the app a competitive feature across TVs, tablets, and phones.
- As streaming becomes the growth engine, Netflix's spending mix tilts from disc inventory and postage toward streaming licenses and delivery capacity, squeezing the margins of the mail operation it still depends on until the projected peak.
Third-order effects
- If the 2013 peak arrives as forecast, home-video revenue migrates from per-disc transactions to flat-fee subscription licenses, forcing studios to reprice how they sell access to catalog films.
- The device race points toward connected hardware where the service brand, not the box, anchors loyalty — a structure that favors whoever controls the subscription relationship over whoever manufactures the screen.
The trend: Home entertainment is migrating from physical-disc distribution to flat-fee subscription streaming on any nearby screen, and Netflix's own 2013 peak forecast marks the crossover point it intends to manage.