The Future of TV According to Netflixs Reed Hastings
Given his track record of being able to accurately predict the future of video he called video the killer app of broadband at our NewTeeVee conference in 2009 it is easy to buy into what he has to say. He also predicted that video would be available as streams on many devices and to many screens over the Internet.
It has been an amazing year for the company. Netflix has seen its subscriber base leap up from 14 million to 22 million in the US. Its stock has been on a tear and it has seen rivals such as Blockbuster fall by the wayside. It has been painted both as the savior of niche television shows and the destroyer of broadband.
When I think of Netflix, I think of a big data company with a special focus on user interaction and content. Of course, there is nothing better than getting the low down from the man himself to find out what he is thinking about next. Last week, in a short freewheeling conversation over Skype (Reed does love Skype), he shared his thoughts on the future of television, video and broadband. Here are some excerpts from my conversation.
- Impact of Bandwidth Caps
- Importance of Fiber broadband
- What TV Looks Like in 20 Years
- Sensors & User Experience
- House of Cards & Content Expansion Plans
On Internet Service Providers & Innovation
In a letter filed with the FCC, Hastings and Netflix were critical of Internet service providers. When I asked if they indeed were the enemies of innovation, he said that his criticism is not blanket criticism and he is critical of certain ISP practices such as pay-per-gigabyte (particularly in Canada)and the practice of charging for sending bits into their network.
Their consumers want Netflix bits and they charge the consumer, says Hastings. Comcast wants to charge our provider for providing those bits. What they want to do is make money on both ends consumers and the content end. He believes that Comcast shouldnt charge for the entry of our bits into their network.
Instead, Reed endorses settlement-free peering but Comcast doesnt agree. It is currently locked in a bitter dispute with Level 3 Communications, which is Netflixs service provider. Hastings points out that Charter Communications, a cable broadband provider, practices settlement-free peering. So, no, we are not making a blanket statement that all ISPs are bad, just certain ISP practices are bad.
(By the way he does think Comcast has done a great job on its Xfinity app for the web and for the iPad, so he is not holding any grudges against them.)
On Bandwidth Caps
Last week Canadian broadban! d provid er Shaw decided to increase its bandwidth caps. According to Reed, this is a step in the right direction because ultimately it is good for the Canadian consumer.
Canadian consumers want unlimited Internet, Reed added. (In the US, we have had unlimited Internet though lately some ISP are beginning to impose caps.) He takes heart from the fact that Shaw increased the bandwidth caps but have also said they are going to increase them again.
The marginal cost of delivering one more gigabyte is a penny, Hastings added. I think once you have the fiber installed, it almost doesnt matter how much [bandwidth] you use.
On Fiber Broadband & the Future
Over the past twenty years, Internet bandwidth has expanded dramatically and in the past decade or so we have gone from dial-up to DSL and cable broadband. And now we are going all fiber to the home.
Hastings was super excited by Googles 1 Gbps Google Access fiber project in Kansas City because it would show us what can be done with so much low-cost bandwidth. Today, he pointed out that Netflix works just fine with DSL and cable, but more fiber means there are going to be more high-definition streams and more on-demand content. It is much more than a Netflix story. It opens up possibilities for many interactive, immersive applications.
What we have got to do is get fiber to everybodys home just like we got electricity and telephone lines, said Hastings. It will happen over a certain number of years.
Hastings believes that the future of broadband is already there and pointed to countries like Austr alia, Brazil and Costa Rica who made fiber broadband to their citizens a top priority. In the US, he is excited by states like Vermont, which are laying fiber for fast connections to its citizens.
When I asked Reed if the fiber deployments were going to be key to Netflixs future international expansions, he declined to comment and said that company would share its global expansion plans in the second half of 2011.
Its an All-NewTeeVee World
Fiber broadband is key to the future of companies like Netflix in a world where all video would become click-and-watch, and will always be on demand. In the next ten to twenty years, almost all video will become click-and-watch Internet video and consumers will interact with it on a wider range of devices and it will able be on demand, he predicted. You will not tune into a certain channel this is broadcasting and that is the radical change. It will be an on-demand world.
Today on the iPad, you install various apps and in two years Samsung televisions will be like that. You can already see bits of that future, he added. In five years Hastings believes that all televisions sold globally will have a built-in Wi-Fi connection and the television will also be an Internet access device. In this brave new world, Hastings says that Netflix is one of the subscription sources for television shows and movies.
On Sensors & The User Experience
When I asked Reed if he thought that the click-and-consume metaphor will apply to everything on the network, he said yes and pointed out that in such a world, the difference would be how consumers interact with services defined by the user experience.
He believes that the future user interface of not only Netflix, but other applications will have to become more interactive and will have to take into account inputs from various sensors. Sensor web is growing and Netflix will have to integrate it into our experience, he added.
Our user interface will be tremendously advanced from where it is today, Hastings added. It will talk, it will integrate with sensors and when you shake your phone, it will give you various shows.
Reed also said, It is up to application developers to integrate those sources of data and figure out social video and what social video means. When I asked him if reimagining the user experience with various sensor inputs was par for the course going forward, he concurred. Over the next few years, he expects companies like Apple, Amazon, YouTube and Comcast to keep innovating and learning from each others experience.
On The House of Cards and its Content Plans?
When I asked Reed if they were getting into the content business, especially with them spending so much money on the House of Cards show, he said the company is in the business of licensing content. It is not in the business of producing content and reading scripts. We dont produce content, he said.
In the case of House of Cards, he pointed out that they are still licensing the content in certain release windows and certain categories. It is a riskier license than the ones we have done before, as we know less about the content than say Mad Men, where we can get a pretty tight prediction on how much people will view it, Hastings added. It is fair to say we are taking a lot more risk in our licensing but it is different from being a content developer.
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