Netflix may suffer from limited mobility

The Netflix streaming app is now available on over 800 different devices, the company said in a job posting last week. That is nearly double the number of devices that the app was on only six months ago.

Much of that growth has come from the addition of mobile devices, beginning with the introduction of the Netflix for Android app in July. Not surprisingly given the increase in availability, the company said in its fourth-quarter earnings call last week that it has seen a surge  in viewing on mobile devices, particularly tablets.

Yet for all of that growth, Netflix is suddenly looking vulnerable in mobile video as new competitors with built-in advantages in mobility start staking claims to Netflix’s video-streaming turf. Given the growing importance of mobility to the streaming-video business generally, that vulnerability could eventually grow into a broader competitive problem for Netflix.

The most notable new competitor is Verizon, which on Monday announced a joint venture with Redbox to launch a new nationwide over-the-top subscription video streaming service that will be bundled with DVD and Blu-ray Disc rentals through Redbox’s 35,000 automated kiosks (soon to reach nearly 45,000, with Redbox’s acquisition of NCR’s Blockbuster Express kiosk business).

Though details of the new service are yet to be filled in, Verizon officials made it clear it will be available to “anybody who has a broadband connection” on both fixed and mobile devices.

As the No. 1 wireless service provider in the U.S., Verizon sells millions of broadband-enabled mobile devices each year, most of which, it’s now fair to assume, will start shipping with the Verizon-Redbox streaming app preloaded. While the Netflix app may also appear on those devices, Verizon will be able to bundle a subscription to its service in with users’ existing data plan. That could give it a significant price advantage over Netflix, whose mobile users will need to pay for a separate subscription in addition to a high-end data plan to accommodate the huge bandwidth consumed in streaming video.

Critically, wireless broadband providers were largely exempted from the FCC’s network neutrality rules, meaning Verizon Wireless will be under no legal obligation to treat third-party content services equally with its own. That could also work to the disadvantage of Netflix.

The Verizon service will also be more comprehensive than Netflix’s, including video downloads in addition to streaming and DVD and Blu-ray rentals. That will enable Verizon mobile users to watch content even when a wireless broadband or Wi-Fi connection is not available, such as on planes, assuming at least minimum storage capacity on the device. Netflix does not offer downloads.

Amazon also poses a major challenge to Netflix in mobile video. The $199 Kindle Fire tablet comes bundled with one free month of Amazon Prime service, which like Netflix offers unlimited streaming of movie and TV content. Though the Netflix app is also available on the Kindle Fire, for buyers who do not already have a Netflix subscription Amazon Prime’s connection with their existing Amazon accounts — a requirement with all Kindle devices — is an incentive to stick with the native service.

While Amazon Prime’s content library is not yet as robust as Netflix’s 35,000-plus movie and TV titles, it is growing rapidly, now topping 15,000.

Amazon Prime is also tied into Amazon’s broader e-commerce platform, offering additional features like free two-day shipping on all purchases, making it a more robust offering than Netflix’s service. Like Verizon, Amazon also offers downloads, through Amazon VOD, along with cloud storage through Amazon Cloud Drive, making it a more flexible mobile platform than Netflix’s.

Netflix still has huge advantages over potential competitors, including 22 million users and the largest streaming catalog of any U.S. based provider. But the technological and business challenges of mobile video delivery put a premium on native support, either at the device level or the service provider level. While the Netflix app may become ubiquitous on mobile devices, unless it partners with a service provider, it will always be a third-party service, lacking native support.

As mobility becomes more important to online video users, that disadvantage could begin to tell.

Question of the week

What does Netflix need to do to avoid getting outflanked by competitors in mobile?