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Netflix [NFLX
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] is considering a service which only delivers movies and television shows through Internet streaming, skipping its traditional mail-order business.
"Reed Hastings mentioned it's a possibility," said company spokesman Steve Swasey, referring to the company's founder and CEO. No more details were given, but Dow Jones reports the company recently surveyed subscribers about the possibility of an Internet streaming-only service for $9.99.
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CNBC.com Netflix |
This potential new service would be a radical move for Netflix, which has built its business over the last decade shipping movies via overnight mail. Streaming is a relatively new offering by the company, one which is added for free to any traditional Netflix subscription.
An Internet-only service would be much cheaper for Netflix, as there would be no shipping costs. It would also give customers instant gratification.
However, it requires a huge infrastructure investment. One analyst suggested Netflix already spent $70 million last year putting in the IT for streaming, with plans to spend even more this year.
The other drawback is that Netflix has only a fraction of titles available to stream compared to the vast library it has available to mail, and many of the films you can instantly access via the Internet are old. That's because other distributors, like broadcast networks or pay cable channels, have cut deals with studios to get new releases sooner. That could change. As CNBC reported in a profile of the company a few weeks ago, those studio contracts are starting to expire, and Netflix is aggressively pushing to get new releases sooner.
In that profile, when asked about criticism of the company's heavy investment in the "hybrid model" of both mail and internet, Hastings responded, "If there are people who want to be against the internet, I guess they're welcome to bet against the internet." Hastings went on to say, " We look at the investment we're doing and say we are going to bet with the internet, and we just feel that we should be clear with investors about that so they know what they're getting."
Will there come a day when Netflix dumps the envelope? Who knows? "We're not commenting further," Swasey said.
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