Rise of the Netflix Killers

Rise of the Netflix Killers

Netflix is the king of streaming, but there's a growing crop of contenders ready to dethrone it.

We hear you: Netflix sucks. You’re tired of not having the latest releases. You’re sick of recommendations that don’t make sense. You’re fed up with queuing movies, only for them to be unavailable due to an expired deal. The hard thing about breaking away from Netflix, though, is that you’re not exactly sure where to go next. You want to keep it simple and stick to one service, but you’re confronted with a confusing patchwork of options: Amazon Instant, Hulu, Vudu, Blockbuster’s revamped streaming service and more.

Here are online and connected-TV services ramping up in 2013, hoping to chip away at Netflix’s sizable market share and steal away customers. Which one is best for you? Read on to find out.

Redbox Instant and Verizon: Filling in the Gap

Redbox, the DVD rental kiosk service at grocery and drug stores across the nation, is joining the streaming business. This March, the company plans to launch “Redbox Instant,” its streaming service and app, giving subscribers access to thousands of movies online and four DVD rental credits for $8 a month. Compared to Netflix, its online choices are scant, according to insiders, consisting only of movies. So if you hoped to binge-watch through seasons of “Mad Men,” you’re out of luck. Many analysts doubt the Redbox Instant — a joint venture between Redbox and Verizon — will gain much traction.

But Coinstar-owned Redbox may siphon away dissatisfied Netflix subscribers. Hollywood often withholds releases from Netflix to protect DVD and Blu-Ray sales, resulting in a glaring lack in inventory. Redbox, meanwhile, gets the latest and greatest. And with 42,600 physical kiosks across the U.S. and growing, it’s succeeding admirably — with revenue up nearly 20 percent at the end of 2012.

“This is about choice,” Shawn Strickland, Redbox Instant’s CEO, told Businessweek. “We have all the movies of the other services, but the four-DVD credits bring fresher content into the offering. If consumers want new movies, they can go to the grocery and pick them up.”

Redbox Instant isn’t strong enough to unseat Netflix yet, but it may pull enough customers to weaken the king of streaming services, as it negotiate its transition from physical rentals to an all-digital model. For the company, the physical kiosks are a selling point, offering the latest films that customers want to see — which aren’t on Netflix. So if you want that hot movie in a convenient service, Redbox Instant may be the one for you.

M-Go: Hollywood’s Choice

Most streaming services have roots outside the traditional entertainment system, so they’re rankled with thorny licensing issues, fees and distribution windows. That means popular films and TV shows become pawns in a power struggle. So unless services pony up for prime content, scrappy streaming services won’t get it — and even then, they’ll have to wait for the privilege. The film, cable and TV industries would prefer to leapfrog over these services altogether, but they have yet to come up with an all-in-one solution. Its UltraViolet format hasn’t caught fire with consumers, but the industry hopes to change that in this year by throwing its weight behind “M-Go,” an on-demand streaming service.

Burbank, Calif.-based M-Go features content from five of the major six movie studios — Paramount, Sony and Warner Bros., for example — with the exception of Disney, which just inked an exclusive agreement with Netflix. The online store, which launched in January, touts a clean and simple interface. It also offers a service with a difference — if M-Go doesn’t have it, it’ll tell you a service that does, a rarity in an increasingly-competitive sector.

M-Go also streams UltraViolet content, with a digital locker services to come. With Hollywood, you get a lot more premium choices, but with limitations: you can only stream to PCs via a Web browser, and connected devices, like Sony and Vizio connected-TVs and Intel ultrabooks, with a pre-loaded app.

The company is making plans for an Android app, and will soon arrive to LG and RCA devices as well. M-Go’s coziness with Hollywood gives it a content advantage, and if you’re looking for the latest and greatest, you’ll be tempted. But limited viewing options hamper the service. Restricting M-Go to PCs, laptops, connected-TVs and some tablets — and not smartphones or iPads — keeps it from gaining ground. M-Go will need to ramp up outlets quickly if it stands to take on Netflix.

Aereo: Streaming Live TV Online

Streaming content doesn’t usually mean pulling up live basketball or football games on the tablet or tuning into the President’s address to the nation via iPhone. “Aereo” aims to change that, making network TV content accessible as it’s aired. If you’re looking to drop your expensive cable and satellite packages, dubbed “cutting the cord,” Aereo may be for you. At $8 a month, it’s cheaper than cable, which can run near $100 a month in certain markets.

For many, this sounds like the Holy Grail of next-generation TV — almost too good to be true. And it is: at the moment it’s only available in New York City due to technology. Aereo takes advantage that anyone can put up an antenna to get free local broadcast signals — it’s the same provision that lets you put antennas on rooftops or get rabbit-ear ones for your TV. The service, basically, does this for you — they put up tiny antennas in data centers, which pick up broadcast signals and relay them to your Internet-connected devices.

Aereo hits at the biggest advantage that cable and TV networks have over streaming services: their live programming. After the service launched last year, rival lawyers immediately took aim, questioning the legality Aereo uses to broadcasts its signals. Deep-pocket investors, including media baron and billionaire Barry Diller, are keeping it afloat as it weathers the legal storm. The company isn’t releasing numbers yet, but the response is encouraging — and it plans to expand to 22 more markets this spring. Aereo lets you “try for free” an hour each day, so it should attract plenty of intrigued customers.

Even if Aereo falls to legal muscle, it’ll push networks into streaming more live content, especially as similar services, like Nimble TV, launch. Networks will need to deal with the riddle of trying to monetize online outlets, which still can’t compete with TV advertising revenue. But threats like Aereo underscore consumers want online live broadcast — and they’ll go any route to pay for it.

Roku: Don’t Forget the Humble Set-Top Boxes

Roku” set-top boxes, which let you hook into services like Netflix and Hulu on your TV, are often been overlooked in the so-called “smart TV” revolution. But Roku’s gained a foothold in the market, playing a valuable role in helping consumers who lack a game console or HDMI outlet to stream content to their living room.

In 2013, it plans to release products that bridge the gap between streaming and live broadcasting. The company is teaming up with Voxx — formerly Audiovox — to create a digital antenna that pushes broadcast TV signals, as well as streaming and online content, into the living room. If you want to keep your home entertainment experience a communal one, centered on the living room TV set, but want the wealth of content you find on your phone or laptop, Roku and Voxx’s project may be ideal for you.

It’ll face stiff competition when it launches the last-quarter of 2013. Microsoft’s Xbox gaming console became a powerful player in streaming to the living room, and Sony’s PlayStation may re-enter the space. Apple, too, plans to unveil a revamped version Apple TV, which insiders believe will shake up the sector. Roku aims to stake its place in home entertainment, as the landscape shifts and blurs with online rivals. But Roku isn’t starting from scratch. It can parlay a sizable customer base — and thriving content partnerships — as it grows. The company is aware of the shift in live broadcast and streaming converge — and it wants to be at the forefront.

“I think that phenomenon is just going to keep going,” Steve Shannon, Roku general manager of content and services, told Forbes. “We do believe that the Internet will become the most popular way to watch TV — it’s just hard to say when that tipping point will occur.”

Can They Topple Netflix?

For all the complaints, Netflix succeeds at the moment because it consolidated what consumers want into their service: a vast content library, as well as the ability to use it from more places than the competition. It recognized a long time ago that watching TV doesn’t mean sitting in the living room to watch shows on a channel. You watch what you want, where you want.

“The inherent success of Netflix streaming can be attributed to its content library and TV centric strategy,” John Buffone, director of devices with NPD Connected Intelligence, wrote in a blog post. “The definition of a TV channel is changing. You no longer just tune to, say channel 27, to watch TV, pressing the Netflix button on the remote is just as easy.”

The streaming giant spends a lot of effort working with device makers and content providers to bring its service to more devices, apps and platforms, letting you access TV and movies anywhere and anytime. It’s also upped the amount it spends on content itself, creating its own shows. And despite the politics of Hollywood, licensing and distribution, Netflix still manages to have the broadest selection out there.

Some services like Redbox Instant address Netflix’s flaws, and others tout advantages Netflix can’t ever hope to have, like live TV. But the hard truth is, if you’re looking for an all-in-one service, you’ll wait a long time, if ever. Cable and TV won’t let their live broadcast rights go online easily, and both are powerful, protective industries with vested interests in the current system. They’ll deploy considerable resources to keep things the way they are.

It’s still possible for you to cut the shackles, but you have to replace Comcast or Time Warner with Netflix, Hulu or maybe Amazon, augmented by a Roku antenna or maybe Aereo — if your market has it. In other words, you’re exchanging one bundle of cable channels with a bundle of online services — one bundle for another, and that won’t change anytime soon.

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