Netflix, Inc.: Is ‘Watch Offline’ Feature the Next Big Step for NFLX?

After years of saying no, NFLX is softening its stance on offering an offline video option in addition to streaming

By Brad Moon, InvestorPlace Contributor

In the last few days, Netflix, Inc. (NFLX) stock has taken a beating on a forecast of weak subscriber growth. Customers are ticked as a previously announced price hike kicks in and the company started actively blocking VPN users in Canada.

Adding to the hurt,, Inc. (AMZN) announced it would begin offering its Prime video streaming as a standalone monthly service for the first time, with aggressive pricing.

Finally allowing its customers to watch offline could be just what Netflix needs to turn things around, and the company is now softening its hardline stance against the feature.

The ability to download video to watch offline is consistently one of the most requested features for any video service. From a customer point of view, the option makes sense. Streaming HD video can use a lot of bandwidth and any time you leave your home Wi-Fi network, there’s a pretty good chance that bandwidth turns into mobile data use.

Why Netflix Needs ‘Watch Offline’ Feature

I’ll offer myself up as an example of why offline video appeals to many people.

Three kids in the family vehicle on lengthy drives for vacations or weekend trips, each kid clutching an iPad and watching movies when the highway scenery gets too boring.

Streaming HD movies over a mobile network is data intensive (a typical HD movie might be anywhere from 3GB to 5GB in size), and nothing would set up howls of complaints like driving through areas where spotty cellular service leaves the streaming video hanging.

When you arrive at a destination and someone decides they want to catch up on a favorite show that’s not offered on the hotel’s cable package and fires up Netflix, the results can be subpar. Hotel Wi-Fi is often an extra cost and is notoriously slow.

It’s true that many U.S. carriers offer unlimited data plans — so three 5GB movie streams every few hours wouldn’t necessarily result in a massive bill — but not everyone is able to shell out the $75 to $100 a month for these plans. And most of them start throttling your data once you go over a certain amount.

After 22GB of data in a billing cycle (which isn’t that much if you make a habit of watching HD Netflix movies on the go), AT&T Inc. (T) starts throttling. And you still have areas of poor LTE coverage to deal with, along with the cost of roaming if you happen to cross a border and binge on Netflix video.

In our case, we buy movies through Apple Inc.’s (AAPL) iTunes and load them on everyone’s devices. We still have a Netflix subscription for home use, but offline video is the way to go when you’re on the move — no data use and no worries about cellular service. You can watch video on a plane, train or in an automobile.

In the past, Netflix has been adamant about not letting its subscribers watch offline. Last September, Gizmodo spoke to NFLX about offline video and was told that the ability would add complexity to the Netflix experience, confuse customers and lead to “paralysis,” where some subscribers would have no idea what to do.

Offline video was a firm “no.”

There is definitely potential for confusion. Amazon Prime offers the ability to download offline video, but the rules vary depending on the content. Rights holders to the movies and TV shows available for streaming on Prime can dictate which content is actually downloadable, how long it can remain on a device and how much content you can have pre-loaded at a time.

On the technical front, there would be no real additional investment required by NFLX, although content rights would need to be re-negotiated and are likely to result in a similar situation to Prime.

At the very least, Netflix’s own shows would be a no-brainer for being able to watch offline.

Netflix is at a place right now where it needs to do something seen as a progressive move for all users. Offering 4K video and HDR video is great, but the content is extremely limited and it is useful to only a very small subset of its subscriber base.

Letting customers watch offline is something that most people would find useful at one point or another, and for some people it could be a killer feature.

According to Re/Code’s Peter Kafka, Netflix is now wavering about its no offline video stance. When asked about competitors that allow users to download video and watch offline at the company’s Q1 earnings call, CEO Reed Hastings had this to say:

“We should keep an open mind on this. We’ve been so focused on click-and-watch and the beauty and simplicity of streaming. But as we expand around the world, where we see an uneven set of networks, it’s something we should keep an open mind about.”

Raising subscription rates and aggressively blocking VPN users in countries like Canada has earned Netflix bad publicity. Competitors like Amazon are actively going after its customers, and global expansion is hampered by sometimes spotty network coverage.

The net result of these factors could be seen in that earnings report, where subscriber growth forecasts are now much lower than expected. Adding offline video to its streaming service would help address many of those negatives and could be just the low-cost, high-impact fix NFLX needs to turn things around.

As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.

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