Just read in the news today that Netflix has teamed up with Starz to stream 1000+ new movies through the "Watch Now" feature. Just logged in to Netflix to confirm that these are already available! So what happens now?
As I had alluded to in my article about net neutrality about two years ago, Comcast and other domestic entertainment delivery companies are under tremendous pressure to shore up their pricey offerings against cheaper (perhaps even better) alternatives. Even discounting the ever present and growing Torrent and Usenet downloads, Hulu and Youtube already offered savvy customers several alternatives to Comcast's fare. Also Vonage was eating into Comcast and AT&T's lunch. But Netflix's deal with Starz, might be really huge.
Most cable providers earn their bread and butter from the pricey entertainment "packages" such as HBO, Starz, Cinemax, and Encore. They also earn from special sports packages such as NFL, college football etc. NFL recently has decided to make Monday night games available on the Net. Other sports and franchises are expected to follow suit soon.
A possible way out of this mess (from Comcast's perspective) was to prevent these data from reaching the customer: hence the preferential blocking and the net-neutrality debate. However, the FCC also has recently (and rightly) reprimanded Comcast for interfering with TCP packets (which Comcast suspected were Torrent downloads).
This leaves Comcast and its cohorts with a very grim realization: they are going to lose their biggest source of income: their lousy yet exorbitantly priced, inflexible programming packages.
This leads me to believe that the days of "all you can eat" internet are over. Brace yourselves for a realignment in Internet service costs as the cable subscriptions begin to dry up. Also, as costs climb, so will public resistance: look for ramifications in price plans. Tiered service and limits on data transfer seems inevitable. I expect the service to resemble (yuck!) cell-phone plan offerings.
Stock losses for about 6 months in service providers, gains for companies like Netflix and Microsoft. If DRM remains reasonably secure I see Microsoft winning over Apple, XBox over PS3 and Wii. Also if DRM remains secure, DVD sales should start falling (much faster) which means loss of revenue for stores like Walmart, but gains for studios who now don't have to move inventory.
Look for intense lobbying by all these companies who have lots of money to lose, and by companies (such as Cisco) that stand to gain if net-neutrality is defeated. If net -neutrality is shot down in Congress, watch for a bump in Cisco's price as its routers and packet inspectors will be used to enforce the service provider's hegemony.
Stocks on the up: MSFT, CSCO, NFLX, INTC, TWX
Stocks on the down: CMCSA, SNE, AAPL, GOOG, T
