A pessimistic view on Netflix growth. By Rodney
For the first quarter of 2011, Netflix showed increased profits, membership rates and power in the world of television and movies. They increased in every important category across the board and at no time has the company been as high as they are currently riding. Netflix has arrived as a major player and nobody can deny that. But will it last? Here are five reasons the answer might be no.
When a company that is relatively new begins earning money in avalanches, it can quickly get out of hand. Netflix has shown itself to be a responsible company, but can they handle this huge windfall unscathed?
Yes, people have been saying this for a long time and yes they are handling it impressively so far. Still, it is not a situation where the shows are going to be given away forever. When the Netflix service starts to affect their bottom lines, the noose will tighten on releasing their products.
Right now, a Netflix membership is a huge bargain. They are raking in members at breakneck speed. When you can pay less than the cost of one movie ticket for an entire month of entertainment, then you have a very easy decision to make. Most people join up the minute they realize how easy and cheap it is. The catch here is that sooner or later Netflix will have to increase their rates. The real litmus test will be when that day comes. Can Netflix survive a higher membership cost? This question leads us to our next and most important point.
Netflix is making a ton of money, and the people providing them with programming see those reports. They see the money, and they will eventually want a larger slice of the pie. Right now, Netflix is getting a pretty good bargain to be able to offer such a cheap membership. When their prices go up to get content, then Netflix will have to pass that increase along to their customers. Needless to say, customers will be a bit miffed about that and some will likely leave. Will they survive?
Netflix has been pretty much flying solo for a good while, and it remains to be seen whether they can handle some real competition. Hulu is making some noise and may be viable competition in the years to come and others are working their way there. Netflix will soon have some other things to think about and it could affect their success.
Each of these things are potential pitfalls for Netflix. If they continue on the road they are on, and make smart decisions, they might just slide right through. So far, they certainly have made all the right moves.
It should be an interesting year to come in the online media world.