Netflix Worried About DVD Kiosks, Not iTunes Or Hulu

While many Netflix (NFLX) watchers are worried that the movie rental company won’t be able to compete with other online streaming services or cable companies someday, Netflix CEO Reed Hastings says the company has a much more important competitor in the short-term — while disc-based rentals are the vast majority of its business.

That’s cheap DVD rental kiosks, owned by the likes of Coinstar’s (CSTR) Redbox business, or Netflix’s familiar rival Blockbuster (BBI), which predicted it would have 10,000 kiosks rolled out by the end of next year.

Hastings lamented the rise of the kiosk on Netflix’s earnings call last night. Via Seeking Alpha:

In terms of competition, the rise of kiosk $1 new release rentals has been notable. In exit surveys of cancelling Netflix subscribers, kiosk is more and more frequently named as where they will go now for movies. And by the end of the year kiosks will likely be our number one competitor as video stores fall inversely. There are already more kiosks in America than video stores. If kiosks companies are able to further refine their systems to be able to profitability support lower-traffic locations then over the next three years we may see a kiosk in every 7-Eleven, every Starbucks and every airline gate.

What about rival streaming services like Apple’s (AAPL) iTunes or Hulu? No biggie, Hastings said. They’re all really focused on competing with TV — and less with each other.

I would say the overarching thing is that the competition on the digital front that exists today, which is the advertising-based free streaming from Hulu and YouTube and the pay-per-view from Amazon and Apple, all three of us are three drops of water in an ocean of viewing that’s mostly TV viewing. All of us are competing for the five hours a day that’s in a typical American household of watching television. And so we hardly notice each other.

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