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Netflix Streaming Costs Primarily Licensing, Not Bandwidth
Hollywood cashes in on Netflix success
by Karl Bode Friday 30-Jul-2010 tags: business · bandwidth
As CNET explores, Netflix has been doing rather well financially -- which resulted in Hollywood very quickly begging them for more money. Hollywood has also gotten Netflix to do things like delaying new releases for thirty days under the misguided impression that this is somehow going to help save physical DVD sales. As NewTeeVee notes, Netflix spent $66 million in the second quarter of 2010 on licenses for streaming titles, compared with just $9 million one year earlier. That's substantially more than they pay for bandwidth:

But despite a huge increase in the amount of video streams it's serving up through Watch Instantly, Netflix's streaming costs haven't increased proportionally. In the second quarter, the company said costs associated with delivery over third-party CDN networks only increased by $1 million versus the previous quarter. Netflix is benefiting from bandwidth costs continuing to fall exponentially as it grows its streaming business.

So far, predictions by Internet video nay sayers like Mark Cuban that Netflix's model isn't sustainable don't appear accurate. Netflix has eaten these Hollywood licensing costs without raising subscriber rates, though of course things could get more difficult for Netflix once cable TV providers (say ones that also own content empires) realize that streaming Netflix functionality embedded in every piece of hardware could pose a long-term threat.

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Z80A
Premium
join:2009-11-23

Mark Cuban is a dummy

He is a media whore Paris Hilton wannabe who really needs to do the world a favor and drink a gallon of Drain-O.
Kearnstd
Elf Wizard
Premium
join:2002-01-22
Mullica Hill, NJ

Re: Mark Cuban is a dummy

Entertainment goons dislike new systems because they are far too customer friendly. look how long it took music to even start to latch onto internet delivery and even then at 99c a track they still wanted more and more money.
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Ulmo

join:2005-09-22
San Jose, CA
If you're saying it and I'm thinking it, I doubt that fast-rolling freight train's gonna stop!
SixSpeed

join:2001-12-24
USA

Steaming service stinks

Netflix streaming is horrible. The titles are old and after having the service for a few weeks, there is noting to watch.

The bandwidth costs didn't go up because their streaming content is garbage.

herb77

join:2005-02-23
Fort Myers, FL

Re: Steaming service stinks

Sorry but you're wrong. I find new things to watch everyday.
--
Obama 2012
Ulmo

join:2005-09-22
San Jose, CA
Reviews:
·SONIC.NET
·callwithus
·Vitelity VOIP

Re: Steaming service stinks

In my experience, Netflix streaming is light on content, but not too close to empty. It's way better than Cable's original VOD.

As the model grows, Netflix either will or will not be able to license reasonable amounts of content. That's the big Q.

At this point, I don't care if Netflix dies and croaks. (1) they don't allow the streaming to be tracked for alternate users of the account, littering my main account person profile with someone else's tastes, and Netflix hasn't offered a tool to move their preferences from one person to another because of this horrible situation. (2) Netflix doesn't allow you to delete another person, so when you change the name, their old preferences influence the new person. (3) They don't take PayPal or prepayment (including money orders). If someone replaces them that does all this better, I'd be happy.

I lost a bank account due to Netflix, because they were the only company that auto-debited my account without my specific each-time approval. I didn't have this problem with any other recipient, because all the other recipients didn't auto-deduct: I had to specify each amount to go to them and the time.

So, if Netflix's business model withers and fades, good riddance. The online streaming is a no brainer. Their implementation of it technically is quite good. Their administration of it sucks raw sewer.

ThrowDemsOut
If you can't convince 'em, confuse 'em
Premium
join:2002-03-03
Mullica Hill, NJ
kudos:4
said by SixSpeed:

Netflix streaming is horrible. The titles are old and after having the service for a few weeks, there is noting to watch.

The bandwidth costs didn't go up because their streaming content is garbage.
And much of what they offer is available On-Demand for free from the cable companies.
--
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BF69
Premium
join:2004-07-28
Camden, TN

Re: Steaming service stinks

said by ThrowDemsOut:

said by SixSpeed:

Netflix streaming is horrible. The titles are old and after having the service for a few weeks, there is noting to watch.

The bandwidth costs didn't go up because their streaming content is garbage.
And much of what they offer is available On-Demand for free from the cable companies.
you get cable for free?

You know you can watch all your network shows for FREE and in HD without having to pay for cable. It's called an antenna.

aztecnology
O Rly?
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Murrieta, CA
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·Verizon FiOS
said by SixSpeed:

Netflix streaming is horrible.
The streaming works flawlessly...

The titles are old and after having the service for a few weeks, there is noting to watch.
Sounds like your a curmudgeon. Hollywood has their hands tied on what they can offer...

The bandwidth costs didn't go up because their streaming content is garbage.

--
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SixSpeed

join:2001-12-24
USA
Reviews:
·Optimum Online
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2 edits

Re: Steaming service stinks

said by aztecnology:

said by SixSpeed:

Netflix streaming is horrible.
The streaming works flawlessly...

The titles are old and after having the service for a few weeks, there is noting to watch.
Sounds like your a curmudgeon. Hollywood has their hands tied on what they can offer...

The bandwidth costs didn't go up because their streaming content is garbage.
I don't care why the content is garbage, I just know that it is. I supposed if you are 60+ years old, you will find the title selections great.

Also, its a heck of a wait to get anything current. After having Iron Man at the top of my queue for 2+ months, I just got it yesterday.

Jason Levine
Premium
join:2001-07-13
USA

Re: Steaming service stinks

Well, I'm only 34 and I find their streaming selection prety good. It could be better but that's more the fault of the studios than Netflix. Netflix is making deals as quick as they can and would toss everything on streaming if they could.

Meanwhile, my 2 sons (age 6 and 3) love Netflix streaming. There are tons of kids shows on streaming (current like Dora and older like Rugrats). I hand the oldest the Roku remote and they go to town watching show after show.

I guess it all boils down to your taste vs what Netflix is currently allowed to stream.

As far as waiting to get DVDs, I've never run into that problem. After I send a DVD back, I typically have a new one in 3 days. I think I've only had one time when the item on the top of my queue wasn't available. Then again, most of the stuff I have on my queue isn't new release material. YMMV.
--
-Jason Levine

Uncle Paul

join:2003-02-04
USA
kudos:1

Re: Steaming service stinks

I'm 41 and find the Steaming selection while large mostly B movies or old titles. Typically anything you'd go to a B&M store and find dust on. If you really like old, foreign, obscure, or indie stuff then they have plenty of content for you. If you're looking for stuff typically released in the last year... not so much.

My 5yo daughter finds the kids selections 'ok'.

It's good if you want to watch old TV series though.

scott2020

join:2008-07-20
MO
Inspector Gadget FTW!
My kids love it, and brings back memories for me!

Jason Levine
Premium
join:2001-07-13
USA

Re: Steaming service stinks

Inspector Gadget was one of the first titles they found and burned through. My son still pretends that he has "gadgets" like Inspector Gadget has.
--
-Jason Levine
Eek2121
Lovin Verizon FIOS

join:2002-10-12
Newton, NJ
Reviews:
·Service Electric..
You are clearly a troll, stuff like 2012, (»www.netflix.com/WiMovie/2012/70108779) etc. are available. There are over 100 movies on netflix streaming that were released within the past 3 years.

Uncle Paul

join:2003-02-04
USA
kudos:1

Re: Steaming service stinks

said by Eek2121:

You are clearly a troll, stuff like 2012, (»www.netflix.com/WiMovie/2012/70108779) etc. are available. There are over 100 movies on netflix streaming that were released within the past 3 years.
How many movies are on netflix streaming that did over $50 million in the box office and were released to DVD in the last six months?

Streaming on Tivo is good quality (sometimes has issues properly detecting bandwidth), PS3 is also good. Sony Bluray player stutters and is poor quality. All systems are on Cat 6 structured wiring on a managed GB switch to Comcast 20 mb service.

The bottom line still depends on what kind of titles you're looking for in the streaming catalog. If you like more obscure or older movies than Netflix has you covered in spades. If you're looking for titles that did reasonably well in the theaters and was released to DVD in the last 6-8 months then the selection if relatively bare.
Ulmo

join:2005-09-22
San Jose, CA
Reviews:
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Yes, correct. Netflix streaming technically is good. The titles available are bad because of Hollywood, not Netflix, AFAIK.

I reiterate that Netflix sucks at user profiling and billing. Baby boomers are dying, and depending on them for their sole bread and butter is a failed business model except for Wall Street fast-backers.

If Hollywood never lets Netflix get good content, then that'll be a nail in Netflix's coffin, as far as I'm concerned. And, because Netflix sucks at the customer side of its business (besides the streaming technically), I'd be glad for Hollywood to kill Netflix off. However, that would still leave the current void of a good streamer. Hulu might replace Netflix.
xenophon

join:2007-09-17
There is so much streaming content on Netflix that appeals to me I can't watch it all. More comes each week that I add to the queue than what I can watch. Seems those who only like generic mainstream titles don't like Netflix. There's an awesome (in the true sense of the word) amount of quality/quirky stuff.. indie, foreign and obscure. What you can't get streaming can be simply sent in mail.

Hope to see them continue titles like Memento, Pan's Labyrinth, Dragon Tattoo, Jackie Brown and Wild China. Sounds like they'll be focusing on TV content in the next year but I hope to see more Discovery/NatGeo type stuff rather than mindless network tv junk.

Have dumped cable for Netflix/Hulu/Playon and am finding it meets my needs.

Great way to check daily Netflix content, sort by new...

»instantwatcher.com
fuzzholio

join:2002-04-30
Shingle Springs, CA

Re: Steaming service stinks

yeah i dumped cable about nine months ago to cut costs from being laid off ...saved me $75 a month...i built a HTPC for my 52" HD TV and stream everything from the net...and with Netflix and Hulu and the likes added by networks offering episodes of there current shows after they air... i have more control of what i want to watch and when to watch...no DVR rental fee...slightly less commercials (though they are repetitious)... my average bandwidth usage is between 140-165 gb per month.... my wife and i like this model that we probably will not go back to any form of cable/sat again...
iansltx

join:2007-02-19
Golden, CO
kudos:2
Reviews:
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Never had payTV. Been Hulu or Netflix for me, and it works just fine. When Netflix doesn't have some content...well, that's the studios' faults, not Netflix's.

As for bandwidth costs, I wouldn't be surprised if they're paying a penny or two per gigabyte nowadays, since they aren't buying from Akamai. Which means a full-on movie takes a nickel, maybe two, to stream. Which is actually pretty cool compared to mailing a DVD...
BosstonesOwn

join:2002-12-15
Everett, MA
Reviews:
·Comcast

Re: Steaming service stinks

said by iansltx:

Never had payTV. Been Hulu or Netflix for me, and it works just fine. When Netflix doesn't have some content...well, that's the studios' faults, not Netflix's.

As for bandwidth costs, I wouldn't be surprised if they're paying a penny or two per gigabyte nowadays, since they aren't buying from Akamai. Which means a full-on movie takes a nickel, maybe two, to stream. Which is actually pretty cool compared to mailing a DVD...
Actually they are still using akamai, but akamai is a "last choice" provider since it's expensive. The other CDN's are eating up the primary "cheap" bits.

Akamai is pitched as "quality" bits.

Funny part is akamai has enough cash in the bank to buy both netflix and 4 of the big CDN's. and not even break a sweat.
--
"It's always funny until someone gets hurt......and then it's absolutely friggin' hysterical!"
iansltx

join:2007-02-19
Golden, CO
kudos:2

Re: Steaming service stinks

Are you sure they're buying from Akamai? I heard they were getting their bits from LimeLight and Level3.

Billy994

@eliablehosting.com

Re: Steaming service stinks

said by iansltx:

Are you sure they're buying from Akamai? I heard they were getting their bits from LimeLight and Level3.
They dropped Level3 and now use Akamai and Limelight. Their contract with Akamai states they must give Akamai at least 51% of their business.

This is 100% fact there have been press releases and tons of information from completely reliable sources about it. If you still care use Google to easily find the proof.

Diablitoo

@comcast.net
When i saw u post dragon tattoo (men who hate women) Swedish title , i had to comment . That movie was off the chart it was mind boggling; If i did not have a netflix account i wouldnt have found it since they try to find your likes and recommend movies according to your preferences. I think the service is pretty good and will get better as long as Hollywood plays along. Also, advancement in technology to provide more bandwidth they will be able to some day provide Blue-ray quality movies without connection problems. I see hollywood like old people, set on their ways, never wanting to change. Hopefully little by little they will see that this is profitable business and what people really want. I cant remember the last time i bought a DVD or CD. So if they want to change consumer behavior tough luck cause i'm never going back, i love netflix streaming service.

odreian615

join:2006-01-18
Chicago, IL

Re: Steaming service stinks

Yes Dragon Tatto was awesome but when I told my cousin about it he said it was on redbox around the same time
BosstonesOwn

join:2002-12-15
Everett, MA

Re: Steaming service stinks

The girl with the dragon tatoo ? Good movie.

First seen it thanks to netflix.

Jovi

join:2000-02-24
Mount Joy, PA
said by SixSpeed:

Netflix streaming is horrible. The titles are old and after having the service for a few weeks, there is noting to watch.

The bandwidth costs didn't go up because their streaming content is garbage.


Streaming quality is superb on my end and always find something to watch.
--
"Some people have no respect for logic."

w0g
o.O

join:2001-08-30
Springfield, OR

1 edit
It works pretty well and the movie selection is pretty good. It doesn't have all the newest 'blockbusters' but if that's all you watch then you're not watching much... my only complaint is the compression is too great and bitrate far too low for my taste. I'd like to see them kick out a 5-8Mbps+ stream with high quality audio at least that rivals iTunes 128kbps per channel, but preferrably lossless or original Dolby Digital (same bitrates or better). Audio hardly uses any bandwidth anymore and the muffled detail-less audio is a drab to hear.
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aurgathor

join:2002-12-01
Lynnwood, WA
kudos:1
Reviews:
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I guess the service must be a bit overheated if it's "steaming" ,
but as far as I, and my 5 years old concern, the streaming selection is not bad at all, especially since it doesn't cost anything extra.

Would it be better if they had more titles available? Of course! But that doesn't mean it's bad.
--
And the winner is:

Xizer

join:2004-02-05
New York, NY
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2 edits
said by SixSpeed:

Netflix streaming is horrible. The titles are old and after having the service for a few weeks, there is noting to watch.

The bandwidth costs didn't go up because their streaming content is garbage.
This guy is right. Netflix streaming is garbage. There are numerous issues with it.

-Not detecting connection speed properly half the time and giving you a low quality stream. This means you have to go through a process of "play video, did Netflix detect it for HD? God damn it, of course they didn't! Back out, start video again. "Presented in HD" well duh, you retards! Why not just give me an option to skip your stupid connection test every time?"

-Low quality. I was unimpressed with the quality; it's obviously not on par with Blu-ray so for any title on Blu-ray Netflix streaming is worthless. It's not even as good as iTunes Store purchased 720p releases, so it's worthless for anything on iTunes... even HDTV channel captures are usually better quality.

Further issues with Netflix's quality: half their content that should be in HD is only in standard definition. I regularly scroll through the catalog of Instant Watch titles and see loads of material I know was shot in HD and no HD icon next to it.
xenophon

join:2007-09-17

Re: Steaming service stinks

I have a 60" panel streaming Netflix via PS3. Even SD content is passable. For about $12/month and BR disc checkout once a week, I have no complaints. Better than paying $3-$6 each on pay per view.

See 9 replies to this post

nonsense

@qwest.net
Sorry, Netflix streaming is great. I use a Samsung Blu Ray with integrated streaming (includes Pandora and YouTube) connected via Wi-Fi plus over the air digital and a little very cool HD DVR to time shift my wife's soap operas and record PBS and the ocassional domestic show. Netflix has great "instant play" titles, especially foreign films and domestic TV shows. Quality is getting better every year. Netflix and Google fight evil everyday. Lets hear it for the monopoly busters. Freedom!!!
NyNexit

join:2009-11-01
Huntington, NY
THAAAAANK YOU.... although its a good start. and Kudos to Netflix for shaking things up
--The interface on the ps3 stinks.
-ooo season 3 of farscape! :::thumbs down:::

Uncle Paul

join:2003-02-04
USA
kudos:1
Anytime I've set up a merchant to auto bill they always auto charge at the end of the billing cycle... that's why it's called auto billing. If you gave them a debit card, I'd fully expect them to take the money at the end of the bank cycle. I wouldn't expect them to ask permission. Your complaint here makes no sense.
Goldman

join:2002-06-21
Maumelle, AR
I think the streaming service is pretty good. Th only problem I have had is with my ATT service slowing or becoming unstable.

The movie selection for streaming isn't bad, but I have to agree that newer titles need to be added faster for most people to get any value out of it.
xenophon

join:2007-09-17

Re: Steaming service stinks

said by Goldman:

but I have to agree that newer titles need to be added faster for most people to get any value out of it.
I think you mean those who only like newer titles won't get any value out of it. There is so much great foreign/indie/classic/obscure content already and they are adding more than I can keep up with. It depends on your tastes. If you like blockbuster Hollywood stuff, NF streaming may not be for you. If you like 'film', NF streaming is a gift of the film gods for only $10-$12/month and 4-5 disc checkouts a month. Would you rather pay $3-$6 per view?

Looking forward to 5.1 and subtitles coming by end of year.

Jason Levine
Premium
join:2001-07-13
USA

Re: Steaming service stinks

said by xenophon:

There is so much great foreign/indie/classic/obscure content already and they are adding more than I can keep up with. It depends on your tastes.
I agree. Tripping the Rift and The IT Crowd are just two titles I found via Netflix Streaming that I fell in love with. Of course, then there are old favorites that I can watch again like Farscape (at least the first few seasons), Futurama (all seasons and movies!!!!), etc. Meanwhile, my wife's been watching Arrested Development and my kids have been enjoying Rugrats.
--
-Jason Levine
Goldman

join:2002-06-21
Maumelle, AR
I mean that most people that want newer movies will simply download them rather than pay for Netflix in it's current form. There is a huge untapped base of customers that download rather than pay for older movies they have either already seen or don't care about.

cableties
Premium
join:2005-01-27
Reviews:
·Verizon FiOS

It's true...

I was questioning a Netflix rep about how impressed I was with their title turnaround (obviously NOT new titles) and how their selection from 12 months ago has increased significantly with older titles.
I was shocked to learn from her on how postage is their biggest cost and that streaming is actually preferred.
She even mentioned how successful they were with innovating licensing deals with manufacturers on integrating Netflix streaming features.

I just wish studios would wake up and embrace netflix...or buy it!

See 7 replies to this post

espaeth
Digital Plumber
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join:2001-04-21
Minneapolis, MN
kudos:2
Reviews:
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1 edit

Netflix is a different model

Internet delivered content has limitations on the number of simultaneous viewers that can be served, so while Netflix style delivery works good for serving up things like Dexter Season 1 episodes to a couple million folks who want to watch on their own time, it doesn't make sense (technically or financially) for things like live broadcasts of American Idol.

Video delivery isn't going to go 100% Internet distribution. There are cases that make clear sense for IP-based delivery, but there are a large number of cases for which IP delivery would represent a massive increase to the cost of delivery -- for those cases traditional broadcast methods will still continue to exist.

See 6 replies to this post

milnoc

join:2001-03-05
H3B
kudos:1

Interesting...

It's interesting that the studios want to keep their 30 day window to protect DVD sales, as pointless as that may be. That just gives video pirates 30 days to rip a DVD and distribute it on-line for free!
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Thatgeekinit

join:2002-05-01
Washington, DC

Re: Interesting...

I can understand why the studios want that window as it will encourage people who frequently buy new DVD's at $20 new release prices not to "wait for it on Netflix"

They just want to protect their dying business model which is based on charging people many times for the same content in different formats.

First they charge you $10/ticket in the theatre. Then $10 to PPV in a hotel. Then $5 to PPV on cable/dish. Then they charge you $20 to buy it on DVD. Then they will want to charge you $30 to buy it on Blue-Ray or $1-2 for a netflix- rental after your DVD gets scratched or you want to just see if Blue-Ray is worth it.
--
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msmisfit

join:2004-09-13
Lawrenceville, GA
kudos:1

Re: Interesting...

Just got a Roku box, and Netflix streaming for me has been terrific... 4 bars and no interruptions. Flawless operation as someone else said.

Of course, I'm the type that can wait for movies I want to see, and have more than I can watch with all the British TV comedy and mystery series available for streaming. [MI-5, Inspector Morse, etc.].

If that $10 mo. was a problem, I could drop a cable digital tier that I have now [to see one channel out of 30 junk ones]. Plus free on-demand on my cable service is worthless as well.

Morac

join:2001-08-30
Riverside, NJ
kudos:1
Reviews:
·Comcast
The reason Netflix gave for agreeing to this was that it allowed them 30 days time to stock up on new releases so that there would be less wait time to receive new releases.

Considering I'm seeing months of "long waits" for new releases that were 30 day delayed, Netflix's plans failed. That or they were just blowing smoke in their press releases.
--

The Comcast Disney Avatar has been retired.
Ulmo

join:2005-09-22
San Jose, CA
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said by milnoc:

It's interesting that the studios want to keep their 30 day window to protect DVD sales, as pointless as that may be. That just gives video pirates 30 days to rip a DVD and distribute it on-line for free!
Ditto ditto ditto. Couldn't have said it better myself.

To boot: the ripped copy will probably be a high quality HD bluray, whereas the Netflix will be some lower hollywood/bandwidth-specified tier and may not even be the best available even if your bandwidth and computer could handle it and it was originally mastered at higher quality.

Van
Premium
join:2009-07-08
New Orleans, LA

I am very critical of all services that I own

but I love Netflix and use it often

Well worth the money as long as they keep updating their lists

thundar

join:2001-01-03
Scottsdale, AZ

1 edit

Cheap for what you get!

I have been paying for DIRECTV since 2003 and yes they keep adding more HD the same out the door price has gone up from $54/m to over $85 and add in the extra charges for "leasing" or as they say access fee for boxes that I bought on eBay and now charge for multiroom... I have just about had it with all the nickel and dimeing. So for $8.99 I gave Netflix at try and I have been very happy with what they offer for such a cheap price. Yes everyone says they don't have the newest movies and such, but as everyone here knows you can find that stuff pretty easy from the net. I think this should be a wakeup call to all the greedy TV and execs that want to charge people to watch shows that are free OTA but want $ a day later. As others say Netflix is a good model at a good price I hope they keep proving the man wrong. Side note I pretty much only do streaming so don't know much about waits for DVDs (you can get Blurays for $2 more a month) but I will say that the HD video stream looks acceptable but having sound in HD with only 2 channels and not 5.1 is not acceptable. They up the video bitrate and 5.1 sound for people that have the Bandwidth and then you have a real winner.

kg1

@bresnan.net

netflix

People are always going to find something to complain about. Netflix is amazing, thing about it, even if there is only one tv series season you would like to watch, its $9 month compared to the $40 or to buy. Blockbuster I think does a $10 for a week thing now for TV series but thats only one season! I'v watched the Sarah Conner Cronicles ( so mad there isn't a third season) all of Prison Break, Veronica Mars and many others. Anything new I want to see I head on over to Red Box. . . Netflix is adding so so so much all the time and not charging us anymore for it. Thank you Netflix for not being greedy. And yeah in a few weeks all the seasons of Family Guy will be available instantly!

clickwir

join:2001-06-21
Dickson City, PA

what about Linux?

If bandwidth isn't an issue, then bring on the better quality. I know some machines cannot play decent quality content (Wii) but other systems do and should be allowed to.

So I have a Wii and a bunch of Kubuntu boxes. If I want to watch something, it's blocky and looks like RealPlayer from 1998... or I'm told to install Windows so they can be sure I cannot copy the movie. Pfft. Just let me watch it. They put more restrictions and bullshit in the way of actual paying members than anything.

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