Netflix Can’t Afford Unlimited Content and All-inclusive Packages

By Kenna McHugh Comment

Netflix grows more and more popular every month, but has no plans to make its library of online entertainment content like movies and TV shows as all-inclusive or unlimited even though competitive companies plan to offer such packages.

“At $7.99 a month, we can’t provide unlimited content,” Netflix CEO Reed Hastings said at the All Things D conference in California, according to Mashable. “We compete for a very specific and small part of the pie. We don’t have everything, but we have a great bargain. That’s what we want the brand proposition to be … Apple and Amazon are very good at being comprehensive.”

Netflix stock price has been shooting toward the stars with 23.6 million subscriber base in Canada and the United States. In addition, Netflix is considered one of the most popular streaming video services in North America.

Even though the bulk of Netflix’s customers are in the United States (22.8 million), the company has been growing its customer base in Canada. Offering an unlimited streaming plan without DVDs in September 2010 is drawing more subscribers. Netflix also has plans to expand in a third country.

But as the saying goes popularity comes with a price. The company is possibly the biggest source of Internet traffic in North America. As Netflix’s popularity grows so does the rights to stream TV shows, movies and other content to its subscribers, hurting the net profit.

Bloomberg reports that Hastings said it “wouldn’t be shocking” to pay upwards of $300 million a year to renew a licensing agreement for movies and TV shows with Liberty Media Corp’s Starz unit. That’s ten times the amount that Netflix paid Starz in 2008. The agreement with Starz expires in the first quarter of 2012.

But, Netflix may have a change of attitude when competition becomes fiercer with Amazon, Apple and Google. These companies have the infrastructure and resources to compete effectively with subscription video on demand.