Netflix’s Crap Problem

Among the new releases being touted as of last Friday by Netflix for its Watch Instantly streaming service were last summer’s hits Iron Man 2 and Secretariat. Also promoted prominently as ‘newly arrived’ was the 2001 kids movie Spy Kids, the obscure martial arts sequel IP 2, the documentary Fat, Sick & Nearly Dead and the 1985 Sarah Jessica Parker star vehicle Girls Just Want to Have Fun.

Of course a classic is in the eye of the streamer. The Wayans Brothers Comedy White Chicks, also a recently featured Netflix new arrival is surely beloved by some. But overall, Netflix’s streaming product has a serious quality problem. To be frank, for every gem like The Graduate, Netflix streaming-only service is loaded with junk like Nick Swardson: Seriously Who Farted? and Home Alone 3. Yet its new pricing structure is seen by many designed to drive users away from renting DVDs.

“We believe Netflix’s pricing change to subscription plans announced yesterday is a strategic move to further drive streaming-only plans and adoption,” wrote Barclay’s Capital analyst Anthony DiClemente last week.

Given the library available, paying even just $7.99 may be awfully hard to swallow for many — with an emphasis on awful. As consumers realize what is really available, it’s going to make it’s new 60 percent pricing hikes for DVD access almost a lot more tolerable. DVD customers can choose from 90,000 titles, while streaming customers get 22,000. That makes the content available for streaming appear stale and the longest part of the long tail.

While some analysts predicted Netflix could retreat from its pricing jump, others thought the company was wise to make the move. According to a report issued Friday by BMO Captial analyst Ed Williams, “the new pricing should provide greater flexibility for subscribers that wish to make greater use of either DVD or streaming, and could also expand the total number of subscribers as households with multiple users may subscribe to separate plans.”

Added Clemente: “Netflix has been aggressively investing in streaming and we believe its movie and TV content is robust enough to support more streaming-only users.”

With all due respect Ed and Anthony, have you guys checked out the streaming library and compared it to Netflix’s DVD collection? Conveience comes with concessions.

For example, based on an analysis of sales figures from Box Office Mojo, Netflix’s streaming product offers just five of the top 25 earning films from 2010. Few of 2011’s early hits, such as The Green Hornet, No Strings Attached or Rango are available either.

Among last year’s 10 Oscar nominees, just 2 are streamable: no King’s Speech, no Black Swan, no Inception. Trying to find the biggest hits from the past several years? There’ no Harry Potter & The Deathly Hallows Part I, no Avatar, no The Dark Knight, No Spider-Man.

The picture is slightly better with Netflix’ TV streaming lineup. Among the 12 Emmy nominated series announced last week in the best drama and comedy categories, 5 are available on Netflix (not the current seasons of course): The Office, 30 Rock, Parks & Recreation, Friday Night Lights and Glee. There’s no Modern Family, no Mad Men, No Boardwalk Empire and no Dexter.

To be fair, Netflix offers a stronger list of acclaimed series, like 24, Sons of Anarchy, and Lost; and the ability to watch in some cases full seasons of series at a time is a pretty good deal for 10 bucks a month.

But again, on the TV front, randomness and lack of depth prevails. Among the new arrivals last week were the 1990s animated X-Men series and the just cancelled Starz series Camelot. Prison Break is available, but where’s CSI or The Sopranos?

Regardless, BMO expects Netflix stock price and revenue to climb with the new pricing plans, despite the widespread consumer backlash. Where will the new revenue be invested?

“We expect the bulk of this increased revenue to be spent on acquiring content for streaming and/or supporting the necessary infrastructure for the DVD by mail business,” Williams wrote. Might be best to go with the earlier, not the latter.