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The DVD Rental Race Analyzed
Thomas Hawk writes "Netflix and Blockbuster have been locked in a price war with regards to the DVD rental space. Wedbush Morgan Equity Analyst Michael Pachter has a $3 dollar price target on Netflix and is in contrast bullish on Blockbuster. Davis Freeberg challenges Pachter's thinking that Netflix will be the loser in the DVD rental battle and Pachter himself responds back on his rationale on why he thinks Blockbuster has the advantage." From the article: "Irrespective of what Pachter thinks about the overall DVD rental business, Pachter's seemingly obvious prediction would appear pretty dire for Netflix. Pacther updated his price target for Netflix On 4/22/05 with the new $3 price. If Pachter is right, then we should expect to see Netflix's stock fall by approximately 75% over the next 12 months."
greencine.com offers adult movies and a more eclectic selection than either. however their service is slower and their prices are higher.
-mkb
Try Greencine http://www.greencine.com/! They have all the Hollywood releases and a ton of stuff the average Slashdotter would be interested in--anime, classic horror, non-animated Asian stuff, and even pr0n. I've been a member for almost two years and their service is great.
Of course that has more to do with the post office than with Netflix or Blockbuster. I use Netflix, and they generally put a movie out in the afternoon mail if they get it in the morning mail. That's about as fast as one can ask.
I assume that Blockbuster is the same way. If not, then they're in serious trouble. I'm not going to say it's easy to achieve on a large scale, but they'd better not be any slower and I bet they can't be any faster.
I don't usually get 48 hour return time, even thoug my local distributor is only an hour's drive from here. But that's mostly the post office adding an extra travel day on one end or the other.
One could choose to alter their model to allow even faster service; say, the ability to request that a movie be sent when you put it in the mail, rather than when they get it, and trust you to be honest (and drop you if you're not). But that would involve them letting out more movies at once, which would cost them more.
Blockbuster could add service whereby you could exchange either by mail or at their place. That might work well for them, since it would mean that they could batch up returns. Mailing costs have got to be a huge chunk of Netflix's cost, since those recipient-pays envelopes have a significant surcharge. A big box of returns would cost only a few dollars. But that would mean making more copies available at the individual stores...
I took Peter Lynchs advice as the best. His whole opinion of stocks boils down to one question: "Do I like their product, their service, the way they treat me", "Will I be buying from them again, and like it", "Will other people like them". He says, if you anwser yes to these questions, chances are you have a good company. Lynch said the best companies he invested in, the big ten-bangers, were companies he really liked, or noticed other people liked.
People can read all about P/E ratio, how fast a company is growing, and the rest. But this will not tell you who will suceed. These numbers should just tell you if there is a red flag, if a company could collapse on itself.
It all boils down to a good product. Price is very important, but if someone sells you crap, or bad service, people will not buy from them, and their buisness is doomed.
Rosco: "If brains were gunpowder, Enos couldn't blow his nose."
if a dvd mail rental place exists in SF for example, how will they know it is illegal to rent porn in a specific county in Georgia, that it violates community standards?
Rosco: "If brains were gunpowder, Enos couldn't blow his nose."
I think the price is fine right now. I suspect that if it became too low, the good service I get with Netflix would suffer. Realistically, the cost is about what I'd expect to pay to rent 4 or 5 movies per month. It's easy to get 3 movies a week if you watch and return quickly so the price can be roughtly 4x cheaper than renting at a store. That's a bargain.
... crazy!). The selection wasn't as diverse as netflix's. And finally, Blockbuster's website was annoying and ugly -- it looked like a WinAmp skin designer had made it up after huffing glue. In contrast, Netflix websitte is very useable, very simple. It isn't gaudy and flashy, but conveys information efficiently and accepts user input efficiently. I really like it.
But the real value is in the selection. Netflix stocks a lot of things that aren't easily found locally. If the price becomes too low, they won't be able to afford buying anything but the most in demand titles. That would suck.
Finally, I did a free trial w/ Blockbuster. They were missing an entire season of one of the Star Treks (a middle season like season three or four -- I can understand not having the last season, but why have 1,2,3,__,5
So, while I don't think of myself as Netflix zealot -- I will become one if it means keeping Blockbuster from dominating the DVD by mail rental market.
What changed under Obama? Nothing Good
Blockbuster has a 2-day turnaround for me...although I live just outside the DC metro area and the distro center is only about 40 miles away.
Last month I went through 15 movies, which could've cost me $45-60 to rent locally (assuming I could even find that many movies worth watching amidst the rows upon rows of garbage), but instead was only $15.
I used to split Netflix with my roommates in school...but I have to say I went with BB on my own because of the price and the two free movie/game local rental coupons per month.
From TFA "Blockbuster on the other hand is a bloated company" You'd be bloated too if you had over 9,000 stores and kept opening more (Thats more retail locations than WalMart in case you're counting). You just don't get that big without a certain amount of bloat , extra layers of management, etc.
I've used both, and Blockbuster seems about the same to me. Of course, Houston probably has its own distribution center, so that may be part of it.
I was talking to an employee at the Blockbuster store by our house (when we were using one of our 2 free monthly in-store rentals, which are handy when you want something on a whim) says they're in talks with the USPS to have them scan the returning DVD's when they receive them, so that they can send outgoing ones before the returning ones even arrive at the distribution center.
I really like the service from Netflix. They are also the first to do it and they do it well. I have the three at any given time plan and my cycle time is 5-6 days (assuming two day delivery to me, two day delivery to them, one day viewing, and one day delay on their part)
Even when they were a couple of bucks higher then blockbuster - i stayed loyal because they were the innovaters and still offered me great service.
I mod down so you can mod up. Your welcome.
Blockbuster stores carry "soft" versions of what Blockbuster considers "hard" R-rated films. They actually carry edited versions of MPAA R-rated films. A film from Bbuster may be different from the version you saw in a theater. Also, they do not carry NC-17, unrated, etc.
Feel like watching Romero's Dawn of the Dead? Good luck finding it at Bbuster.
Netflix on the other hand caters to the film fan. You can get unrated director's cuts, unrated material (very often "x-rated" or worse for those interested), art films, etc. Most Netflix subscribers I know are urbanites with interests beyond the disneyfied and censored selection of Bbuster and Hollywood Video. Even a good independent store can't cover the diverse material out there.
Video-on-demand is for suckers. I want commentary tracks, extras, and portability. 20,000 films on demand...I'm not holding my breath.
Basically, there is a niche that Bbuster won't even touch. At this point it's like if McD's started offering scotch or fine wine. If you like shopping where you need a member card for sales, coffee from trendy chains, and food from cartoon characters, then by all means rent the latest Michael Bay movie from Bbuster.
Netflix has excellent service. I will always pay more for diverse selection and opt out of supporting homogenizing and competition killing corporations like Blockbuster.
There's plenty of options already in Canada to get a similar service. How about zip.ca? or vhqonline.ca? I've been with Zip for half a year now and I love it. As much as I'd love to see Netflix start up in Canada, it's not like we're totally deprived without it. Zip.ca's selection is pretty massive. Turnaround times aren't as fast as some people claim they are for Netflix, but I expect that's more an issue with Canada Post than zip.ca. So, don't worry, you won't be stuck with "getting only Blockbuster".
store #06516 hermosa beach,ca back in '97
and yes it really REALLY sucked working there. The number one thing i couldnt figure out was why they would try to sell all that movie merchandising crap but it was a loss every damn month when they would put it at 99 cents clearance just to get rid of it piling up. also i hated how they would have us specifically mislead the customers for their rewards cards and return times.
http://www.livejournal.com/users/cixel
I'd just like to chime in and say that I don't think that your experience with Blockbuster Online is universal. I've had really great turn around times with their service (3 - 4 days) and I also enjoy the 2 in-store rentals per month that are included with my online subscription. With those coupons, if there's a movie that I want to have immediately, I can drive to my local Blockbuster and pick it up. If I get to the end of the month and haven't used the coupons yet, I tend to go in and pick up a random video game that I otherwise wouldn't have played. I haven't tried Netflix's service, but I have several friends who use it and are happy customers.
however their service is slower...
Apparently, their only distribution center is in San Francisco. So if you're far away from San Francisco, they might not be worth it unless you really value their selection. Their FAQ says a 1-3 day delivery time for the West Coast and 2-4 days for the East Coast. Personally, I wouldn't use them if I lived outside Northern California.
Well, I think it's a decent argument but your numbers are completely wrong.
25 miles per gallon, ok.
In our hypothetical scenario:
The nearest Blockbuster will be 30 miles away
Distance travelled: 60 miles
Fuel Consumed: 2.4 gallons (rounding up for car warming up, leave running, whatever else)
2.4 gallons consumed, not 6. So, really, it's less than $6... Lets say it's $5.
Now, lets say that you do this trip once a week and rent 3 movies:
$20 in fuel expenses, movies rented 12
With Netflix, you spend $18 total and can easily get 12 movies in 4 weeks. For rural areas you save money using Netflix than you do over Blockbuster.
I am definitely rooting against Blockbuster. Don't forget, Blockbuster has been known for censoring movies -- editing them to make them more palatable for family viewing. Try renting a movie like 'Y Tu Mama Tambien' from Blockbuster or Walmart. You will end up seeing a version that has been edited for content.
Maybe I'm 'misunderestimating' the maturity of the average American, but I think that as long as Blockbuster and Walmart have crappy policies like this, there will be a nice niche for the comparatively corageous Netflix.