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NOV. 12, 2010 • Citing a lack of a generic or complete platform security and content protection mechanism available for Google’s Android mobile phone system, Netflix disclosed it had no immediate plans to stream video content to all Android phones as it has with the iPhone or Windows Phone 7.  Netflix instead will work with the individual hardware manufacturers to to craft DRM solutions that will permit secure content streaming.

Impact: Internet analysts recently estimated 20% of U.S. prime time traffic was due to Netflix online streaming of video content.  With all the major game consoles able to stream Netflix content, it seems the only major growth limit Netflix faces is the rollout of broadband.  That and the upcoming renegotiation of the existing low-low cost contract giving Netflix access to movies to stream. On the mobile front, the hardware uniformity behind iOS devises makes security less of a challenge but already Windows 7 Phones are available from multiple manufacturers such as LG, Dell, HTC and Samsung, somewhat negating that point. The issue for Netflix is the massive growth of the Android phone installed base.  On Dec 9 Google’s Android VP of Engineering, Andy Rubin, revealed that 300,000 Android phones are being activated daily.  With their generally lower price points compared to Apple’s iPhones and popularity with younger media consumers, this is a market Netflix could use to maintain its pace of growth.  We view the Netflix issue as a potential warning sign of game piracy issues on the Android, something iOS devices have not been immune to.

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