Netflix (NFLX) Will Cost You More than You Think
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Here's yet another reason why Netflix (Nasdaq: NFLX) might be in trouble, though much of it might have already been speculated.
With the growing demand of Netflix, and consumers turning to Internet video and media versus traditional cable programming and packages, service providers will inevitably try to cash-in on the movement in the best way they know how: charge more money for broadband.
According to reports Wednesday, one analyst from Sanford Bernstein sees a large operator aiming to implement total usage fees, rather than just tiered pricing for speed. Sanford mulls providers like Cox Communications (NYSE: COX), Time Warner Cable (NYSE: TWC), and Charter Communications (Nasdaqq: CHTR) as potential candidates on the move, amongst others.
In Canada, where Netflix expanded into during the second-half of 2010, Rogers Communications (NYSE: ROG) was already set-up for the move. It had been billing customers based on consumption since 2008. In the U.S., AT&T (NYSE: T) is experimenting with usage-based plans.
Companies are using the bills as a deterrent for customers who nearly want to clip the cable, opting for Internet media from providers like Netflix, and now Amazon (Nasdaq: AMZN) and Hulu.
But looking at the numbers, it almost makes more sense for providers to simply turn more to broadband. With Netflix and Amazon aiming to get more in the game, studios are beginning to demand higher fees in order to get content. Bloomberg notes that gross margins on video are about 60 percent, compared with 95 percent for broadband.
Heck, we might get into the broadband game on those kinds of margins.
Finally, Time Warner Cable CEO Glenn Britt said the move to tiered pricing based on usage is "inevitable." Time Warner is currently doing testing on meters that measure usage just for that purpose. They'll probably charge you for the meter, too.
So there you go. If you're a big Netflix fan, or plan on becoming one, the recent price hike and media segregation won't be the last thing looking to ease the burden your over-packed wallet creates. No specific numbers were given, and pricing depends on where you live, but if a cable company is looking to deter you from a certain service through price, then a slight price hike probably won't happen.
Welcome to 1984, Winston.
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With the growing demand of Netflix, and consumers turning to Internet video and media versus traditional cable programming and packages, service providers will inevitably try to cash-in on the movement in the best way they know how: charge more money for broadband.
According to reports Wednesday, one analyst from Sanford Bernstein sees a large operator aiming to implement total usage fees, rather than just tiered pricing for speed. Sanford mulls providers like Cox Communications (NYSE: COX), Time Warner Cable (NYSE: TWC), and Charter Communications (Nasdaqq: CHTR) as potential candidates on the move, amongst others.
In Canada, where Netflix expanded into during the second-half of 2010, Rogers Communications (NYSE: ROG) was already set-up for the move. It had been billing customers based on consumption since 2008. In the U.S., AT&T (NYSE: T) is experimenting with usage-based plans.
Companies are using the bills as a deterrent for customers who nearly want to clip the cable, opting for Internet media from providers like Netflix, and now Amazon (Nasdaq: AMZN) and Hulu.
But looking at the numbers, it almost makes more sense for providers to simply turn more to broadband. With Netflix and Amazon aiming to get more in the game, studios are beginning to demand higher fees in order to get content. Bloomberg notes that gross margins on video are about 60 percent, compared with 95 percent for broadband.
Heck, we might get into the broadband game on those kinds of margins.
Finally, Time Warner Cable CEO Glenn Britt said the move to tiered pricing based on usage is "inevitable." Time Warner is currently doing testing on meters that measure usage just for that purpose. They'll probably charge you for the meter, too.
So there you go. If you're a big Netflix fan, or plan on becoming one, the recent price hike and media segregation won't be the last thing looking to ease the burden your over-packed wallet creates. No specific numbers were given, and pricing depends on where you live, but if a cable company is looking to deter you from a certain service through price, then a slight price hike probably won't happen.
Welcome to 1984, Winston.
Join StreetInsider.com FREE and get immediately alerted when news breaks on your stocks and other market items - JOIN NOW
*NEW - Download StreetInsider's FREE iPhone and iPad App - Click Here
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