August 26, 2009

Netflix and Business Method Patents

Filed under: Digital Distribution, Information Supernova — Robert John Ed @ 11:28 am

At a party the other night, a group of people started discussing Netflix.  I love Netflix; it costs all of $9 a month to get one movie at a time.  An hours worth of time spent picking out movies and organizing them sequentially allows me to receive a few months worth of movies without thinking about it on the cheap.  It’s especially nice during the winter months when getting outside is more difficult and inherently less enticing.

The read deal Holyfield, though, is that the same $9 gets me access to all their online content.  Netflix has done an AMAZING job with their online queueing system.  There are two very specific reasons.  The first is that it’s quick, it gets licensing and buffers within a minute and you are set to watch the movie.  The second reason is content.  Screw cash, content is king.  Content is half of the market, regardless of who supplies it.  Netflix has that, and they know how to monetize it, unlike most other online content companies.  I’ve been watching the old Heroes seasons lately, they’re good and Netflix’ system makes it a breeze to watch an entire season in a week or so.

Right now, I either turn my 24″ iMac towards the couch and watch instant queue, or I hook up my laptop to the 42″ LCD for company.  Easy, breezy, beautiful.

It’s funny, the tangible DVDs aren’t really that big of a deal to me.  The online streaming is.  That’s what I’m paying for, really.  Certain titles aren’t available online, due to licensing agreements I’m sure, so they are a necessary evil.  Netflix is a big player in terms of future potential for the reason that they know how to monetize digital content on a subscription model, NOT an advertising model.  Big difference.  Looking at the closest competitor (that I know of), Hulu, and the difference in content is remarkable.  I literally have trouble finding a movie to watch on Hulu and the speed is much lower.

Then at the end of the conversation, someone enlightened me to the fact that Netflix has a Business Method Patent, which is essentially taking out a patent on the way you monetize your business due to it being unique and novel.  Apparently, they license this model to Blockbuster.  I found that interesting (and odd) as that is their main competition.  Here’s a graph of how business method patents are growing, something to think about.



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