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Blockbuster's Offensive Against Netflix Flops
bigtallmofo writes "With over four million subscribers, Netflix was an obvious target for rival Blockbuster. In 2005, target them they did. Introducing their own DVD-by-mail service and (for a while) undercutting Netflix's price point, Blockbuster went for the jugular. A year later Netflix shows a market value of $1.5 billion with no debt compared to Blockbuster's $684 million worth with $1.0 billion in debt. Is there still a DVD-by-mail war or has Netflix won?"
Not to bring the whole "throttling" thing into this, but it really seems that the war now is between Netflix and themselves. If they can keep from shooting themselves in the foot again, i.e., lawsuits, etc... Then theoretically, They shouldn't have anything to worry about(considering their market share). I can say from personal experience that they are trying to protect and keep their existing user base, and are quite apologetic when called on it now. I am currently enjoying a a free month + two months at half price after calling them on it. Bottom line is this, they both obviously have deeper personal issues to deal with... I'd say the war is on temporary hold until they can both get their crap together
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Netflix has already partnered with Tivo, which already has tivo-to-go that works for the video iPod.... potentially they're ready to roll-out downloadable movies...
Seth
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I used Netflix when they first came out, as I thought it was a very novel idea and one worth trying. It worked great until I ran into the same problems that everyone else did - delays with new movies, being pushed into the far reaches of the queue and other inconveniences. I quit Netflix due to their growing pains, but didn't have a ton of animosity toward them. Having been in the business world, I understand that sometimes you can shoot yourself in the foot with success when demand exceeds capacity.
Recently, I was given a Netflix subscription again and noticed that they've gone through substantial upgrades, added new features and have none of the same queue problems that I exeprienced before. To me, this shows the maturation of the company, because they have the resources now to meet their customer base, given that they are now a very profitable company with the means.
I don't think Blockbuster is going to go kaput over the issue, because there will always be people who prefer a brick and mortar video store or you'll have an occasion where you can't wait a few days in the mail for a video. For this, Blockbuster is king. However, the cost of running a B&M operation like Blockbuster far surpasses an online only entity like Netflix, where store space, rent, maintenance, employees and the like are no longer issues. This means that Netflixs' margins are simply leaps ahead of what Blockbuster could even hope to achieve in their wildest dreams.
So can Blockbuster compete with Netflix? I think the answer is on the walls to everyone. I think this is exactly why Blockbuster tossed everything (and the kitchen sink) against Netflix, because they saw the picture and it didn't look pretty.
Do I think Blockbuster is going to bite the bullet? Not at all. Do I think Netflix will take a giant cut of of their market and force Blockbuster to resign itself to a B&M only operation with limited expansion abilities? Very much so.
Market value and debt don't really tell enough. Earnings and cashflow are bigger tools to gauge the success of the companies.
How about some good old-fashioned "profit"? (And we'll have none of the EBITDA crap either!). A quick look at the charts on Yahoo reveals a $603.30M loss.
Inexplicably their market cap is also about $600M, with a $1200M debt. Now, I have a debt that's more than my income or savings, sure, but it's a mortgage, so my creditors can sell my house and reclaim the money. If they sold the company in parts, assuming that strip-raiding it adds 25% in value over market cap, that still leaves $450M in bad debt.
Of course, it might be that all debt is really from one division (say, the DVD posting division) that they're looking to get rid of. But still, things look pretty bleak, seeing as that debt isn't doing anything right now, and their last investment pretty much failed. This kind of company is usually propped up by their creditors to salvage what potential is left.
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I need to become a lawyer. This lawsuit rocks!
- Sue a company for something they didn't really do wrong in the first place
- Negotiate a "Settlement" that's really a marketing campaign for that company
- Pocket massive legal fees!
Did anyone read this settlement? If you sign up for it, you get a free month of a one-level upgrade of Netflix service. Then, and here's the cool part for netflix...
After that month, THEY CONTINUE TO BILL YOU AT THE HIGHER PACKAGE PRICE!
What kind of "penalty" is that? Trade a couple rentals to get your customers to upgrade packages? That's cheap advertising is what that is!
paintball