Re:Netflix kills Qwikster
by erichocean on Tuesday October 11, 2011 @12:57AM
(#3097172)
For those wondering why Netflix was allowed to stream content at low cost so far, here's the reason: marginal consumers.
Currently, the content industry gets $32 billion/year for content. There are still a few people ("marginal consumers") that aren't paying for content now, but at a much subsidized price, are willing to view it.
These are the customers Netflix has right now for streaming.
Now here's the problem: marginal consumers are only marginal when the represent an insignificant portion of users. When they grow numerous enough, the pricing terms have to change. That's why Netflix is jacking up prices.
Eventually, Netflix will have to pay the same price as Cable providers for content (and it's nowhere as close to as cheap as what Netflix is charging now).
Currently, the content industry gets $32 billion/year for content. There are still a few people ("marginal consumers") that aren't paying for content now, but at a much subsidized price, are willing to view it.
These are the customers Netflix has right now for streaming.
Now here's the problem: marginal consumers are only marginal when the represent an insignificant portion of users. When they grow numerous enough, the pricing terms have to change. That's why Netflix is jacking up prices.
Eventually, Netflix will have to pay the same price as Cable providers for content (and it's nowhere as close to as cheap as what Netflix is charging now).