Now these guys completely disagree with the last article. I still believe content is King. And the cheerios theory tells us people love cheerios (content) but don’t really care where they get them so long as they are about the same price and they don’t have to work any harder to get them. The problem I see for Netflix is that they have lost their exclusivity on the “cheerios” and thier new “original content” is to expensive to maintain. Right now Netflix is still cheap to get each month, but for how long. If they don’t keep their prices down then Amazon, Hulu and iTunes will just keep chipping away at them. The “mail to your home DVD market” may be all they have left.
A Winner in the Battle for the Living Room
By Andrés Cardenal – August 7, 2013 | Tickers: AAPL, GOOG, MSFT, NFLX | 2 Comments
Andrés is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
Industry giants like Apple (NASDAQ: AAPL), Google (NASDAQ: GOOG) and Microsoft (NASDAQ: MSFT) are stepping up their efforts to win the living room war, an area that could have huge financial and strategic implications over the years to come. It´s still too soon to tell who the winner will be, but one thing is looking quite clear, though: Netflix (NASDAQ: NFLX) seems to be in an outstandingly strong position to profit from the future of TV.
Microsoft is having a hard time lately: sales of Windows 8 have been a disappointment since tablets have continued displacing PCs over the last few quarters, and the company is having serious troubles in mobile with lackluster demand for its Surface tablets.
But the company has always remained strong in gaming with its Xbox console, and it’s trying to leverage that strength to expand into computing and TV with the new Xbox One. The new console is intended to be an all-in-one entertainment solution combining games, music and online video with the ability to jump from one to another as simply as changing a TV channel.
We still need to see how the Xbox One resonates among consumers, but Microsoft has a product that sets it apart from the set top boxes built by competitors like Apple and Google. If the company succeeds in its attempt to make the new console a Trojan horse to conquer the living room, this could be a real game-changer for Microsoft.
Apple knows it needs to do much better in TV if it wants to be at the same level it has achieved in smartphones and tablets, and the company is admittedly working on that area.
Tim Cook has said on several occasions that the company has “intense interest” in smart TVs, and a full-blown television set from Apple has been rumored for a long time. The company has only taken modest steps, like improving its $100 TV box so far, but according to reports from The Wall Street Journal, Apple is also collaborating with cable companies and TV networks for a new online TV service, which may even include a premium option allowing users to skip ads.
Apple is a famously secretive company, but one thing looks quite clear: the Cupertino giant is moving forward with its plans to revolutionize the TV.
Google TV has not achieved much success, but that doesn’t mean the search giant is giving up on the living room. On the contrary, the company has recently launched its new Chromecast: a 2 inch-long, $35 device that plugs directly into TV sets and streams video and other digital content from mobile devices.
Chromecast lacks the breadth of content provided by other dedicated streaming media players, but it’s inexpensive and easy to use, and it has received mostly positive critiques so far. Considering these advantages, and the fact that Google owns key strategic assets like Fiber and YouTube, the company has serious potential to become a relevant player in the smart TV competition.
Microsoft, Apple and Google have many things in common: one is that the three companies are trying to revolutionize the TV, and another is that the three of them have partnered with Netflix in that competition. This is quite telling about the strategic position the company has achieved; if you want to compete for the living room, you need to have Netflix on board.
With nearly 30 million members in the US and 8 million in international markets, the company has positioned itself as the industry leader, and that means that hardware manufacturers need to play nice with Netflix if they want to succeed. Both customers and industry players know that Netflix is the best way to quickly and effectively access huge amounts of content.
Original content is a big part of that strategy, and it goes well beyond short term profitability. Netflix will not make enough money with new subscribers to pay for “House of Cards” or “Arrested Development,” certainly not on a middle-term horizon, but the company is playing this game for the long-term.
For $7.99 a month members have access to a wide variety of titles, and there is a big chance that some of that content will be considered valuable enough to pay the modest membership fee. As the company continues building its library for the same price, the proposition gets even more attractive over time.
At this stage, and increasingly more over time, finding reasons to subscribe to Netflix is much easier than finding reasons for not doing so, and that’s a great thing for Netflix and its shareholders.
The war for the living room is on, and it will only get more intense over time. While major industry players fight each other to own the hardware and software in the new TV paradigm, Netflix is simply focused on providing plenty of high quality content at a compelling price. The way things are going, Netflix is securing its position in the future of TV.