Netflix App for iPhone Puts Spotlight on Mobile Video

Yesterday, Netflix released its long-awaited app for the iPhone and iPod touch, rounding the company’s offerings for Apple’s iOS platform. Significantly, the app works using both a Wi-Fi and a 3G connection. In my limited testing, the quality of the video streaming does take a hit over 3G, but the convenience of anytime, anywhere access makes for a fair trade-off.

This move dovetails nicely with my upcoming report on mobile content, which predicts a threefold expansion of the US mobile video audience between 2009 and 2014. In the report, I point out that attracting subscribers hinges on the right content, questions of cost and the quality of the viewing experience. Historically, these latter two factors have impeded the growth of mobile video.

The fact that the Netflix app has jumped immediately to the top of the charts of the most popular free iPhone apps provides strong evidence of pent-up demand for a video service that combines a deep catalog of content, multiplatform viewing and quality streaming. Netflix recently deepened its catalog with a nearly $1 billion deal with Epix that will add access to films from Paramount Pictures, Lions Gate and MGM.

In the wake of the Netflix launch yesterday and the introduction of Hulu Plus in June, consumers have increasingly rich options that combine online and mobile video streaming, and that is what will propel the market over the next five years. Although ad-supported video will grow more quickly, subscriptions will still account for the bulk of mobile video revenues, more than doubling from $413.4 million in 2010 to $901.2 million in 2014.

Have the issues associated with viewing quality and cost been solved? Not entirely, but let’s consider how these issues might play out.

Mobile bandwidth is certainly more plentiful, more ubiquitous and more reliable, although it may be the case that the amount of data mobile consumers use will always expand to fill the ever-widening pipes. However, Wi-Fi access points and, increasingly, WiMax networks will help alleviate some of the strain being put on the existing infrastructure.

As for cost, the ability to watch across multiple screens helps amortize the expense of a service such as Netflix or Hulu Plus. Of course, there is the looming issue of tiered bandwidth pricing and its potential impact on mobile data consumption. But here again, Wi-Fi is likely to provide a remedy. Plus, there is little evidence to suggest that mobile will become a primary platform for video consumption anyway (according to Nielsen, for example, the amount of time spent viewing video on mobile devices has remained stable over the past year).

In the end, it all comes down to platform integration. Consumers will increasingly expect video content (along with games and music) to be available on demand or via subscription on TVs, mobile and PC. The content owners that will thrive in this digital ecosystem are the ones that understand the need to deliver seamlessly across every possible platform.