Partnering with Airlines

Partnering with Airlines

The video entertainment industry can be broken down into four main markets as mentioned in the industry overview. Airlines are one of four markets, in-home is another. Major airlines have begun installation of Wi-Fi broadband routers in aircrafts this year. For instance, Southwest has planned to begin installation of routers into 15 of its aircrafts per month beginning in April, and will accelerate to 25 per month. (Patricia) The whole fleet will be outfit with wireless capability for consumers by 2012. (Patricia) Other airlines, such as Virgin already offer Wi-Fi connections

to their customers. Broadband antennas are already installed in most aircraft, and new fleets come with antennas built-in to the chassis. (Patricia) With broadband capabilities in aircraft for all major airlines, Netflix could distribute through airlines to airline and Netflix customers alike.

This could work in a few ways: Netflix could offer their streaming library to airlines, who in turn could offer it to their passengers for a flat trip fee, and to accompany the complementary selection. Airlines could also choose to eliminate the complementary selection and go Netflix all the way (either complementary or not). This might be challenging for airlines because Netflix does not provide streaming access to new-releases, and to-be-released films, as are currently offered as in-flight entertainment. Netflix could also be available solely to their subscribers through entertainment systems in the airplane. With the expansion of broadband access to passengers, current subscribers would be able to access their accounts during the flight, but

incur large in-flight broadband usage fees, which characterize current in-flight access offered in select carriers. In any of these scenarios, selection could be limited or

Netflix' entire streaming library could be made available for in-flight entertainment. Such a deep selection is otherwise impossible for carriers to provide in their planes due to secondary storage constraints of electronic hardware, and the costs associated with procurement and implementation of the video systems.

As the airline industry is still working out the kinks in these plans, Netflix should work to establish partnerships with major carriers to be one of, if not the exclusive content provider for flights. This will provide a good opportunity for airlines by establishing yet another medium through which they can engage in price discrimination. The partnership would most likely function around a revenue-sharing model if Netflix content was provided complementary with flight service, as is typical of streaming content. Netflix could also take a majority of access fees from the airline, in return offering increased value to passengers and increased ticket sales. This will prove to be a huge opportunity