The killer app in this space is studio catalog - that's the competitive advantage.
Distribution for NFLX is strong - but given the move for most new hardware devices to include "Apps" integration, distribution is going to be a waning advantage.
It's going to be an interesting battle, for instance what does the paperwork look like in Netflix' studio agreements - can they sell to Apple?
Astute. I think you're dead right about the studio catalogue.
Unfortunately, the studios are still trying to protect what they view as their major customers: Retail chains (WalMart and Blockbuster) and cable companies. They understand those business, they've made money with them, and file sharing and secondary markets are negligible in those environments.
I've never thought about Netflix's agreements with third party distributors. That's a good question. Originally, I assumed some money was changing hands but maybe not. Maybe Netflix looks at it as a form of loss leader and a strategic advantage in the long run.
It seems like every company that comes out with a set top or mobile device now eventually includes Netflix. For consumers, Netflix is becoming a feature that's just not anticipated, it's expected.
I think Netflix is aware that their advantage with regards to distribution isn't going to last forever and that they need to focus on getting more (and newer) movies.
They seem to be making headway in expanding their catalog - e.g., the $1 billion deal with Epix (Paramount, Lionsgate, and MGM) to increase the size of their "Watch Instantly" portfolio. From what I've read, this is a big deal, as they're paying a bit more (relative to the premium cable channels) for the same rights.
Distribution involves an endpoint: me+device. Netflix has me, and millions like me. On any device. I watch on my PC, my Mac, my Wii, my iPad. My 5 yr browses for shows on the Wii and the iPad. So Netflix has the advantage of customers and devices.
I spend $20/month on netflix. I have spent a total of $10 for TV shows on iTunes.
Distribution for NFLX is strong - but given the move for most new hardware devices to include "Apps" integration, distribution is going to be a waning advantage.
It's going to be an interesting battle, for instance what does the paperwork look like in Netflix' studio agreements - can they sell to Apple?