Dan Rayburn - StreamingMediaBlog.com

Report: Walmart To Charge $2-$4 Per DVD To Convert Movies To UltraViolet Cloud

[Updated: Tuesday, March 13th - Walmart announced they will charge $2 for SD and $5 for HD.]

Tomorrow at 1pm ET, Walmart along with UltraViolet partners Universal, Paramount, Warner Brothers, Sony Pictures and Fox will announce Walmart's UltraViolet offering. Studio execs I have spoken with say that consumers will be able to bring their DVDs into Walmart, which will then charge the consumer between $2-$4 per DVD to give the consumer access to that movie in the UltraViolet cloud locker system. DVDs will then be stamped at the store, so they can't be used by multiple people and I'm told pricing for converting the DVD to digital will vary based on either SD or HD quality.

I'm sure the studios and Walmart are going to talk about how great this is for consumers and they will probably use a term like "nominal" to describe the fee consumers will have to pay. In reality though, the studios are doing exactly what consumers don't want, which is forcing them to pay multiple times for the same piece of content. The fact that consumers already spent money to buy the DVD apparently is not good enough to allow them access to a free digital copy, which they could easily get if they ripped the DVD on their own. It costs the studios almost nothing to store the movie in the cloud, about two cents per movie, and it only costs about four cents, at most, for them to pay a CDN to stream the movie to the user. So at $2 per DVD, a user would have to watch the movie 50 times from the cloud before the studio was losing money from digital.

Consumers have been vocal in saying they want more content digitally, at a fair price, and many of the studios are acting like they are giving consumers what they want, when in reality, they aren't. You can get digital, but only of you pay for the movie again. And you can get a digital copy with the Blu-ray disc, but only if you pay between $5-$10 more for a copy that includes a digital copy. Pricing seems to be all over the map for a Blu-ray with digital copy, but they are clearly much more expensive than just the Blu-ray only disc.

While there have been a lot of technical issues with the UltraViolet system that have been well documented in the media, those issues could be resolved over time, but it's no guarantee. UltraViolet is not easy to use, it requires multiple accounts with multiple websites, there is very little device support and Disney and Apple refuse to join the consortium. Physical Blu-ray copies with digital are more expensive and studios are charging so much for their download and own offerings, between $15-$25 a movie, that it makes more sense for a consumer to rent the movie for $3.99 instead of buying. Many studios have gotten so greedy that they are pricing themselves out of the digital download to own market. In addition, with the way the content windowing works for content going from theatre, PPV, rental, purchase etc. the studios are now going to have to augment that window in some way to allow for the new UltraViolet offering.

Aside for all of this, UltraViolet is a cloud based system that requires you to have to be connected to the Internet. As far as I know of, there is no way to play your movies from the cloud locally on your machine if you don't have access to the Internet. You have to connect to UltraViolet's system to get you license key and if you can't you won't be able to play any content. Unless UltraViolet comes up with an option for local playback, your entire library of movies and content will be in the cloud not accessible locally. That's not going to be ideal for a lot of people and it also requires consumer to once again choose between one quality over another. Studios should want to deliver consumers the best quality video available, yet they are going to force many users away from HD, simply due to price. That's not the best user experience.

Another topic one has to wonder about is privacy. UltraViolet is going to know every movie you stream from the cloud. And with so many studios, broadcasters, CE manufactures etc. in the program, what you what and when you watch it is going to be known. Who has access to that information? I can't find any language on the UltraViolet website that talks to the privacy of one's account in the cloud. Are they going to be data mining our usage habits and sharing that with third party companies? If they do, and I expect they will, that data is worth a lot of money to advertisers who will then know the demographics of who is watching their movies. That is very powerful data that UltraViolet is collecting, which they can make a ton of money from.

And what if UltraViolet starts using that information to track what you do outside of UltraViolet? Can they now deny you access to a movie in the cloud if they notice your IP address shows up in a torrent site? Can they now disable your UltraViolet account? In the end, do you really own the content that is in the cloud? I think this could be a major concern if the service starts to get some traction and is something UltraViolet will need to address

In January, Paramount rolled out a service to sell ten year old movies via the UltraViolet cloud for $22.99 for HD. Many of these same movies are available via Blu-ray for $8-$10 cheaper and I still can't find any definition from UltraViolet on what they classify as an "HD" movie. What exactly is the quality? How was it encoded? Is the digital copy in the cloud comparable to the Blu-ray disc? I highly doubt it as it would probably require 8-10Mbps to stream, which means the studios are selling HD digital copies, which are less quality than the Blu-ray, yet are charging consumers more for it. And the studios think this is something consumers won't notice?

Every year the studios seem to come up with new ideas and ways to try and charge consumers for movies. First it was the studios delivering two-hour movies to cell phones, even though consumers weren't and still aren't asking for the service. Then came the studios charging more for a digital download over the physical DVD. That was quickly followed by Sony charging $24.95 for a 24-hour rental and admitting it does not want to upset Walmart and the studios own DVD business. Then you had studios charging consumers more for movies on USB drives, and you also have some of the studios forcing Netflix and Redbox (and library's) from renting physical DVDs for 28 or 56 days, because the studios are trying to force consumers to buy more DVDs. Not to mention you constantly have the MPAA complaining about piracy. I don't condone stealing, but what do the studios think will happen when they aren't giving customers what they want at a fair price and will do everything in their power to prevent consumers from copying their own DVDs?

As a whole, the studios still don't get it. They aren't listening to consumers, they haven't truly changed their way of thinking and their pricing and business models don't make sense. In reality, a back-end system like UltraViolet that would allow such seamless viewing across all devices still hasn’t been created and it won't be the studios that make it happen.

Studios Still Don't Get It: Paramount Charging $20 To Stream 10+ Year Old Movies

For all talk from the studios about how much they are "embracing" digital, they really aren't. Consumers are asking for more choices when it comes to being able to get first-run content in digital form, for multiple devices, yet the studios continue to launch services that are limited in playback, with pricing that's too expensive.

The latest example comes from Paramount which has just started offering the streaming of films from the cloud, using the UltraViolet platform, and are charging between $22.99 for HD and $12.99 for SD. Support for Android and Windows Phone are not possible and while it works on iOS devices, HD quality isn't possible, only SD. It also doesn't work on set-top boxes and on average, the DVD of these movies they are selling cost 2/3 the price of digital. On the ParamountMovies.com website, a recent movie from 2010 costs $22.99 to buy rent in HD, yet a movie that is thirteen years old is only $3 cheaper and still costs $19.99.

What studio executive thinks consumers are going to pay $22.99 to stream a movie when we can buy the DVD for $7 or rent it for less than $2? The economics don't make sense for how the studios price digital content and the fact they are keeping Netflix and others from even renting physical discs, only so they sell more DVDs, clearly shows where their true interest lies - and it's not in digital. At some point, the studios are going to get burned just like the music industry did and while they spend a lot of time complaining about piracy, they need to wake up and realize that consumers are demanding digital content, for a fair price. So far, the studios are not willing to give it to them and over time, are going to see their business models crumble as of a result. They own arrogance is going to be the death of their legacy business.

Netflix's Long-Term Business Model Flawed, Competitors Willing To Give Content Away

As much as Netflix says they aren't trying to create a subscription based content service that competes with cable, that's exactly what they are trying to do. The company is licensing exclusive content in an effort to try and retain customers and sign up new ones, but their long-term business model is flawed. Netflix thinks that having access to a series like Mad Men is enough to keep customers subscribed in perpetuity but the problem is that once a customer blows through the episodes and has nothing else to watch, they will cancel.

Netflix's CEO has compared their licensing of exclusive content to what HBO does, but that's a bad comparison. While cable channels like HBO have exclusive content, they also have fixed delivery time frames. This means that customers can only watch content when HBO wants them to, including modifying what content is available on-demand. When Netflix was the only service in the market to offer this kind of content, Netflix focused on the breadth of their library, not exclusivity. But with competitors like Amazon willing to give away the same content that Netflix is charging for, as a loss leader for their other products and services, Netflix is now scrambling by trying to get exclusive content to keep customers. The problem is that long-term, this approach by Netflix can't last because they have no way to compete against free.

Long-term, Netflix business model for licensing exclusive content won't work. When a competitor comes up with a way to deliver streaming content in breadth, think Amazon and Google, Netflix is done. Netflix can't afford to give the content away like Amazon, Microsoft, Sony and Google can and Netflix doesn't have any other products or services they can sell. In addition, when it comes to the digital delivery of video, the studios have complete control of the content, the MSO's own the last mile and Netflix's prior advantages in the physical world of DVDs completely disappears in the digital world. If Netflix doesn't own the content or delivery, then why would they have a superior service when others are willing to use movies and TV shows as a loss leader?

Some might argue that Netflix will just acquire a large library of content on an exclusive basis, but that won't happen. Studios make the most money by licensing the same content for many platforms, not just one. Netflix can never charge enough for their subscription service to make up for displaced DVD revenues and Netflix doesn't have enough money to license a large catalog of content on an exclusive basis when it is estimated that Mad Men alone is costing them $75-$100M for seven seasons. We all know that studios make their money by selling us the same content multiple times for different platforms. An on-demand offering for one low monthly price would kill the studios business model since consumers would not want to watch the content via other platforms if they knew it was already available on-demand any time they wanted. Netflix's model completely disrupts the studios window strategy for making money.

In addition, someone I was talking to about Netflix made a good point about the studios not wanting to be “iTuned” like the music industry was. The studios will try to encourage as many channels for content delivery even at the expense of short term profits to maintain longer term survivability. Having one company like Netflix control 80% of the streaming movie business, the way Apple owns 80% of the music market, is not in the best interest of the studios. For many years, Netflix's strategy was that no one else could have the breadth of content they have or be on as many platforms and devices. But that's no longer the case with Amazon and other competitors are starting to catch up very quickly. Now, Netflix is focusing their efforts on exclusive content, with the same strategy that Blockbuster had, thinking that content exclusivity would save them. In the long-run, it won't work.

Netflix is no longer the only game in town. With content subscription services from Hulu, Amazon and DISH, video on demand from the MSOs, services like Comcast XFINITY TV, and other competitors like Microsoft, Sony, Google and Redbox all entering the market soon, Netflix is going to get squeezed. This is the whole reason no MSO has bundled Netflix's service in with their cable TV offering, it's competition. I expect we'll see this happen for Netflix's service in Latin America, but that's more out of a necessity for Netflix since most consumers in Latin America don't have credit cards and Netflix will need to use the local MSO for billing purposes.

People always fall back to the argument that Netflix's content is better, but it comes down to what's "good enough" and what people are willing to pay for. Also, most seem to argue that Netflix is only $8 a month, but remember that Netflix is not a replacement for other services. So it's $8 a month of top of a $100 cable bill plus other services like Hulu Plus that a consumer might also be taking. And for a consumer that already has something like XFINITY TV and Hulu Plus or Amazon Prime, do they really need Netflix? You have to add up the value of all the services a consumer has and then compare it, as a whole, to Netflix's offering.

Netflix has the chicken and egg problem. To get subscribers, Netflix needs content. To get content, Netflix has to pay the studios which requires subscribers. Netflix is having to commit to up front massive payouts to studios for whatever content they can get. But if subscriber growth stagnates, Netflix could quickly find itself upside down in those agreements. From a financial perspective, Netflix has already estimated it won't be profitable next year as they expand into new territories in a clear sign that content costs are skyrocketing.

Long-term, Netflix is going to face some serious problems, some of which we are already starting to see. Netflix's continued need to increase their content library, and have exclusivity, has a lot of upfront costs that could increase monthly fees in the near-term and slow subscriber growth rates. And while Netflix content might be a bit better than the competition, competitors services will become good enough and make Netflix's cost of customer acquisition and churn increase. 2012 is going to be a very tough year for Netflix.

Updated: I've gotten a few emails from people saying that no one seemed to be making these arguments when Netflix's stock price was at $300 a share. Actually, many were. In September of last year, when Netflix stock price was at $165, I was making the very same arguments, as were others. So it's not about people all of a sudden piling on Netflix when the company is having trouble.

Disclaimer: I have never bought, sold or traded a single share of stock in any public company ever.

DISH Offers No Streaming Subscription Service, No Threat To Netflix

DISH Network just announced their new integrated DISH/Blockbuster service, now called "Blockbuster Movie Pass" and while it's a nice product integration for those that already have DISH's pay TV satellite service, the new offering is not available as a stand-alone subscription and poses no threat to Netflix. DISH advertised today's announcement as "A Stream Come True", but overall, the announcement was a complete disappointment.

For those that already have DISH Network, the cost for the new service will be $10 a month and new subscribers to DISH's TV service will get the service for free for 12 months. DISH did say they want to bring movie services to non-DISH subscribers, but all the company would say is that they will share those details "in the future" with no ETA as to when that might be. DISH said that with the new Blockbuster Movie Pass service, customers can get 5,000 movies and TV shows streaming to their TV and 10,000 movies and TV shows streaming to the computer. 3,000 of those titles for TV are from the Blockbuster side of the house as well as 4,000 titles for the computer. Those are not very impressive numbers.

At a time when consumers are asking for more content delivered via streaming, DISH spent most of the time focusing on how you can get DVD's and games in the mail. The company showed off a bunch of new commercials for the service and in nearly ever one of them, they talked about how you can get 100,000 movies, TV shows and games "delivered straight to your door by mailman". One of the commercials even showed a mailman being all excited in the video. The problem is that the future of this business is not about consumers getting envelopes delivered by their mailman, but rather the ability for consumers to stream more movies and TV shows directly to devices.

While executives from both DISH and Blockbuster spoke, I had to laugh when the President of Blockbuster took to the podium. He gave an update on the Blockbuster integration with DISH and said that, "the hero of the Blockbuster brand has been the store itself". Really? Then why didn't Blockbuster survive in the market? He also reinforced that since the DISH acquisition, Blockbuster has signed up 500,000 customers in last 30 days, yet that's a pretty meaningless number. He also said that "Blockbuster stands for new releases", but of course he is talking about for physical DVDs and not when it comes to online content as Blockbuster's new release inventory for streaming is very weak. I really don't get why DISH thinks the Blockbuster name has any value left in the market, it doesn't.

DISH did mention more than once about IP enabled set-top-boxes, as if they were also trying to show they know the importance of connected devices, yet they would not say exactly how many of their boxes are actually connected to the Internet when asked during the Q&A portion of the event. The CEO of DISH did say that they have 5-6M IP enabled boxes in the market, but that number is meaningless. If 50% of their set-top-boxes are connected, it means that even Roku has more connected boxes in the market than DISH does.

While advertised as a bigger deal, today's announcement by DISH is really only relevant to those who already have their service, or are looking for a new pay TV provider. And for anyone who does not have line of sight, does not have permission to install a dish receiver on their roof, or wants one provider for phone, Internet and TV, DISH is not an option. Until DISH announces some kind of streaming only service, they pose no threat to Netflix, Hulu, Amazon or any other subscription based service.

I've included some slides from the DISH presentation below.

Amazon Adds 1,000 Movies and TV Shows To Their Streaming Video Service

Earlier today, Amazon announced that they have added 1,000 more movies and TV shows to their Prime streaming video service. This brings Amazon's total number of movies and TV shows available for streaming to just over 6,000, per the Amazon website. So while it's not the volume Netflix has yet, Amazon has already added 1,000 more titles less than four months after launching their service.

As I have already blogged about before, I expect Amazon's Prime streaming service to disrupt Netflix over time. (You can read more about how here: Amazon Prime Streaming Will Disrupt Netflix, Here's How) Add in the fact that we all know that Amazon will come out with a tablet some time soon, and Amazon is really positioning themselves to own the entire value chain. While they won't own the content, they will control the distribution of video thanks to their AWS services group and control at least some of the devices the content is played back on. Amazon also said that they now have over 300 devices capable of streaming Amazon Instant Video.

After Amazon announced their new service, many said that Amazon would never spend the kind of money Netflix is, more than $1B this year alone, to license content. The difference is that Netflix needs to spend the money today to get more content to continue their growth. But Amazon gets the vast majority of their revenue from non-streaming related services and is not under as much pressure to close content deals fast. Advantage = Amazon.

Amazon Prime Streaming Will Disrupt Netflix, Here's How

Over the past 24 hours, I've read a lot of blog posts about Amazon's new Instant Video streaming offering available to Amazon Prime subscribers, yet there are a bunch of really important aspects about the service no one seems to be discussing. When detailed it is clear that over time, Amazon will absolutely compete with Netflix for the digital delivery of movies and TV shows and become a dominant force in the market.

For starters, I don't see anyone talking numbers when it comes to Amazon Prime subscribers or the potential revenue Amazon generates from it. While Amazon has not publicly said how many Prime members they have, analysts on Wall Street all seem to agree that there are about 10M Prime members. Of those, it is estimated that 60% are paying members. If that's true, and it sounds rational, Amazon brings in $474M a year in revenue from Prime subscriptions.

If Amazon could add 5M paying Prime members this year, they would generate nearly a billion dollars in revenue from about 10M Prime members. That's a lot of money they can then use to license content and Amazon would very quickly be at half of Netflix's subscriber count. While some of the money from Prime would have to go to offset the cost of shipping physical goods, numbers I have heard suggest that Amazon's Prime members buy more than 4x more goods than non Prime members. As a long time Prime member myself, I can say that definitely rings true since I always check Amazon first knowing I get free shipping.

While there seems to be a lot of talk around Amazon Prime being cheaper than Netflix's streaming only option, that's really not a big deal. The bigger point is that anyone who signs up for Amazon Prime immediately sees it as a way for them to save money. To date, that's the only reason why someone would become a member. Spending $79 means you will end up saving more than that in shipping each year. Very simply, Prime has always been all about a way to save money.

Of course, for a small percentage of Netflix customers that is the same reasoning since some members use Netflix streaming in place of other more expensive video services. But with Prime members, that's the case for all of them. It's a very easy sell. Add in the fact that you now get free streaming of movies and TV shows and Prime has a lot more value than Netflix. When compared to Netflix, the selection of content in Amazon's Instant Video streaming service is about 25% of what Netflix has today. The quality of video with Amazon's service is not as good and Amazon's Instant Video offering is not yet on a lot of devices. But the fact is, these were all of the same shortcomings Netflix had in the market when they first started their streaming offering.

Amazon can and will get on devices very quickly and one has to remember that Amazon is not starting from scratch. They have had their Amazon Video On Demand application on devices like the Roku and TiVo for years and Amazon does not lack the technical expertise or resources to get Prime streaming to more platforms. It won't happen overnight, but it won't take years like it took Netflix when the broadband-enabled device market was still just starting out. And with the success Netflix has had in the industry, there are plenty of device manufactures and platform providers who are going to be very eager to work up with Amazon to add more content choices to their devices.

When it comes to the argument that Amazon's video quality is not as good as Netflix, that's a valid one, but one that will be short lived. I don't know if anyone has noticed yet but Amazon is not using their own CloudFront CDN to deliver the Prime videos. So far, of all the videos I have traced they are all coming back to Limelight Networks. I know Limelight was doing a large majority of the delivery for Amazon Video On Demand, and it's clear they are also delivering videos for Prime. This is relevant because Limelight is one of the same CDNs that Netflix uses. So when it comes to the quality of videos being delivered, the difference between Amazon and Netflix simply boils down to the encoding specs.

While I have seen some folks like CNET say that Amazon's streaming is "comparable to Netflix HD", that's factually not accurate. There is something to be said for one's own interpretation of what defines quality, but Amazon has given out the specs on their encoding for Prime streaming and it maxes out at 1.3Mbps, far lower than what Netflix encodes for. Amazon does offer higher quality streaming at 720p, but not for free videos via Prime as of yet. Updated: Amazon has confirmed that they do offer up to 720p video quality for Prime streaming, but for some reason I still can't get above 480p when I watch content.

As most folks already know, Netflix uses Amazon's Web Services for a substantial portion of their web-hosting and video transcoding infrastructure. In a recent filing, Netflix warned that any disruption of Amazon's service would have an impact on the company. In the filing Netflix said, "While the retail side of Amazon may compete with us, we do not believe that Amazon will use the AWS operation in such a manner as to gain competitive advantage against our service."

That's an interesting statement from Netflix and while they are talking about a technical advantage, Amazon already has a competitive advantage over Netflix when it comes to cost since Amazon owns the infrastructure that Netflix is leasing from them. And at some point, Amazon will most definitely use CloudFront to deliver their videos and move away from using third party CDNs. That's another cost advantage Amazon will have over Netflix, who is estimated to spend more than $50M this year just in video delivery across third party CDNs.

Amazon has a big advantage over Netflix of being able to allow their core business drive the growth of their streaming service without having to worry about how many members they sign up each quarter, which is exactly what Netflix is so dependant on. The company has the ability to essentially subsidize the streaming service for quite some time, allowing Amazon to spend money on licensing more content and quickly expanding their inventory. Anyone who thinks Amazon won't spend the kind of money Netflix does to license more content is seriously underestimating the company.

Another big advantage Amazon has over Netflix that no one seems to be discussing is the fact that Amazon also sells and rent digital copies of movies and TV shows. Adding a subscription service now gives Amazon three different ways to get in front of the consumer and multiple ways to generate revenue. More importantly, the multiple distribution models are something the content studios love and want to see more of.

Studios I speak to say all the time that they wish Netflix would also offer a pay-to-own download service for newer content, as the studios want to leverage the audience base Netflix has built. For Amazon, they have already this business model in place and one would expect that their free streaming of content will absolutely drive the sale of more digital content for the studios, especially considering how easy Amazon's 1-Click option makes it to purchase content.

And just imagine the disruption Amazon would create in the market if they released a Kindle capable of playing video or subsidized the cost of getting Prime members a broadband-enabled device? The thing about Amazon that I think most people miss is that they own the entire ecosystem of distribution for video, something Netflix can't do. Amazon still has a long way to go before their Instant Video streaming offering is considered on par with Netflix, but anyone who thinks it is going to take Amazon year's to compete with Netflix is truly underestimating the company.

Ooyala Signs Yahoo! Japan In Big Customer Win For The Company

Video platform provider Ooyala has announced a new multi-faceted deal with Yahoo! Japan giving Ooyala access to the largest and fastest growing portal in the region as well as the world's second largest population of Internet users.

Under terms of the multi-year deal, Yahoo! Japan will standardize all of their online properties on Ooyala's platform for video delivery, subscription and advertising services. Yahoo! Japan will also resell Ooyala's platform on a white-label basis and provide end-user support for all of the publishers using Ooyala. Financially this is a big deal for Ooyala as they get paid twice by Yahoo! Japan; once from Yahoo!'s own internal use of the Ooyala platform and also every time Yahoo! Japan resells it.

According to Ooyala, Yahoo! Japan serves 40% of all the online video in Japan using Yahoo's own content delivery network with the average user in Japan watching 12.5 hours of video each month according to comScore. Yahoo! Japan will deploy Ooyala's platform inside their CDN and while financial terms of the deal were not discussed, Ooyala's President and CEO Jay Fulcher said that the value of the deal is based on certain thresholds of traffic. While it will take time to get Yahoo! Japan up to scale, I think this deal could bring in a substantial amount of revenue for Ooyala twelve months from now. By substantial I mean multi-millions, especially since Yahoo! Japan's stream count is in the billions each year. Ooyala also mentioned that they expect to share more major news of this kind in the next couple of weeks.

In the online video platform space, the market is currently dominated by Brightcove, Ooyala and Kaltura in terms of market share. For some time I've thought that it would be very hard for any company to really give Brightcove a run for their money, but Ooyala seems to have really picked up a lot of momentum as of late and this deal is probably one of the largest seen in the OVP space. Kaltura has been growing very nicely as well, but they are really a different kind of OVP targeting their open-source platform to a somewhat different segment of the market.

Since all of these companies are private and don't discuss revenue, it's really hard to know if any one vendor is truly taking wallet share away from another or if the market is simply growing fast enough that all of them are seeing growth based on new business. One thing that is clear though is that Ooyala is clearly a force to be reckoned with and the competitive landscape for all three of the major OVPs continues to heat up.

Netflix Expected To Launch Streaming Service In South America

Netflix's domination is about to truly go global. While Netflix has been saying that they will expand internationally in 2011, the company has yet to release any info about which location they plan to target next. While I don't have all the details or know all the specifics, it looks like South America is the next territory that Netflix will launch their streaming based subscription service.

In order for Netflix to expand their business and keep up their current rate of growth, the company needs to enter countries that have a large population capable of getting a 2-3Mbps video stream. While not every country in South America fits that bill, many do, and they have huge populations with large Internet penetration rates:

• Argentina: As of March 2010 the country had a 64% Internet penetration rate with 26.6M users with an average broadband speed of 3.33Mbps. 
• Brazil: As of Dec. 2009 the country had a 37.8% Internet penetration rate with 75M users with an average broadband speed of 4.46Mbps.
• Chile: At the end of 2009 the country had a 50% Internet penetration rate with 10M users with an average broadband speed of 6.62Mbps.
• Colombia: In mid 2010 the country had a 48% Internet penetration rate with 21M users with an average broadband speed of 4.32Mbps.
• Mexico: In 2010 the country had a 27% Internet penetration rate with 30.6M users with an average broadband speed of 3.54Mbps.
• Peru: As of June 2010 the country had a 27% Internet penetration rate with 8.8M users with an average broadband speed of 4.62Mbps.

In 2010, South America had a estimated population of just under 400M with 156M Internet users. Central America had a estimated population of 154M with 38M Internet users. Depending on which territories exactly Netflix launches in, the company has the potential opportunity of expanding into a new market with a combined population of more than 500M users, with just under 200M of them online, with a combined average broadband speed of 3.2Mbps.

From what I am hearing, the new Netflix service is already being tested in certain regions and is expected to launch shortly. Last week, on Akamai's earnings call, the company commented that they had signed a "new" deal with Netflix saying that they, "expect to work closely with them to leverage our globally distributed network to their market expansion." While Akamai has been doing caching of small objects for Netflix for some time, to date, Netflix has not had a reason to deliver content outside the U.S. or Canada. Netflix's new contract with Akamai, which I don't believe to be exclusive, is just another sign that Netflix is about to launch out into International markets very soon.

There are a lot of questions about what type of content Netflix will offer and while I don't know those details, I do know that some content will be in-country and other content will come from the U.S. and be streamed to the new territories. From what I am hearing, it sounds like we should see the new service launch Internationally before the end of March.

* Data on broadband penetration, population and download speeds were compiled from Wikipedia, the US Census Bureau, AMIPCI, ITU, eMarketer and SpeedTest.net

Note: I didn't contact Akamai asking for a comment as I knew they would not be able to give out any information and while Netflix did return my inquiry, they were not willing to confirm or deny anything.

Blockbuster Closing Stores, Selling Pre-Owned Movies For 2x What Amazon Sells Them For New

Earlier today, signs went up at my local Blockbuster store saying the location was closing and that everything was now on sale. I decided I would pick up a few games and DVDs on the cheap, but boy was I wrong. Of course I should of known that this is Blockbuster and they don't do anything that makes sense, so I probably should not have been so surprised to see that Blockbuster is selling most of their pre-owned DVDs for 2x the price that Amazon sells them for new.

As an example, Blockbuster is selling the Deluxe Unrated Edition of Salt for $16.99 for a pre-owned copy. Amazon sells it new for $8.99 and sells the Blu-ray version for $13.99. Blockbuster's store shelves were full of movies priced at $14.99 and $16.99, all pre-owned, and all 2x more expensive than buying them new from Amazon. Apparently Blockbuster doesn't know what movies rent OR sell for these days. I don't like seeing a company go under, it puts a lot of people out of jobs, but in this case, as a consumer, one can't help but be happy to see Blockbuster closing down. Any company that treats consumers as if they are idiots and thinks they don't already know of other options in the market for getting movies cheaper and in better quality, does not deserve to stay in business.

I Think Cable TV Is The Best Value and Experience For The Money Spent, Here's Why

While many will call me crazy, (it wouldn't be the first time) I do in fact think that the $65 I spend on cable TV each month provides me with the best choice and video quality for the money spent. Of course, that's not fashionable to say as these days, the media and many in the online video industry take advantage of every opportunity they get to complain about how expensive their cable bill is or their perceived lack of content choices. But the fact is, cable TV provides an experience online video will never replace.

Of course some will be quick to comment that I sound like an out of touch cable exec or someone not watching what's taking place in the market. But the fact is, I routinely consume online video via almost thirty devices, use every online video subscription and pay-per-use service in the market and test many of these products, platforms and services before they even come to the market. I eat, sleep and breathe over-the-top video. But right now, I don't see any combination of devices, services and platforms that are even going to come close to replacing cable TV in the next few years. Disruption? Yes, but only to a limit and not replacement.

Of course some are going to point to the number of "cord cutters" and will be quick to point to stats that show these cord cutters to be in the six-figure range. Yet these same people never talk about what percentage of the overall market these cord cutters make up, which is well less than 1% of cable TV subscribers today. Of course cable TV is not for everyone and in some cases, it is a waste of money if you don't watch a lot of TV, care about sports, live news or only care about watching one or two shows. But for the vast majority of the 100 million plus cable subscribers in America, who pay on average $75 a month for their cable, they do find it worth the money.

Of course I know many will disagree with me and that's fine. I love hearing people's opinions on the topic but I can't stand the fact that right now, anyone who says they like paying their cable TV bill is thought of as someone who does not "get it". This was the same mentality that permeated the market when in 2000, the entire industry was talking about "convergence" and how in a few years the TV and Internet would be one platform. And if you didn't agree with that consensus back then, you were though of as an idiot. Yet eleven years later, all we have is a fragmented TV platform with many, many years of work ahead of us before it really comes to fruition. Lets stay grounded in reality this time.

The fact remains that for $65 a month, cable TV provides me with more content choices and better video quality than I can get online, over-the-top or via any of the online video subscription and pay-per-use services. I pay Verizon $95.99 a month for a FiOS triple play bundle of phone, 25Mbps Internet service and cable. Of that $95.99 a month, the cable portion of my bill is $57.99 a month and rounds out to around $65 with taxes. When I turn on my TV I never have to wonder what the quality will be or if I can find the show in HD. The fact is TV is convenient, it always works and that's why so many people pay for the service each month. The same can't be said for over-the-top services and other forms of online content.

The last time I went to the movies it cost $28 for two tickets. At that rate, I could go to about two movies a month with my wife, or have cable TV for 30 days. Of course lots of folks talk about over-the-top services replacing cable TV, but if I got subscriptions to Netflix, Hulu, MLB and bought two shows a week on iTunes, that would cost almost $64 a month, the same as my cable bill. And I still would not be able to get local MLB games, other live sports, news or many of the shows I want in HD.

Over-the-top video services will always be subject to potential quality issues, buffering, lack of an HD source or many of the other things that plague these Internet based services. The Internet is not capable of supporting the kind of quality and viewership that cable TV supports, period. Of course that's something that many want to debate by saying that P2P protocols or some other kind of technology will fix the problem, but it won't.

Cable is all about convenience. I have dozens of channels and hundreds of shows all in one place and many stored on my DVR. I don’t want to have to buy shows from multiple sites, or subscribe to multiple services, nor do I want to have to use my PC to find shows to send to another box connected to my TV. I want to sit down on the sofa, pick up a remote to navigate through a simple program guide and DVR interface (TiVo) to choose the shows I want to watch. Easy. I also don’t like the idea of buying or leasing episodes of a show from iTunes that I may or may not like. With cable I can simply change the channel.

I watch a lot of TV, have about 50 season passes in my TiVo and for the money I spend each month, there is no other video service that even comes close to what cable TV offers in the way of choice and quality. Some in the industry are going to say that my role in the industry is to promote the adoption of online video and the value it provides in the market. And while they are right, my first job is to set expectations properly. And today, for the average consumer, cable TV is still one of the best choices in the market for quality and convenience.