In the early days, some companies tried to take a page off of the YouTube playbook of charging up-front for a video and allowing the customer to watch the whole package in a matter of minutes. But like many Internet businesses, the cost was too steep. “People weren’t willing to pay that. They said ‘I’m not willing to pay that,'” said Steve Ross of the National Association of Broadcasters.
Now many video streaming services are offering a basic version for a penny or $30, with more on the way. The YouTube deal gives Netflix in particular the ability to sell those subscriptions as a subscription offering for $9.99 per month. With video rentals being a major part of the Netflix business, this could put pressure on rivals.
“Netflix is a dominant player in content online, and this is going to be a significant blow to that,” said one Netflix executive, who spoke on condition of anonymity for the same reason that executives at the networks declined to discuss specifics of their arrangements.
Netflix Chief Executive Reed Hastings has been blunt. On one occasion, when a reporter confronted him about the recent price increase, he said: “I don’t know. I’m not the guy who gets asked about this, so I can’t comment.”
Another, more pointed criticism by Mr. Hastings — that the company treats its customers like cattle — was backed up by the latest video price data: It’s more than the industry average of 15 cents per video hour, the first time Netflix has paid more than that and perhaps for the first time since the company started providing comparable data in 2001.
“If there was ever a time when we didn’t need this type of price increase, it’s now,” said Jim Gianopulos, CEO of the Internet Archive, which recently added Netflix subscribers to its free program.
But Netflix is only one of the Internet companies trying to figure out whether streaming video is a sustainable business model. Amazon, meanwhile, has started to aggressively expand its video offerings. The company has recently added a handful of original series as well. And it’s not the only one in the market. Amazon has taken the lead on video rentals (though it does have a smaller service, a subscription version which can be purchased and rented for a fee), has a more-sophisticated offering called Instant Video and recently offered up on-demand clips of its original TV shows.
Mr. Hastings, the company’s CEO, has made it clear that Amazon is not trying
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