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?"

Comments

They each have thier own issues to deal with...

[Chris Bradshaw]

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

Re:They each have thier own issues to deal with...

[iPaige]

Netflix as a corporation has many lawsuits, but their out there with no real basis to start off on anyhow. These plantiffs are suing because the DVD's arent there in "one-day" always. Isn't that the postal services fault? Also because not all the plans were "unlimited rentals", well did ya really think the 7 dollar plan was gonna be the same as the 20 dollar plan? I mean, come on.

Netflix...

[lasmith05]

I think Netflix is too entrenched to be taken out by another company. However, I do think faster broadband and downloadable (legal) movies like those available on itunes are going to slowly chip away at netflix.

The Red Envelope

[oGMo]

Yeah a number of people might subscribe to Blockbuster's deal. It might suit them fine. But in this case, Netflix has won the mindshare. Blockbuster is the video store on the corner, and well-established at that; but on the internet, Netflix is the common word. The red envelopes are signature. They've won the highly-important mindshare game, and they appear to be winning the business game, too.

Sure, there are always advantages of one over the other. Blockbuster has instant gratification---I can get the movie I want within minutes. Netflix has wider selection---I can't walk into a BB and find much anime. They also have convenience---I decide on a movie, I can click it and it'll be there tomorrow. And I can procrastinate and watch it when I feel like, returning it when I want. And it's cheaper than the corner store if I watch a lot of movies.

I can't really speak to BB's online service; they might have similar selection and pricing, but they also have the same disadvantages. And after dealing with Netflix ("oh, the movie never came? here, we'll ship you another free of charge") vs Blockbuster ("oh, you returned the movies in the morning, but we didn't notice til after noon... that's $6 please"), I would definitely rather do business with the former.

The classic online vs B&M model

[wmajik]

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.

And I really wanted to stay on the sidelines here

[Stubtify]

Blockbuster's 2 free rentals a month are sweet; I used to use them for video game rentals (which are now $7 each at my local store).

That said, with all of the comments on which service is better I'd like to weigh in on a few specific points:

First, each service does a good job of what you want it to. Keep a large quantity of movies queued up and they show up in the order you want and you've always got something to watch. Look into who has a better catalog of what you like to watch and stick with them.

Second, each service FAILS when you use it to the limits. I've heard people saying they average 18-23 movies a month with netflix/blockbuster. 18-23 movies!!@?? That's WAY below a dollar a movie, and don't forget shipping back and forth (at least $.60). The idea here isn't to scam the company into a loss on you, the idea is to use a service and have a reasonable good time using it.

Now, I'm all for fairness in advertising (i.e.: unlimited should mean unlimited) but don't complain when you only get 15 movies in one month, for $17. And ESPICIALLY don't complain to me when I know that the majority of the people who are doing this crazy 8 movies a week thing are simply burning every movie right when it comes and then shipping it back the next morning. It is all but impossible to watch three movies a night three nights a week. That is SURELY not what these services were meant to be. You're raising my rates, and it's totally illegal as well.

Blockbuster may have a chance...

[supabeast!]

Blockbuster still has one ace up its sleeve - porn. Most of the mom-and-pop shops that survived Blockbusters intense expansion did so by renting and selling hard-core porn. That option is certainly a tough one for Blockbuster, as many franchise owners will object, but for the corporate locations it may be the only option to keep them open.

Of course, this wouldn't kill Netflix - it would just turn Blockbuster into the world's largest chain of sex shops. But being a chain of sex shops is a better option than going bankrupt.

Re:And I really wanted to stay on the sidelines he

[jp10558]

I'm sorry, but 18-23 movies isn't even one movie a night. And there are at least some users (like my DAD) who are retired, and like to have something to do during the day when everyone else is at work/school/out whatever. The 5 out a month barely supplies enough to keep him in stuff to watch unless he gets the TV series discs which have ~5hrs of content, so 2-3 days per disk rather than one for movies.

And for many rural people (who seem to be a large market segment) we don't get much over TV, and the quality is random - sometimes quite snowy. Also, like many others I prefer no commercials, so I like to watch DVDs of a show vs broadcast. And watching one TV episode a night can eat up the slack (I mean, with several people in a household - you might need 2 discs at a time, due to different tastes and more than one TV/DVD player in a house).

So the idea that 18-23 DVDs a month is for piracy is certainly not necessarily the case, especially for a household of 4. Now if you are a single guy with a full time job, and you're doing that you either have no life beyond work and DVDs, or you are pirating them as fast as you can.

But there are many reasons you could turn around 18-23 DVDs in a month as listed above. Especially if one family member (if not all) are somewhat TV addicted(not unusual in the US).