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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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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.