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Netflix wants to be a major player in the inflight entertainment world and it is not going to let that pesky detail of limited inflight connectivity get in the way. Billing itself as the “world’s leading Internet entertainment service,” the company wants to ensure that its customers are able to connect to its content anywhere and any time. At the APEX EXPO conference in Long Beach, CA last week Spencer Wang, VP Finance/Investor Relations & Corporate Development, spoke on behalf of the company. Wang made his case for why airlines should be “not just allowing Netflix but promoting it.”
With Netflix inflight we are bringing the entire Netflix service to passengers at 35,000 feet in the air and it works just like it does on the ground. We’re not supporting on-board caches or [embedded] seat systems…
For airlines we can generate awareness and excitement for your investment in next-generation wifi. We want to work with you to help build a great business model around low cost or free inflight wifi.
The gist of Netflix’s position is an easy one: Passengers have already chosen it as their preferred source for media content so airlines should cooperate in delivering it. That comes from a combination of airlines making the wifi free to passengers and Netflix delivering content over those cheap/free pipes. That’s a hard point to argue at first blush, but it is, of course, more complicated than that.
In the US market airlines mostly have connectivity systems installed. That’s the first major hurdle to overcome. Alas, the total capacity of these systems remains below what Netflix needs to stream content on board. The company is working to reduce the bandwidth required – it claims a 250kbps stream for “DVD Quality” (a/k/a 480p) content is available to airlines now – but even that is not enough of a cut for many aircraft. The backlog of capacity upgrades from airlines – Gogo and ViaSat have hundreds of pending installs across Delta and American while Panasonic Avionics is set to upgrade its hardware on United’s fleet – helps but that still doesn’t cover the full fleet.
And even with the additional capacity on board that doesn’t mean Netflix will be able to use it, certainly not for free. Passengers pay for access on most airlines today. Where they do not pay directly the cost is generally carried by a partner/sponsor (e.g. Amazon Prime and JetBlue). Based on Wang’s comments Netflix does not really seem to care who pays for those bits and bytes so long as it is not his company.
Airlines give away peanuts, too. They have inflight entertainment systems that they spend millions on.
Should the money being spent towards onboard hardware and licensing be shifted to cover bandwidth for streaming Netflix content to passengers? That certainly seems to be a part of the company’s play.
With tens of millions of dollars invested in hardware and content on board it is unclear that airlines are going to switch wholesale to the Netflix model. Then again, American Airlines finally confirmed (after more than a year of reasonably strong speculation) that it will be removing its remaining in-seat screens as planes are retrofit in the coming years. The airline will have on-board streaming servers, the cache that Netflix is avoiding, but there is no doubt that the content licensing business is shifting dramatically for many airlines and passengers.
Wang spent a decent portion of his presentation talking about the value proposition of airlines participating in Netflix’s program. Much of that comes from getting access to the lower bandwidth codec. But he also talked a lot about how Netflix is able to monitor nearly everything about its customers’ experiences with the service. Available bandwidth, buffering times, rebuffering frequency and other metrics are all recorded and analyzed to help improve the service. So why does the company need airlines’ cooperation? Why can it not dynamically detect and adjust the content delivery to use the better codecs and improve the passenger experience?
The cynic in me says the “partnership” is really about airlines promoting the Netflix product for free, while shouldering the costs for the bandwidth or dealing with frustrated customers. And I’m not the only one with such thoughts. One airline executive grumbled similar to me before heading off to a meeting with Wang at the show.