08.31.2009


If smart means forward-thinking, innovative and able to connect with consumers, Netflix is tough to beat.

Almost every week we learn about a new manufacturer partnering with Netflix to include its "watch instantly" feature on their devices.

In essence, these companies are piggybacking on Netflix’s elusive success.

Since the '90s, we've been hearing that home entertainment will soon be IP-based with no need for discs. The electronics industry knew where it was going, but product innovators didn't seem to know how to get there. The consumer electronics industry spent most of this decade mired in a disc format war.

Netflix — with its mainstream appeal and popular "watch instantly" library of 17,000 movies and TV episodes — is helping the electronics industry get over the hump.

Even Apple is rumored to be interested in adding “watch instantly” to its iPhone and iPod touch. That's proof that Neflix is pretty smart.

But is it the world's smartest company? I talked to a couple of industry folks get more perspective.

Steve Koenig, director, industry analysis for CEA, says:

"With its flexibility and variety of content and delivery methods," he says Netflix is well-positioned to appeal to a broad range of consumers. The company bridges the gap, Koenig says, between "early adopters eager for IP-based content" and mass market DVD lovers.

But Koenig reminds me that Netflix is really just about content.

"As a feature, content services are rapidly moving from a differentiator to a key, competitive feature in a number of CE segments from displays to wireless phones. However, price, brand and other hardware features remain primary purchase criteria."

Fair enough, but you have to give Netflix points for forward-thinking, says Ross Rubin, director of industry analysis for NPD Group.

"[Netflix co-founder Reed] Hastings has said that the plan from the beginning was to deliver movies electronically which is why the company was named Netflix, not DVDs by Mail."

Rubin also reiterates that Netflix is just a content service.

"Instead of building its own device, it has exposed itself as a service and is being offered on a number of platforms."

Rubin also got me re-thinking the value of Netflix's "watch instantly" feature.

"Only about 10 percent of its catalog is available under 'watch instantly.' And the pricing is still tied to a DVD subscription service as opposed to a pure all-you-can-eat model. To even get the 'watch instantly' feature you need to sign up for a DVD rental plan."

That's true, but the cheapest unlimited DVD rental plan ($8.99 per month) includes "watch instantly." I wouldn't criticize it for including DVDs, especially considering Rubin's point about only 10 percent of the catalog (it's actually about 17 percent) being available instantly. The point is well taken though.

Rubin does give Netflix props for breaking barriers.

"It's been probably the most successful as far as getting its service integrated and offering premium content integrated into a broad range of platform."

Going forward, Netflix does seem to have its limits, Rubin adds.

"Competitors have raised the point that it’s going to be hard for them [Netflix] to offer first run DVD movies because Hollywood wants to command a premium. [Studios] don’t want Netflix to be of an all-you-can-eat subscription service."

One thing Rubin and Koenig didn’t offer (nor did I ask) is the name of an electronics company that is smarter. I'll ask you …

What is the smartest electronics company right now?