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Has Netflix Picked the Perfect Time to Launch Download Functionality?
Netflix might be a global phenomenon but it's only just playing catch up with a function Amazon Prime Video has had since August 2014; the ability to download movies and TV shows to watch offline - even though Amazon is only active in a handful of countries (although this is about to change significantly). Amazon's download functionality has been well received by consumers, despite little promotion around it; Futuresource's Living with Digital survey from June-16 shows that 59% of Amazon Prime Video Users in the US, UK and Germany have downloaded Movies or TV on the service, equating to over 20 million users of the service. Half of these cite doing so regularly, with the functionality also popular in Japan.
Netflix, as recently as last year had been vocal about not adding a download function, so why now?
The feature provides additional value to "Netflix Originals" allowing its own titles to become more prominent initially and further supporting its intense program of releases. It could be that a train/plane/car journey watching downloaded TV shows is all that is needed to get viewers hooked to a series.
Netflix is placing increasing importance on emerging nations to drive growth. In Western countries the main benefits for a download function are to view whilst out of the home, to save mobile data or to use when access to the internet is either impossible, or expensive. Over fixed networks most Western subscribers can stream content without too much problem. However, in emerging nations even over fixed networks buffering can ruin the experience. So the benefit for downloading is greater, circumventing low speeds of fixed networks as well as low speeds and data caps of mobile internet, and allowing for a better quality viewing experience. Downloading on SVoD services is also a common feature on a number of local services in emerging markets.
Futuresource's Living With Digital study already shows that Netflix users would use the option as 75% of Netflix Subscribers who also use Amazon Prime Video are already downloading content for later. The demographics of Amazon download users is interesting too, households with young children skew much higher, as do young adults (18-25) who are often on the go.
There are some limitations to the services, with a significant proportion of Netflix's library not available to download. Along with Netflix Originals, Sony Pictures, NBC Universal, Lionsgate and some other independent studios are prominent. But others including Warner, Fox, BBC and Disney have no or limited content, and with perfectly good reason. Download functionality could well impact transactional digital sales, which for the home video divisions of the studios remains a major focus. Packaged video spend is declining by double digits in most countries and for the studios moving consumers to digital sell-through in particularly is a key focus in many developed markets.
In addition, the complexity of such rights is highlighted by key titles including Daredevil, Luke Cage, Jessica Jones and others which are "Netflix Originals", which can't be downloaded as Marvel rights are held by Disney, who apparently aren't on board. This will add consumer confusion as they can't even be assured that they can download all Netflix Originals, instead having to rely on the dedicated "Available to Download" section to find shows to watch later.
Overall, this will be a good move for Netflix, the demand has been there since day one and this is good timing for them too. Christmas is coming up, a time when a lot of people travel and we typically see a spike in SVoD subscriptions for evening entertainment. Amazon is due to go global, adding competition so this is another feather in Netflix's cap. However, this download capability will surely add cost to its enormous content spend and adding more major studios could be challenging, despite assurances that more content to download is on the way. The industry will have a renewed interest in the Netflix Q4 investor relations report.
Here at Futuresource Consulting we deliver specialist research and consulting services, providing market forecasts and intelligence reports. Since the 1980s we have supported a range of industry sectors, which has grown to include: CE, Broadcast, Entertainment Content, EdTech and many more.