Netflix launched in the U.K. this week with a high-visibility PR push and a heavyweight ad campaign, but what can it offer British consumers that they are not getting already?
Sky is the dominant player. Rupert Murdoch's satellite broadcaster has 11 million subscribers, and a heritage of big deals with U.S. and U.K. production companies and broadcasters. It has to charge premium prices to fund those deals, however, and a typical package is between $25 and $30 a month.
Amazon-owned LoveFilm, with two million subscribers, is the other big competitor for Netflix. It was built on a postal DVD-rental service but has been enhancing its streaming capabilities in anticipation of Netflix's arrival. LoveFilm is a strong movie brand, and the fact that most Amazon shipments arrive with a LoveFilm flier keeps it front-of -mind.
Then there's the popular BBC iPlayer, which offers free, high-quality streaming of the broadcaster's latest TV shows.
James Kirkham, managing partner at London creative agency Holler, owned by Leo Burnett, is not optimistic about Netflix's chances."The whole nation's video on demand is already carved up," Mr. Kirkham said. Some people will only watch the iPlayer; others swear by LoveFilm's philosophy. ... I select what's available on Virgin or Sky, or I'm happy to pay iTunes for an episode of Entourage to watch on my laptop. Netflix is very new and might take a while to achieve scale in the U.K. The response is , 'Oh, it's a bit like LoveFilm.' It's already a relatively mature market, and we're not short of choice."
So far, the big complaint seems to be about the films and TV shows available on Netflix."There's a poor selection, and they are being panned for it," said Andrew Stirk, executive planning director of BETC London, has signed up for the service. They've got to address this quickly. It may be a degree of arrogance on the part of Netflix -- perhaps they think there is latent demand."
Graeme Hutcheson, Mediacom U.K.'s associate director-media futures and implementation, agreed. "Most of the [Netflix] content I can get for free. I'm not paying $9 a month to watch Kill Bill. Sky is a very strong business model to crack. ... They have customers tied into all sorts of double- and triple-play deals, and I can't see it being usurped."
Netflix's launch campaign, done in-house and bought by WPP Group's MEC Global Solutions, is about pushing trial based on the offer of a free membership for a month. Netflix CEO Reed Hastings has been all over British media this week, answering critics and saying that his hope is that people will try Netflix and see how easy and convenient it is .
(Reporters's note: When I tried to sign up for Netflix from London, I kept getting the message, "We are unable to process your request -- please try again later, or contact customer service." Customer service turned out to be in California; the response was that their engineers were doing their best and to try again tomorrow.)
In addition to dealing with the content issue and inertia of the British public, Netflix must persuade consumers to get up to speed with technical advances."We as a nation are not far away from the DVD shop and the box set," said Jon Tipple, head of planning at McCann London. "We will get there, but we are behind the U.S."
That could actually end up helping Netflix if it can ride the wave of Britain's conversion to streaming TV and movies. With 95% of households "digitally enabled," the U.K. may be on the verge of a new relationship with viewing.
The public response, judging by Twitter conversations, is that people are impressed with the seamless technology and cross-platform compatibility, if not by the entertainment choices.
LoveFilm is moving quickly to match Netflix's free trial and monthly charges, and both it and Sky are expanding offering onto different platforms. As a result, Netflix's most distinct differentiation could be its social-media credentials. "Social-event viewing is on the rise," Mr. Stirk said, "and Netflix is using social viewing right from the outset."
Netflix's U.K. homepage encourages users to sign up via Facebook. While at first it appears that 's the only option -- a source of complaint by some who want to keep their viewing habits private -- there's also a nonsocial sign-up.
"It's very compelling for some people to see what Paris Hilton is watching," Mr. Tipple said. "And if you have a friend with great movie taste, you can replicate the conversation from the pub on social media. It might be too early for some British consumers who are still het up about privacy, but it's the right way to be going."