In 2006, Netflix scored a grand slam when they announced a $1 million prize for anyone who could improve their recommendation engine by at least 10%. It took 3 years for a team of scientists to actually accomplish this feat, but the prize was ultimately worth far more than a million dollars in publicity and to Netflix’s bottom line. Better recommendations not only led to happier subscribers (less churn), but they also made it easier for Netflix to sell the niche content that they spend less money on. Recognizing the benefit that they received from the contest, Netflix was quick to announce a sequel, but ultimately had to suspend their plans over privacy concerns.
While a contest to replace Silverlight likely wouldn’t garner as much attention, I believe that the financial benefit to replacing this video platform could be just as significant.
Some will argue that I’m being tough on poor old Softie and that Silverlight represents some of the best video compression out there, but consider my logic for a moment. From where I’m sitting, Silverlight has two basic flaws: It’s buggy as all get out and it’s a bandwidth thief.
The screenshot posted above is a real life example of Silverlight in action. All video frameworks are prone to errors of course, but look at all the hoops Netflix makes their customers jump through just to support this buggy piece of software. If I had a nickel for every time I’ve had to restart my browser after a Silverlightning strike, I’d probably have .35 cents by now. Seriously, I have less trouble with Real Network’s codec and that’s saying a lot. Instead of putting up with these kinds of errors, Netflix should be actively searching for a more reliable alternative.
Given Netflix’s runaway success, it shouldn’t be a surprise that the big telco companies are running scared. While usage based pricing hasn’t hit the US yet, the Canadian telcos were very quick to raise rates the minute Netflix invaded their territory. When you consider how many internet service providers also sell video, it’s clear that Netflix will need a way to undercut these tactics, especially if they plan on expanding internationally. Currently, an SD movie over Silverlight clocks in at approximately 2 Gigs, while an HD movie will cost the user 3Gbs towards their cap. If Netflix could reduce the size of a movie file by 50% – 75%, without sacrificing quality, they could end the usage based meter for their customers, while also undermining a critical future component to their latest competitors’ business model.
Getting Hollywood to sign off on an outsourced video codec could be a potential problem for Netflix, but even if they were able to gradually ween their customers away from Silverlight by delivering independent films with the new technology, the benefit could still be substantial. Given how little they pay for traffic, they probably wouldn’t save $1 million on their bandwidth bill, but being able to stop telcos from nickle and diming Netflix’s members would be priceless and would help to future proof their business.
Davis Freeberg is a technology enthusiast living in the Bay Area. He enjoys writing about movies, music, and the impact that digital technology is having on traditional media. Read more at Davis Freeberg’s Digital Connection.