What ever the case may be, they are going to compete for content driving content costs up, at the moment it's focusing on music, but other content is coming, and when NFLX content costs go up due to competition, margin goes down. GOOG acquired ON2 back in 2010 for their video codecs, they have the means to roll out their own service. I would like to see NFLX remain a competitor, just plain better for the consumer, but this action by GOOG will have an effect on NFLX business.
Heavy use of Netflix's streaming service has already driven content costs up and the $8 a month price is shuting out the competition from offering a comparable service. Just look at the facts, after 5 years since launching it's streamig service Netflix has 20 times more internet traffic than Amazon it's closest competitor. Nobody can compete with Netflix on the same scale without losing a lot of money. Amazon are losing money with streaming because if they were making money they would obviously close the huge gap between them and Netflix.
Higher content costs were seen as a big negative, Netflix were forced to raise prices and sub growth slowed because subs canceled. Sub growth has returned because Netflix still has the best service for the price and now the high content costs are helping Netflix by discouraging the competition from entering.
Amazon is spread too thin to compete with Netflix at Netflix's current level. Plus the pay per stream that Amazon uses is not as attractive as the 48 all you can eat. Plus Netflix's current library is vastly superior.
Netflix has first move advantage which is an extreme advantage. No one's going to approach 33 million subs anytime soon.
I did try the streaming service a while back, and wasn't blown away by what was available, but teh mail service is right in my wheel house, been enjoying that ever since, and we suppliment that with the occasional trip to a redbox. CSTR, and NFLX aren't an either / or option, redbox is convenient for instant gratification, but I like being surprised by the red envelope, and what's inside. Should be a no-brainer, but I honestly have more important things to worry about, so it is always a surprise when it shows up, and that service does offer a very wide selection.
On the consumer end there could be some improvement as the landscape changes. And even though I love the red envelopes, and that service, I'm extremely bearish on the stock right now.
Also lurking around the corner is AAPL's new TV, I expect it to be a whole house consol that bundles everything you currently have in all your electronics, and with 138 billion or so sitting around, they certainly could enter the streaming video service with an "Iwatch" campaign.