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Why isn’t Netflix failing like everything else?

Netflix vs The Music Industry

Netflix, the world’s largest video subscription service recently announced that fourth-quarter profits jumped 36 percent to $30.9 million from $22.7 million in 2008’s final quarter. Sales this past year were $445 million and Netflix expects to have 13.8 million subscribers by the end of the first quarter on 2010. Meanwhile, overall music sales are up only 2.1% over the previous year, bringing in about 1.5 billion dollars. That’s right – a single company – brought in almost a third as much revenue as the entire music industry.

So what do Netflix and the music industry have in common?

They both deal in digital information stored on a disc. In both instances, it’s possible to stream that same information over the internet. Both CD’s and DVD’s can easily be copied and duplicated via your computer, though some might argue that due to a variety of factors (size, file complexity, etc) a CD is easier to copy than a DVD. Maybe. With services like Rhapsody and Napster you can stream music over any high-speed internet connection for a monthly fee of $7 – $15. There are also many sites like Last.FM, Pandora, and even MySpace where you can stream music for “free” if you don’t mind a bunch of advertisements covering your screen. Netflix subscriptions start at about $9 and go as high $48 depending on how many physical DVD’s you rent at a time. Both movies and albums can be made by independents for a few grand or by giant companies for millions. Either can feature huge celebrities, or some schmo nobody’s has ever heard of. Both can be great, both can suck.

So the music industry has a lot in common with Netflix – but what do they do differently?

Netflix doesn’t sell anything, it’s only a subscription service, but unlike any music service they send out physical media. That would be like Rhapsody sending CD’s to your house that you would listen to once or twice then send back. For the most part, people seem to like to either have music, either through ownership (using the term loosely) or have access to it (such as an online playlist.) Despite the fact that DVD sales were significantly higher than music sales in 2009 (about $7 billion higher), in my personal experience I’ll listen to my favorite album significantly more than I would watch my favorite movie. On the surface that would seem to indicate that an album actually has more value to the consumer than a movie, but not so fast – there are others factors at work.

Denying music our full attention

First we must think about length, but not in the obvious way. Sure, most films are about an hour longer than most albums, but television shows on DVD are extremely popular and many of them are shorter than albums. But then song length tends to trump TV show length, so that’s a wash. The main difference is how engaging the material is. Even I, someone who’s devoted their whole life to music can casually put on my favorite album, then turn it off in the middle of the third song because I need to go do something else. I would rarely do that with a DVD. In fact I wouldn’t even start a movie if I wasn’t planning to sit and devote total attention to the entire thing.

Maybe what the success of Netflix proves is that the ‘digital devils’ aren’t to blame for the music industry’s demise after all.

Maybe music has become less engaging. Or perhaps we’ve just become too passive when it comes to listening to music. In either case, find the root of our casual attitude towards one of our favorite things, and maybe we can fix this mess.

About the Author: Phil Woodring has been barely scraping by as a full time musician and producer since 2001.  He releases music and other junk through his label VibaRhythm Media.

Reader Comments (1)

I'm not sure that this is a fair comparison. Netflix's success was due to the fact that it provided a MUCH better experience than video rental stores. One price. No late fees. You don't have to leave your house; the DVDs come to you. And wide selection, more than your local Blockbuster could stock. And Netflix has recently added streaming video options. I watch Netflix shows through my PS3 now.

But arguably streaming music outlets like Rhapsody, Spotify, Lala, etc. also offer these same features. So why aren't people jumping on the streaming audio bandwagon in droves?

I can only guess. One of the things that comes to mind is portability. Most people still watch their movies and TV on a television screen in a single sitting, so digital video largely doesn't need to be portable -- yet.

On the other hand, people listen to music in many different settings: while they work, while they drive, while they entertain, etc. There's no fixed point of consumption. As of yet there's no great solution for making digital music portable. You're tethered to a computer, or worse, a particular device. Why shell out $14.99 for a music subscription when it doesn't work on my Blackberry? Or only works in a web browser? Or only on Windows?

I think the difference is in the way people obtain movies has shifted, but the way they consume movies has not significantly changed. For music, both have shifted drastically. No one service has solved the problem of universal access across many devices.

February 9 | Unregistered Commenterscottandrew

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