Did Netflix Just Kill the US Postal Service?

Originally published 7/13/2011

Yesterday, Netflix announced a new pricing structure, eliminating the “all you can eat” streaming and DVD packages.  The old low-end product, that allowed unlimited streaming and one DVD at a time for $9.99 per month, was discontinued.  If you want to continue both streaming and one DVD at a time, you will now have to buy two $7.99 services: one for the streaming and one for the physical DVD.

Like Roger Ebert and a lot of other people, I immediately cancelled my old subscription and re-upped for the streaming-only package (so sorry, Netflix, $2 less of my money is coming to you each month). There are just too many options for new discs at a lower rate (both Redbox and Blockbuster Express are only $1 per DVD…and I don’t usually watch more than one new-release DVD per month—that’s why I have premium cable.).  I was mostly using Netflix to catch up on old movies and TV series that I’ve missed, which are usually available for free at my local library a few blocks from home. (I often rented the DVD of a series instead of watching it on instant view: since a lot of instant view content isn’t available with closed captioning and DVDs are. Sorry, Tim Roth on Lie to Me mumbles in a British accent, and neither my wife nor I can make out what he’s saying without subtitles.)   And then there’s always Hulu and other streaming services that I can tap into, so I don’t feel like I’ll be missing out on anything.

In addition to losing some subscribers and some revenue (almost certainly more than offset with the cost savings of not having to purchase, inventory, sort and mail physical DVDs), Netflix may have also just dropped the final straw on the back of the camel that was the US Postal Service.

It’s no secret that the USPS is struggling to survive.  Between competition from FedEx and UPS, and most importantly email, USPS revenue has been consistently shrinking in a growing economy.   Considering that the USPS is currently operating at a loss ($2.2 billion as of Q2 2011), any additional loss of revenue from Netflix is only going to exacerbate their situation. And how much lost revenue is this?  Reed Hastings, Netflix CEO, posted on Quora that Netflix spends between $500 and $600 million a year on postage.  Not all of that revenue will go away, obviously, since there are (probably) a lot of Netflix users that either *only* rent DVDs or will still subscribe to packages that include shipping of DVDs. 

I’ve joked for months that Netflix and Amazon are the only reasons that the USPS is still in business, and now one of those rugs has been pulled out from underneath them.  It’s a good thing you can’t download books from the internet. Oh, wait…

Oh well.  Who needs all those bills and junk mail anyway.

Cloud Music

As you probably read, this week Amazon announced a new option for music aficionados. Their Cloud Drive service allows people to store files (including music) on Amazon’s servers, and their Cloud Player allows people to stream their music files to either Android devices (phones or tablets) or their favorite browser.

It’s an interesting idea to be sure, and certainly has advantages and disadvantages over the conventional approach to keeping your music locally on your MP3 player or smart phone.  But do the advantages outweigh the disadvantages? Here’s my take.

First let’s start with the advantages (from my perspective).

·        
1) You no longer have to worry about keeping your music collection synchronized across several devices. I currently have an iPhone, an MP3 player for my car, three iPods and three PC’s that I occasionally use for listening to music.  I certainly try to keep the music on all these sync’d, but in practice it’s a royal pain.  For instance, if I buy a CD (which I do about once a year these days) I have to rip it on one of my PC’s, then transfer it to all my other devices (I haven’t “played” a CD in years—the first time it comes out of the jewel case it gets ripped, then it goes back into the case and into a storage bin).  Basically the same thing is true if I buy an album off of iTunes or Amazon, for instance.  It initially gets saved to the PC I synch my iPhone and iPods to, then has to get transferred to all the other devices and PC’s.

2) You no longer have to worry about storage space on your music player.  If your music collection is bigger than the storage space on your player (or your phone) you have to constantly decide what music you want to take with you vs. what music you want to leave behind.  With Amazon’s new Cloud Player, it doesn’t matter how much local storage your device has: as long as it can connect to the internet, it can play any of the music you have stored in the cloud.  And you can store as much as you want (for a price, of course).  So another advantage is that you might be able to save some money the next time you buy a phone by buying a cheaper model with less memory, but still be able to access and listen to all of your music.

To be fair, there are some rather severe disadvantages (in my humble opinion) as well.

·        
1) To be able to listen to your music, your music player (or PC) must be connected to the internet.  Not so much a problem if you are listening to your music on your phone (unless you are on an airplane; or in an area where you have no service; or you are bandwidth-capped by your phone company; or if streaming your music kicks you into a higher bandwidth billing rate for the month, etc.).  But none of the iPods or other MP3 players I own connect to the internet, so a bit of a disadvantage there.  Not a big deal: future devices will if this takes off.  Perhaps a bigger concern is the following.

2) You have to trust that the cloud won’t eat your data.  There are numerous examples out there of organizations starting a cloud-based storage solution for various data, only to shut down and delete all the data months or years later.  Granted, “the cloud” is a lot less risky as a storage locker than it used to be, but ultimately your data is beyond your physical control.  I can see keeping a copy of my music in the cloud for convenience sake, but not my *only* copy.

The biggest problem is that, at least the way it works today, it might be illegal. Not illegal for you to store your music on Amazon’s servers and not illegal for Amazon to store your music for you, but illegal for Amazon to *stream* your music to your device.  If you’ve been around for a while you might recall a similar offering by a company called MP3.com over a decade ago: it was promptly sued into oblivion by the music industry.  Now granted, Amazon offering a similar service is a much different proposition. And I would think they will be able to sufficiently license rights to stream music from the music industry (What? You don’t want to license us the rights? Ok, no problem.  We’ll just stop selling your CD’s). And it appears that other big players also want to enter this “cloud music storage” model (such as Apple and/or Google), so the music industry will likely get the deal done whether they like the idea or not.

So as a convenience, the advantages might outweigh the disadvantages for some people.  But personally I think I’ll hold off for a while.  At least until everyone figures out how I can use the service on an airplane.