Posted the following today over on ArsTechnica re: the whole iTunes vs. Netflix thing. Posting it here as well for my imaginary audience of rational and discerning fans. Enjoy.
Consider the following: with the iTunes model, you are renting access to one particular movie or episode of something. If that rental turns out to be horrible, you can’t exchange it for something else; you’re now invested in that particular rental. At $0.99 per (which I guess is the median price for episodes), you can only view (as per the article) 9 rentals through iTunes for the same price one could spend on an entire month of Netflix viewing… and you’re still stuck with just a rental; a purchase through iTunes is a drastically different investment than a purchase of a full season of a particular show on DVD in a retail store.
With the Netflix model, you are renting access to an *entire library* of media, viewable as much as one wishes for the entirety of the month. If I see something in the Netflix library that looks pretty bad but still interesting enough to risk watching (scifi, horror and anime titles fit this description pretty frequently for me), I risk nothing but my TIME in choosing to view that title, as opposed to forking over a dollar to discover the movie sucks. In addition, I don’t have to watch the ENTIRE movie; my Netflix ratings are strewn with the abandoned corpses of movies at only 5-10% completion… so there’s literally no commitment to any particular title. I’m paying for the availability of the service as opposed to the (temporary) ownership of the given title, and I much prefer it that way… just as I prefer to pay $25 a month for relatively slow internet access without a data limit and would NOT pay the same amount for blindingly fast internet access with even a 100Gb limit… I probably consume more than that per month on Netflix (and The Daily Show) viewing alone.
So yes, from the consumer perspective, unless there’s one show in particular you already KNOW you like, Netflix is the much, much, much superior deal… particularly for grazers like myself. I use Gamefly for the same reason, especially since it allows me the best of both rental and retail worlds: I can rent access to the Gamefly library as quickly as I can return and receive new discs (so again, I’m expending my TIME more than anything else), yet can also permanently purchase games I feel I’d like to retain forever if they are offered at an acceptable price point. So I can try out stuff that looks potentially crappy or looks ok but has been rated crappy to see if it’s any good… and if it actually IS crappy, I can (and do) send it back the same day; I’m only out the time invested, as opposed to a set rental fee per rental.
So from the vendor perspective, it appears to me to take this shape: under the iTunes model, consumers are under pressure to pick their purchases wisely. If no one chooses to watch your show, you make NO MONEY; and since people are unlikely to choose to watch shows randomly (as per previous analysis of the $0.99 untransferrable investment) you only stand to make money reliably off people who ALREADY like your show… and I would suggest from my own watching habits that such fans of a show are more likely to purchase (or otherwise “acquire”) the DVD box set to be able to watch the show anytime, anywhere than pay $15 (for a typical 15-episode season) for a single viewing of the season. Pricing their “undervalued” episodes at something higher than $0.99 would seem to make them even LESS attractive to consumers; I myself would definitely just go buy the box set instead… or just wait for it to come out on Netflix.
And there’s the rub: Netflix pays a flat fee regardless of viewership. So if I have a show with low TV viewership, I still get paid regardless of Netflix viewership; indeed, my show’s popularity (and subsequent DVD/merch sales) can improve if people randomly graze to my show based on Netflix rating suggestions, as I myself did with Better Off Ted, Archer, Happy Tree Friends and the vast majority of Showtime, HBO, Discovery Channel, Food Network and Travel Channel shows, to my great delight… not to mention countless excellent documentaries and awesome foreign films. Even the owners of shows who worry about “undervaluing” their shows via iTunes should (and apparently do) prefer the Netflix model as Netflix income is assured and (depending upon subscription volume) steady, whereas iTunes income would come much more in spurts, assuming people didn’t just grab the season via DVD (or “elsewhere”) instead. Indeed, as more high popularity vendors sign on to Netflix, the quality of the library improves, increasing subscription volume and potentially allowing Netflix to increase their subscription costs, or even offer an “Instant Only” subscription… which would most likely allow an increased fee be paid to vendors.
So for all concerned, I would guess that the Netflix model is the way to go. The only thing I could see that would result in this NOT being the case would be a complete changeover of ISP structure from a pipeline system to a data balance system… in which case iTunes could become viable as each byte expended becomes precious… but on that day, I’d probably just grab the $5 “eMail-worthy” plan out of protest and keep renting DVDs through Netflix instead. Thoughts?