Netflix vs. Blockbuster Revisited

Thomas Hawk writes "Exactly one year ago at thomashawk.com Davis Freeberg debated Wall Street analyst Michael Pachter regarding the future of the online DVD rental world. Freeberg maintained that Netflix was the clear and obvious choice for a winner while Pachter predicted that in the next 12 months Netflix would significantly underperform Blockbuster. Now another look one year later at the competitive landscape in the DVD market. Pachter is nice enough to continue the conversation and even admits in hindsight that he made a mistake regarding his prediction on Netflix vs. Blockbuster for the year past -- but Pachter still maintains that Blockbuster has the upper hand over Netflix in the coming year ahead. Freeberg, of course, thinks he's wrong once again and that Netflix will continue to dominate as the leader of this market. "

Comments

I want what comes next

[BenEnglishAtHome]

The biggest problem with Netflix is time. Like most folks, I figured to sign up, watch movies quickly, and really get my moneys worth. It doesn't work out that way. Just because "Teenage Exorcist" is waiting in my mailbox when I get home doesn't mean that I'm going to feel like watching it tonite. Recently, I've gone through nearly three busy weeks when I haven't had time and haven't been in the mood to watch a movie. At that point, my subscription isn't very cost-effective.

I'll keep subscribing for now, but I may just be one more watching-mood-drought away from cancellation. What would really keep me as a customer is someone who could offer high quality and fast downloads for a buck or two. Then I could buy on a whim and get exactly what I'm in the mood for instead of picking from among the three Netflix envelopes on the kitchen table that just happened to be fairly close to the top of my queue but aren't *precisely* what I want tonite.

Re:I want what comes next

[boxlight]

Just because "Teenage Exorcist" is waiting in my mailbox when I get home doesn't mean that I'm going to feel like watching it tonite.

I think you're doing it wrong. "Netflixers" I know do it like this -- get the DVD in the mail, copy it to your PC with something like DVDShrink, send the DVD back right away so you get the next item in your queue sooner.

Then later when you feel like watching the movie, burn it to a DVD+/-RW, watch it, then delete the file off your computer.

This may be walking the tightrope of "fair usage", but that's the reality of how people I know are using this sort of service.

boxlight

Re:I want what comes next

[LordKronos]

That's what I've been doing when I don't have time to watch it right away (except I rip them to my mythbox...no need to burn anything).

The problem I'm having is that I'm unprofitable for Netflix, so rather than just canning me outright, they are doing their best to slow me down. After the first couple months of 8 movies per month, many of my returns started taking 2 days to get back to them (the return center is very local, so they have to be sitting on it for a day). That slows my down to under 2 per week. I kept that rate up for a couple more months, and occasionally got 2 a week by mailing back the same day I received it (or when my return actually got processed next day). Now the latest trick is 3 of the last 4 movies have been being shipped from across the country. Thats never happened before, and these aren't old/rare movies, nor are they movies in high demand. They are couple of year old movies that had their run. I never had any problems before with movies being shipped across the country, so it seems more than coincidence.

Anyway, those 2 acts have my rental rate just over 1 per week. That doesn't make it very worthwhile to use Netflix. On top of that, they've been shoving me to the back of the queue for new movies. I added King Kong to my queue the week before it was released. The morning of release, I checked my queue and it said short wait. Later that day it changed to long wait. The next morning it was now a VERY long wait. It's been 4 or 5 weeks now since King King came out, and I'm still at a long wait.

Anyway, my Netflix subscription is just about renew, so I'm planning on cancelling and switching to blockbuster. Well see how they are, but the one real advantage I see there is that they give you coupons for 2 free store rentals per month. That means even if they do the same sort of profiling of high use customers, I can still run out and get the movie from the local Blockbuster in a timely manner.

Re:I want what comes next

[rho]

I don't do that. They come in, we watch 'em when we have time. They go back out. Some months we watch 3 movies a week--some months, just 3 movies total. At $20/month, it's a good deal for me for these reasons:

1) If I hear about a movie I might want to see, or if somebody recommends something I haven't seen, I put the movie in the queue. No fuss trying to remember anything.

2) We don't have cable, so this is the majority of our entertainment budget.

3) With no late fees, we have total control of when we want to watch something.

4) Practically endless choices. I've never gone looking for a movie that I couldn't find.

If you're going to rip the DVDs as soon as they arrive, why not just download them from torrents? It's just a legal (or illegal, rather), and you don't have to worry about shelling out that MASSIVE $19.95 every month and making sure that you somehow game the system so your Netflix rentals work out to be $0.25/movie like a penniless schlub.

It's to be expected really

[Frenchman113]

Infinite rentals, no due dates, a massive library, and you can rent from your very own chair without ever leaving your house. What's blockbuster got to top that?

Re:It's to be expected really

[gEvil (beta)]

What's blockbuster got to top that?

Ummm, infinite rentals, no due dates, a massive library, and you can rent from your very own chair without ever leaving your house. (Hint: I'm not talking about the brick and mortar Blockbuster.)

Re:It's to be expected really

[Scutter]

Infinite rentals? Infinite up to 11 per month when they start throttling your deliveries, you mean. Not such a good deal now, is it?

Re:It's to be expected really

[DigiShaman]

Coupla decades of building brand recognition and customer base?

Such as getting screwed by their late fee policies? That's what I think of Block Buster...

Haha
Hahahahahaaaa

i wished they'd pay-as-you-go

[boxlight]

I would like to use an online rental service like Netflix (more specifically, their Canadian equiv. zip.ca) instead of Blockbuster, but I don't want to be locked in with their subscription model.

If they would introduce some kind of pay-as-you-go scheme, that would be ideal. I don't want to pay the monthly fee as in any given month I may only rent one movie -- or none at all.

boxlight

Re:i wished they'd pay-as-you-go

[kevin_conaway]

And you're they're worst nightmare.

They would make no money off of you. Business is a 2-way street you know. They get to make money and you get something in return.

I think the situation you're describing is more suited for the "on-demand" model of cable television.

How I look at it.

[apparently]

With Blockbuster, my membership gets me 4 "free" in-store rentals a month for my $17.99 Blockbuster Online membership. So basically, the service is letting me make 4 rentals for $4.50 each (which is about the norm anywhere), and then in additional, I get "unlimited" Blockbuster Online rentals. As Blockbuster figures out how to further utilize their brick-and-mortar stores, I wonder how NetFlix will be able to compete against this?

Re:How I look at it.

[Moofie]

Um, Netflix sure didn't satisfy me. Their stealth throttling policy lost them my business many years ago, before they acknowledged that they throttle their service.

Had they simply been up-front about it, there would have been no issue. However, a queue of 40+ movies, all on "delayed availability", with nothing shipping to me, told me they didn't want my money anymore.

Re:How I look at it.

[PortHaven]

I received a $10 gift card to Blockbuster. It took me over an hour find two movies. Essentially, every movie I wanted to see was out of stock. In the end, I didn't rent anything. Rather, I bought two used movies "I Robot" and I forget what else.

So, I don't think I'd find those in store rentals of much use. Sure, there may be a film that me and a bunch of friends might want to watch right this moment...and be willing to run out to the rental store to get it. But I'd wager all the copies of said film will be rented out. At least that last few times I went to Blockbuster that was always the case.

At least with Netflix I have a steady flow. I also get to watch a lot of TV shows I miss. I've got the 5 disc program and seldom do I not have something to watch. With 5 discs it's pretty good. Just make sure you mix you queue up so you always have something lighthearted, something action and something dramatic. Plus your series filler (currently ST:DS9 for me) *lol*

Re:How I look at it.

[jandrese]

In-store coupons for BB are pretty worthless where I live. BBs in-store selection is pathetic (almost completely lacking in older movies, even cult classics), and greater than 50% of the store is checked out pretty much all of the time. That's the reason I got Netflix in the first place, because it was usually the case that BB didn't have any movie that I was even vaguely interested in seeing. The small handfull of cult classics they had were always checked out, and they seemed to stock huge numbers of horrible movies (that stupid ocean liner horror movie stands out in my mind with a full wall of copies with disks behind them surrounded by a sea of checked out (better) movies).

All it took was BB screwing me on one late fee--got to the store around 11:55 or so, but had to stand outside waiting for the guy to finish his work on the door (apparently some punks had vandalized it the night before) before I could get in. Got in the store at a touch after 12 and got hit with a late fee because I was after the 12:00 time limit. The manager was insistant that I should have just gone earlier to drop it off too. Needless to say, that's the last time I've ever visited BB. I can't remember if I even paid that late fee.

Re:How I look at it.

[szrachen]

I found that to be a great deal as well. However, I also found that some months I really didn't feel like I needed any more movies than the ones that I got online (and that was when they only gave out 1 rental a month). I've since switched to Netflix because I didn't want to pay $17.99 for the 4 extra movies when I hardly need more than 2 at a time and don't necessarily need the in-store movies. I would guess that the vast majority of people are probably in the same boat.

I guess the way I see it, here is your decision:

Do you watch 3 or more movies a month?

• If Yes, continue...
• If No, just go to the movie store...

Do you need to get a movie at any time on a whim as long as you're alright with driving to the movie store and paying a little extra?

• If Yes, Blockbuster Online is probably better for you.
• If No, Netflix is probably better for you. Be patient grasshoppa.

Other considerations

• I have had better luck getting working discs from Netflix
• The friends recommendation system is pretty nice on Netflix (I don't recall if BBO had this)
• You may set up individual family member queues on Netflix

I don't want either of them to "win"

[hellfire]

I want both of them to keep fighting it out... for a very long time.

Because when video rental services compete, I win.

Three cheers for competition!

What about Redbox?

[Sentryp]

http://www.redbox.com/ They have some they everone else doesn't... Cheap pay as you go rentals. And you can get fries with that!

Blockbuster's New Releases

[Anonymous Coward]

I got fed up with turn around time with netflix and went with blockbuster. A month later I'm now back with netflix. Blockbuster will not send you a new release until it has been released for 90 days. Netflix will have the movie on your doorstep release day. After renting virtually limitless movies for a year New Releases are all I have to look forward to. Blockbuster not shipping new releases to force store visits completely contradicts what people are looking for.

Until blockbuster can realize that they need to stop putting all their weight behind their stores, netflix will always be the superior choice.

I once had NetFlix

[robogun]

I found eDonkey significantly outperforms Netflix, at least for me.

I was once a subscriber, but I dropped Netflix back when they went from $19.99 to $23.99/mo.

blockbuster in-store rental coupons

[MORTAR_COMBAT!]

they are just a pain in the ass. they come as e-mail links, you visit the web page, print it out, pick it up from the printer, then have to remember to bring the coupon when you go to the store. in the several months that i was a blockbuster online dvd rental subscriber, i didn't use a single in-store rental voucher. if, on the other hand, they had simply tied the coupons to my blockbuster account, i would have used them. and perhaps remained a customer. but as it was, the value-add just wasn't there.

My Thoughts

[MBCook]

I really REALLY like Netflix. I've had them for two years or so and they are fantastic. I haven't tried Blockbuster and I don't intend to because, frankly, I hate the company. Their stores have gone down in quality and the prices have gone WAY up in last few years (specifically video games). All that said, I'd like to comment on something from the article:

"Since the launch of Blockbuster's online dvd rental program in August 2004, they have added 1.3 million customers, but over the last 6 months alone, Netflix was able to add almost as many subscribers. Each customer that Netflix acquired represents pure growth for the company, but of Blockbuster's 1.3 million subscribers, how many of them represent former retail store customers? "

The last few times I've been in my local Blockbuster, they have been doing hard sells on their online service to every customer. They talk about how convenient it is, how much it will save you, blah blah blah.

I seriously doubt Blockbuster has gotten very many new customers at all to their online service. I think most of them were conversions from in-store customers.

Blockbuster and Netflix each have their own issues

[hal2814]

Have you been to a Blockbuster lately? Buying DVDs has gotten pretty cheap while renting movies has only gotten more expensive. The $4.50 per rental they charge is about 1/3 to 1/4 the price it would cost to buy the movie outright. And game rentals are now in the neighborhood of $7 per game! That's just crazy when the used video game market is rapidly devaluing games. Most of Blockbuster's gaming library can be bought for $20 or less. Why spend $7 just to rent it for a week?

Then there's Netflix where I can't just go pick up any movie I want. I have to request it and have it shipped. And that only happens after they get back one of the earlier movies I rented from them. That's a minimum two day turnaround. And while it is nice that you can request Netflix movies from the comfort of your own home, the less scrupulous out there have discovered that you can download just about any movie you want in far less time than it would take Netflix to get it to your door. And on top of that, their "unlimited" rental model leaves a lot to be desired for those who don't rent very often. Their cheaper packages offer little enough that they're not a good deal.

My shipping history...

[PortHaven]

For 2006 I've kept a log of my movie rentals to track turn-around-times. I recorded when a movie is sent, est. arrival, actual arrival and when I I recorded when I return the movie and how long until they log it received. It's about a 1.3 days on avg to receive a movie and 2.2 days on average for Netflix to record it received. A total turn-around time of 3.5 days per film. Not too bad, consider they're utilizing the postal service. (Which in my area is notoriously poor in performance. A letter mailed 2 hours away can take 4 days + to be delivered.)

They are both toast in the long run - here's why:

[zerofoo]

On-demand movies are here to stay - they are more convenient than rentals, and as the selection gets better, a nice way to watch older movies that your local video store may not stock. Hard drive space is cheap, and soon it will be possible for cable companies to warehouse thousands of titles that you can watch whenever you want.

Content providers aren't too thrilled with this setup since the carriers (cable companies) get a cut of every viewing.....but it is a deal with the devil they must make - why you ask?

Piracy. Physical media is bad for the war on piracy. Everyone I know makes copies of their Blockbuster and Netflix rentals. Shipping physical media around the world is no way to control the duplication of that content.

The RIAA and the MPAA want to make this an on-demand world - one where you don't possess physical media. You consume the content streamed to you in a protected, DRM'ed out the wazoo, format.

The final nail in the coffin for physical media will be wireless - once wireless speeds are up to the challenge, you'll be able to stream music and movies to your portable devices and the car. It will only be a matter of time before the "lazy" media-consuming public stops collecting physical media and streams everything.

Then the issue of piracy via "media copying" almost completely goes away. Sure it might take 10 years, but it will happen. The hardcore guys will still figure out a way to capture the streams, but if the streaming world is easy enough, available enough, and cheap enough, most people won't bother.

-ted

Screw those guys....

[Lxy]

Support your local library. Membership is free, and usually you can borrow all the latest movies and music at no cost. There are late fees, but nothing near what Blockbuster et al charges.

MOD PARENT UP

[MustardMan]

Not only does blockbuster online (the thing being compared with netflix) do everything netflix does, you also get coupons for various in-store promotions, as well as free in-store rentals included in the cost of your rental program. I get two free in-store rentals each month, which means if I decide on a whim that I want to see a certain flick, I can pick it up without paying any extra on top of my monthly subscription fee. I still have my 3-out-at-a-time movies to pick from as well. BB does everything netflix does, plus some.

Why I switched

[DarkFencer]

Until this morning I was a Netflix user. I had cancelled this morning and subscribed with Blockbuster before reading this article. The problem with Netflix is getting 'new' movies. I am a medium level user with Netflix (I get a good amount but I'm not one of the more heavy users) but anytime I want something relatively new it is in "Long Wait" for weeks or even months.

Even if Blockbuster makes me wait a while for the newer movies then I can still get the one free in-store movie a week, as well as satisfy the impulse rentals that my wife and I want.

Amazon Rentals

[TwentyQuestions]

I think Amazon will have the lead in a year or two. It has had good success in the UK and they are preparing to launch similar services in the US.

They have more than enough stock, and shipping centers. I think they can finally do online rentals right.

Selection

[szrachen]

In my experience, Netflix has had a much larger selection of titles as well as a greater number of obscure titles. I don't recall what movie I was trying to get from Blockbuster but it was seemingly impossible to get it because of its obscurity. On Netflix, I got it right away. I also recall that Netflix has a lot more of the Season sets for Television shows.

I feel your pain!

[Quiet_Desperation]

they come as e-mail links,

Oh my GOD! The ultimate in inconvenience!

you visit the web page,

Great Satan's Firey Balls! That must require the use of at least three muscles to move the pointer and click the link! Does Blockbuster offer health insurance?

print it out, pick it up from the printer,

Jesus Tap Danching Christ On A Cracker! Those foul villans! They make you trek all the way to the printer? Do they subsidize the required team of Sherpas and ruggedized GPS navigation equipment?

then have to remember to bring the coupon when you go to the store.

Wow! What does Blockbuster think? That we have highly evolved brains with complex memory capabilities? Those fools! Thos bloody, viscious fools!