Netflix Streaming vs Broadcast TV

Netflix is the company that fixed the annoying rules of movie rentals, you make a queue of movies you want to see, and then they’re delivered in batches of 1,3 or more movies depending on how much you pay every month, you can then keep the movies all you want since there are no late-return fees.

This article is about why I think they will be the real winners of Internet Video, with a different business model than the free/ad based approach of Hulu and Joost.

Their current business model
I’ll attempt to disect their current business model, which has proven to work, they now have over 8 million subscribers and a catalog of over 100,000 movies, revenues of over $1.2 billion, and a net income of $66.9 million last year.

But the goal has always been to deliver the movies instantly, the technology wasn’t there, but now it seems to be here, and probably it’s also gotten to the point that the bandwidth of delivering a movie is cheaper than the associated current costs of delivering a real DVD to your door.

Being a customer for many years, I can guess some of the costs involved per movie are:

  • Custom Envelopes (which also make money cause they add advertisement in them)
  • Employee Processing costs (cataloging, putting cds in envelopes, receiving CDs in envelopes)
  • Shipping costs (at least $0.47 for USPS)
  • Replacing costs (many DVDs break, scratch, and get stolen, boy have I gotten my DVDs stolen)
  • Royalties costs (no clue, but they must be there)

Somehow, Reed Hastings and his team figured out a way to make money after these costs, maybe from the people that pay every month who don’t really have the time to watch 12 or more movies a week.

Let’s do the actual numbers to get the average customer price.

$1,200,000,000 revenues /8,000,000 subscribers = $150 a year avg. revenue per subscriber

$150/12 months = $12.5 avg. subscriber monthly rev.


$66,900,000 net income / 8,000,000 subscribers = $8.36 a year avg. cost per subscriber

$8.36 / 12 months = $0.7 avg. subscriber monthly rev.

If we substract the net income from the revenue, we’ll get the average costs monthly per user, that’s
$11.8 a month, in costs.

Estimated Cost Per Movie (Now, CDs shipped)
The company ships on average, 1.9 million discs a day, that’s 57 million discs a month. They have 8 million users, that makes the average user watch around 7 movies a month. (I watch at least 3 a week, that’s 12 movies a month, 3 times more than the average user).

So, let’s say the average subscriber watches only 3 movies per week, that’s at least 12 movies every month. We grab those $11.8 and divide it by 12 movies

Average Cost per Movie $11.8/7.125 movies monthly = $1.65

The Online Business Model

Netflix has understood that the key to evolution on the TV/Movie business does not lie on the browser, it’s right there on the TV Room where we have been trained to sit and be entertained for hours. Only us early adopters, or people with no TV really have the adaptation capabilities to watch content on our computer screens, or we know that we need an HDMI cable and can do the whole setup to get our computers to play video on the living room.

This means the audiences for video on the internet are considerably smaller (Today) than those of TV, the best way to put it is by grabbing the numbers of the biggest internet video audience so far, The 2008 summer olympics… they only generated $6 million in ads, vs $1 BILLION that the broadcast generated… why? cause the big audience lies right there in the confort of the Living Room, or wherever you have your tv.

Netflix knows that there’s a great deal of people that have:
– TiVO
– XBox
– Other video game consoles

They made a first step when they came out with the RoKU, their own way of putting Netflix on a box in your living room. They’re cutting out deals with Samsung to put the same technology on Blu-ray players.

They will come out this Nov. 19th on the revamped Xbox Live which sits already on 10 million households with XBox Live Gold Subscriptions. I already have a Netflix subscription, but my guess is that at least 4 million of those 10 million XBox live subscribers don’t have it, and they will be tempted to subscribe. If Microsoft and Netflix are smart, they will allow those users to give it a try, and once they see the benefits, those $9.99 will be worth their while.

Xbox Live gets to keep the user base that’s doubting if its time to buy that PS3 and toss the subscription. Netflix on the other hand will almost double it’s customer base, if it manages to convince 1/2 of Xbox Live subscribers to give this a try.

(I wonder where Boxee stands in all this, they could also cut a deal with Netflix if they amass a millions of users at some point, although they seem to be doing something with Apple, and this would compete against the Apple Store per per view model, which BLOWS!)

At what price?

Here’s where the analysis gets tough. Microsoft has huge infrastructure, and Netflix just announced another partnership with TiVO (see, they know the war is won in your living room), but someone has to pay for all this bandwidth.

Engadget also confirmed that their streaming quality will be nothing but HD! (only 300 titles to start though)

So we estimated that currently netflix has about an average cost $1.65 per movie shipped (might be less if the average user watches less than 12 movies a month) and we see that bandwidth costs are dropping. Let’s take Amazon EC3 (which is expensive to me, given we can do it at a much lower price at

“Over 150 TB per Month $0.10 per GB”

If you’ve ever watched a movie compressed in DivX, you know you can get a feature film at very good quality eating up only 700Mb… let’s say that Netflix will actually do this in HD, and they had films in double the DivX quality, and each film would be 1.5Gb, it would only cost them $0.15, hell, even if it was 3 Gb or even 5 Gb per movie, you’re still below the 50 cent price, add to that royalties and other costs, at you are still way below the $1.65 cost per movie of today. Let’s say it’ll cost $0.65 per movie streamed.

That’s a saving of $1 per movie, however this convenience will make the number of movies delivered (streamed) to increase, but this might mean they’ll cut better deals in bandwidth getting the costs even lower.

Not to mention the savings to the environment, less DVDs would need to be printed, less paper and ink wasted in envelopes, no gas burnt by USPS, and all the carbon emissions generated in each step of the CD delivery process.

What this means also, is that Netflix will probably get rid of many of its +2000 employees, bringing costs further down, I will add less and less DVDs to my queue as the online catalog grows.

Helps fight Piracy

Another big plus of a full blown catalog (maybe available a few years from now) is movie piracy mitigation. Instead of the MPAA suing their customers, or making things hard for everyone being forced to distribute content with DRM based solutions that never work, what you need to do is have your product easily accessible to as many people, legally. I strongly believe most people are good, otherwise you couldn’t go out on the street and make it back in one piece every day. As a side note, I find it very funny that the MPAA is always asking Internet Video distributors (including netflix) to add DRM to their streams, but they don’t put DRM on their DVDs, anyone could get the 6 DVD subscription to Netflix and copy all the DVDs, there’s just no need to do it, cause Netflix makes it so convenient for you to get more and more movies.

So Why do I care?
I’m just very interested in what happens with TV, how it will manage to survive or evolve, but in this case, there’s a financial incentive.

Ladies and gentlemen, just check out the price of netflix on the stock market, we’ve been blessed with a recent crash, If I were you, I’d be buying NFLX right now.

So the question is, what’s gonna be the price of NFLX a few months or years from now? I’ll leave that answer to Henry Blodget, I think it all depends on execution (get XBox right and then expand to other services and the user base will easily double or triple for Netflix, then go international), they’re targeting the biggest audience ever, the living room audience, the one that makes billions of dollars in the Olympics, the one that’s fed up with the passive entertainment model and who wants to see what they want whenever they want, to share this experiences with friends.

I also care since I no longer have cable TV and I’m constantly looking for legal video entertainment of professional quality. Companies like Hulu and Joost should follow the same steps and try to go to our living room, Netflix not only has a great catalog of movies, but they have entire shows, some you can already watch, for example I got to stream 2 seasons of the office back to back on Netflix, before they were available on Hulu.

(Hulu || Joost) for Free TV streaming on the living room

As for Joost, they should probably acknowledge they’ve lost a great deal to Hulu, which streams 100 million videos a month, it would take a major breakthrough in content to beat Hulu, and even though Hulu is putting big numbers, they just can’t compare with the ad revenue that you can generate on the living room. For Joost (if Hulu didn’t start already) there’s still the opportunity to port their tecnology to PS3, to Wii, why not even come out with an Xbox free download that will allow you to watch Joost on your living room. There’s certainly going to be a lot of people not willing to sign up for Netflix, and the Free TV offer Joost has would be of interest to this audience. If I were Michael Volpi I’d try to use a considerable part of my resources geared in this direction, If Hulu gets in the living room before Joost, it’s game over.

Guitar Hero World Tour – Drums – Are you gonna go my way

I couldn’t find the new drums, but Activision was cool enough to allow the old drums to be compatible with Guitar Hero World Tour.

Here’s my performance on the old rockband drums of “Are you gonna go my way” on expert level.
I’ve strong beliefs that this is the first user made video of someone playing Guitar Hero Drums (with the rockband drums) outside the official promotional videos you can find all over the web.

This was a lot of fun to play, I didn’t do a 100% score, but close, so to all trolls, this is not a video to show how good I can play, but to demo the backwards compatibility, and that you can actually learn to keep the basic beat of this song with a game like this.

I put the original audio of the song on top and it syncs perfectly.

Played on Xbox 360.

By Gubatron

How to filter logs in lighttpd

I usually don’t keep lighttpd access logs turned on to avoid writing for every read, but there are times when you need to monitor what’s going on, and you’d like to have a high signal-to-noise ratio so it might be convenient to ignore all requests to .gif, .png, .jpg, .css, .ico and other urls on your webserver.

To only log certain files, or to NOT log certain files, you resolve this the same way as you do every other thing in lighttpd… by matching lighttpd variables to regular expressions and applying the settings where they match.

# www -> the main website
$HTTP["host"] =~ "^$" {
server.document-root = "/var/www/"
server.errorlog = "/var/log/lighttpd/"

#Only log non-css and images
<strong>$HTTP["url"] !~ "(.css|.jpg|.gif|.png|.ico)$" {
accesslog.filename = "/var/log/lighttpd/"

So in this example, we only log, where the URL doesn’t end with any of the “.css”, “.jpg”, “.gif”, “.png” or “.ico” extensions. We filter those out.

Hope this works for you.

Apple Wireless Keyboard

I just got a new Apple Wireless Keyboad.

My laptop currently sits atop a Griffin Elevator, this keeps it cool and also helps keep my neck at a healthy angle, something I need given how many hours I spend on the computer.

The problem with the Elevator is that after a while, your arms get tired and you end up resting your arms over your elbows, causing you elbow dryness and sometimes pain.

To rest my elbows and have an ergonomic posture, I needed a keyboard that was small enough to fit on my tight desk.

The other reason I got it was that the MacBook keyboard is extremely worn out.

Getting used to the new keyboard
The function keyboard layout is a bit different from the one on the MacBook. It took me a couple hours getting used to the spacing between the keys, but now I’m fully used to it. The feeling of the keys going down is very addictive.

Since the keyboard is wireless, I’m planning on getting another one to put it in front of the TV. Once Boxee integrates Joost and Hulu perfectly into the system, getting an Apple TV or a cheap custom built computer as a media center will make a lot of sense.

I’ve been hooking up the laptop via HDMI to the TV, and it sucks every time an episode ends in Hulu, or when there are commercial breaks on the HD player because you have to get up and click on continue, or select the next episode to watch (unless you have setup playlists previously).

A wireless mouse and keyboard solve that problem.

Useful for Internet TV
Another plus, it can work like a remote control, for your HDMI-TV/Laptop setup.

I can proudly say we’ve been Cable-TV free for over 10 months now (saving probably around $200), I “survive” on Netflix DVDs & Streaming (can’t wait for the Xbox Live upgrade), Joost and Hulu.

Given my past history of doing things 2-3 years before regular people, I can see a big future for the Internet TV/Video companies that survive this “crisis” (bullshit crisis really, go to Venezuela and see what a real crisis is), eventually the whole thing will be packed on little boxes and CableTV companies will be in trouble if they don’t jump on the I-watch-what-I-want-whenever-I-want-via-internet boat.

Joost tests Flash based player – 5 days ahead of schedule

Monday, October 13 9:25AM

NEW YORK (Gubatron) — This morning Joost has launched what seems a stealth test of their Flash video player delivering 5 days ahead of scheduled, according to the announcement made by the company the last September 18th when they released a new browser based version of their platform.

There is no press release in relationship to this on their website yet, but the new Flash player is readily available on the web site for Windows, Mac and Linux. It looks and feels exactly the same, and best of all, now all Linux users can enjoy the vast content on our favorite distro (content which I think suits us perfectly as a geek audience)

Also there are no embedding options available as of now. Hopefully it’s just a matter of time, they have plenty of viral content.

Joost could be in more devices = More Viewers
I expect this player will broaden the possibilities for Joost as an ubiquitous platform. Now the possibilities for integration are endless, I’m already starting to think Mobile (iPhone, Android), Wii, PS3, all you need is a flash player on your platform, and anyone out there (if the company doesn’t do it first) with enough spare time on their hands will be able to put together a Joost player.

Now imagine all that free tv spectrum to be released in February 2008 to be used for free internet access, I can see enormous worldwide TV audiences on mobile devices for marketers to start drewling.
This is great not only for Joost but for all the video companies that have enough vision (and funding) to realize these opportunities today. Start gathering your Android teams now.

Other improvements
I also noticed the search result page has a new filtering set of links, that can help you down narrow search results. This is a great improvement, since their search results would yield several hundreds of videos and there used to be no other way but to page through all of them. Now when you perform a search, you’ll see Filters (each with a count of how many videos are available) by Venue, Genre, Sub-Genre, Series, and Runtime.

No more p2p?
Now the question remains, will they ditch their P2P plugin, their old P2P client? If they do, this only means one thing:

100% Flash Player = No more P2P

They had said that P2P users would get content in higher quality than those with the “Joost Standard” Flash version, as you can see on the screen shots, the quality is pretty high for the flash version, my guess is somewhere down the line, they’ll probably decide to get rid of P2P altogether and foot the bill just like Hulu is doing now (which has a growing catalog of HD content). Hopefully bandwidth is getting cheaper, In my personal experience I consider the whole Bandwidth business is way overpriced, because Data centers and Networks can always find themselves big corporate customers and resellers that will pay anything, we can only hope this will change as the technology advances.

Screen shots
Click on the screen shots to see bigger.

Joost 100% Flash Player running on Ubuntu 8.04

Joost Full Screen on Linux Ubuntu 8.04

Joost Flash player on Mac OSX Leopard


Joost is a system for distributing recorded TV shows and other forms of video over the Web using peer-to-peer TV technology (and now Flash), created by Niklas Zennström and Janus Friis (founders of Skype and Kazaa).