[saurik]

I often find myself using Netflix to watch a movie, decide I want to see more titles by that director or starring that same lead actor, find out I can't stream that movie and would need to wait for a mailing, and then task switch to iTunes for a rental.

I would be perfectly happy giving Netflix that money; if nothing else, they deserve the iTunes affiliate cut for making me want to buy something at that moment. I realize many people use Netflix because of the flat pricing and wouldn't go for this, but people like me are the "whales" when it comes to media spending, and it might be worth trying to pick up our business.

(Sadly, I bet many people would then see this as a serious conflict f interest against their flat-priced streaming service, and get angry. :()

[Timothee]

I was recently thinking of how much money I've spent on iTunes in the past two years (since we've "cut the cable") and a lot of our purchases were from TV series seasons that we bought after we watched the first seasons on Netflix and wanted to catch up with the latest. (Breaking Bad, Sons of Anarchy, Dexter, etc.)

Yes, they would deserve a cut on most of our iTunes purchases, but for one thing, I don't know what that would amount to. Maybe not enough. (I believe the iTunes affiliate rate is 5%, so that would be $1-$1.50 per TV show season, 25 cents per movie rental)

And indeed it doesn't seem to make sense: let's say they added a "latest season is on iTunes" link. It would tell the user "we are not able to secure the latest content for you". And if they added exclusive rentals on top of the flat fee, it would be tempting to delay the switch from exclusive to regular catalog for how long as necessary. It would be going against everything Netflix has been about from the start: flat-fee for unlimited consumption.

[saurik]

Yeah, as I said, I can appreciate the problem you describe in your last few sentences: it is a conflict of interest, and it undermines their existing market. However, right now, they already can't get licensing deals for a lot of the newest content, so it really is kind of a crummy position for them. :(

As for the 5%: that's actually a lot of money to buffet their streaming service: a Netflix subscription is $8.00/mo, but they only make $3.50/user/Q[1], or $1.16/mo (so a 15% margin). If I buy a TV show season a month, or rent a few movies, that doubles the amount of money they make off me. (In fact, I probably do both.)

[1] http://seekingalpha.com/article/912051-netflix-don-t-buy-int...

However, while researching that, I discovered the reason why my plan is actually stupid: they make comparatively good money off of their DVD business, at $2.90/mo.

It is then probably the case, for all users (even "whales" like me) that if they can get me to use their DVD service (which they do heavily integrate into their website) that is better for them than if they can get me to use their DVD service it will do better than getting an iTunes affiliate revenue.

Oh, wait, ok, but now I'm confusing myself with my own "if nothing else": what I was actually originally thinking is that Netflix could replace iTunes rentals, offering some content for free and some for pay. That is the business model that the-second-coming-of-Napster had: flat fee for most things, but per incident out of pocket for some items.

From what I understand (it probably isn't important enough for me to pull a reference on it, but I give talks on "the business models of Apple" and have done it before), Apple charges the same 30% processing fee for music downloads that they went with on their App Store, which probably leaves them with 10% after fees and costs, which then is in the competition range for the DVD service.

(I actually find the DVD model weird, as it seems like a short-term solution...either DRM is going to win or it is going to fail, but either way everything is going digital: in another 5-10 years, I find it difficult to believe--but am probably wrong anyway--that the notion of "borrowing a DVD" won't have been entirely replaced by "renting a download".)

Again, though: it is a nasty precedent to set that would lead to a very tempting conflict of interest, so they probably just need to "not go there". It isn't like the-second-coming-of-Napster did very well ;P.