Netflix May Already Be Killing Blockbuster?

Mattintosh writes "A blogger at C|Net takes a moment to consider the impact Netflix has had on Blockbuster. Some notable highlights include heavy losses ($35 million), job cuts ($45 million worth), and store closings: 'Much like the print media and retail stores refusing to change, Blockbuster has been a victim on an online company finding new and inventive ways of bringing a product to a customer. And due to its size and outdated corporate culture, there really is no salvation for Blockbuster at this point. Try as it might, the future of Blockbuster is bleak, at best. Sure, the company still enjoys revenue that climb into the billions of dollars, but with an ever-increasing net loss and a public refusal to focus on Total Access--the area where Netflix continues to dominate--what is the impetus for us to jump on the Blockbuster bandwagon?'"

Damn

[dedazo]

I swore to myself that I'd never use Netflix because of the fact that they invented the pop-under along with the assholes at X10. This is bad news. But I still think they're better than NF, even with the 5-exchange limit... namely because Netflix gives me exactly zero in-store exchanges for the same online subscription price.

Their website sucks (while Netflix's is fantastic), but they still have a larger catalog. I've never had any throttling problems at all. I hope they don't go under. I have something like 600 movies in my queue and no way in hell to pull it out without some nasty screen scraping...

Re:Needless to say...

[i kan reed]

Actually, the netflix settup uses fewer copies of movies, because each individual shipping location covers a larger population than a given brick and mortar blockbuster. Basically, the statistics of it say they need fewer padding copies to cover the (unexpected) surges in demand. This means that even though the same total amount of renting happens, the movie studios see fewer dollars as a result.

I know my statement appeared as a general hatred of the MPAA, without much forethought, but they do lose money with netflix compared to brick and mortar.

This whole argument depends on netflix and blockbuster both having sensible purchasing policies with demand analysis. I don't know that.

in ireland

[Anonymous Coward]

i work for a small company that writes rental software for video shops. we have about 100+ locations where our software is installed.

over the past few years there have been a lot of closures of video shops as various net rental services come online. i personally reckon the main thing to kill the market is bittorrent as the average consumer is now sufficently capable of downloading movies with the greater availability of broadband.

while the online rental locations have started to appear in the past few years the size of their operations is not comparable to the dip in the sales at brick and mortar operations.

that said how can they still compete?

some of our customers are now doing more business with internet cafes/gaming/voip/tanning salons/dvd sales more than dvd/games rentals. our software has had a lot of changes to cover these changes. one chain has closed a few shops but has also opened a few in new locations.

others have specialised. my favourite is one small chain of 3-4 shops that specialises in world cinema/cult movies. they have an incredibly loyal customer base who don't walk in and look on the shelves for a film. they come in and ask at the counter for a specific film. while most shops have a high staff turnover this chain still has the same staff it did 10 years ago for the most part. they hunt out all these films for their customers.

Re:Don't they have a similar service now

[siriuskase]

If they had a system where the top items in my queue were in the store when I returned a DVD, it seems that would beat the service I get from Netflix. They don't need to always have MovieC in inventory, but if it is near the top of my queue, they can arrange to have it in stock, then after I rent and return it, they can send it off to wherever else it might be wanted. All the stores in a region could share the less popular movies. And I rent a lot of TV series. You don't even need to look at my queue to know what I will want next since I watch each season in order, and if I like the show, I watch the seasons in order, too. A system like that would easily beat Netflix since the transit time would be shorter.

Re:Thank Big Tel/Cable

[garcia]

I just don't get it. I refuse to go to Blockbuster and I cannot justify Netflix's fees and I really like to watch movies (I consider watching three or four movies a month above average). I go to the local grocery store and up to their DVD kiosk and rent a movie for 24 hours at 1.05 (including tax).

I drive by the store containing the kiosk (which is directly across the street from Blockbuster and Hollywood) at least several times a day. I'd rather put my money there ($5 for a rental at Blockbuster? Please.) and have slim pickings than go to Blockbuster.

Can someone please explain to me why you are willing to pay astronomical monthly fees for Netflix on a recurring basis and you might not even get your #1 choices? I just don't understand how the business model survives.

Re:Thank Big Tel/Cable

[Shimmer]

I think it's the other way around - dedicated TV cable/fiber to the consumer will lose ground on two fronts at once.

On the onc hand, TV stations are broadcasting digital signals over the air (wireless!). These look beautiful in HD today and will only get more numerous and stronger, especially when analog signals go away in a few years and interference is no longer an issue.

For the few non-broadcast TV providers worth watching (e.g. ESPN, HBO), the Internet will become the platform of choice. The need for a special "set-top box" to receive cable signals will be displaced by plain old PC's connected to the Internet.

Anyone who has both Cable and Internet is basically paying for the same thing twice (especially if you get one of those stupid "triple plays" from the same provider). People will eventually figure out that Cable is a subset of Internet and stop paying separately for it.

Phone service, on the other hand, may survive as a distinct offering because of its importance in real life. No one has an emergency need for Cable TV, though, so it will fade.

This is the lesson of the PC revolution, repeated over and over: General purpose PC (with networking) displaces special purpose hardware. This is why Netflix (or its descendants) will be around long after Cable is a memory.

Re:Thank Big Tel/Cable

[Anonymous Coward]

Indeed. The GP should have said the only thing holding Netflix back is the anticompetitive nature of the telcos, et al. Netflix offers movies for download already and with greater bandwidth they might even start offering them in an watchable resolution. I just hope they lose the IE-only bit.

Salvation

[zogger]

If the studios/distributors would just get ((*^&^ing real on the cost of plastic disks, they could save blockbuster, make more money, slow down piracy. Switch from elaborately packaged boxed discs,and "renting", go to a burn on demand kiosk mode for cheap. For the same loot, customer gets "rent" and "bring back" or "take home and keep". Which would most people choose, either going to the store or doing it through the mail? Blockbuster has the locations already, they could SELL burnt on demand disks slipped into cheap paper sleeves with the title for what they charge for renting now. Popular disks-latest releases and strong demand items- they could have a lot already made up sitting on the shelves. Throw in a few duplicators in the back room or the back of the store, a few kiosks for ordering and browsing for what isn't displayed on the shelves. They could up their inventory space tremendously by going to digital tech and storing ten times the amount of movies they have now and use the on demand service. They might make less per "unit", but selling a lot more "units" they would make more net profit.

Re:They have a grandfather clause

[AdrianZ]

We were in the same boat and had the 3 disc plan. I had even been dissing my Netflix friends because they couldn't just go pick up a new film when they were finished with theirs. Then one day I was told at the store I reached my exchange limit. "Limit? What limit?" "You received a letter explaining it a few weeks ago." "No, I didn't." "Sorry" I then went home, joined Netflix, and cancelled my blockbuster plan.

I do miss in in-store pickups and just browsing the selection in person. Though, I had NCIS Season 1 on my Blockbuster #1 spot for a year (no, really... and 3 tech support tickets didn't change anything). Added it to my new Netflix account when I created the account. Just after I finished canceling my Blockbuster account, Netflix Shipping emailed me that those same DVDs Blockbuster couldn't give me for a year, had shipped.

Their huge losses explain the problem though, clearly they aren't putting resources toward the logistics or suggestion systems.

Re:Thank Big Tel/Cable

[pragma_x]

I can't speak for everyone else, but personally, I find Netflix fantastic at providing me access to a seemingly bottomless library of old, independent and foreign movies. I tend to have rather esoteric tastes, so paying for a subscription that is almost on-demand for just about anything I could want is well worth it. Basically they have all the stuff that more space-constrained institutions (Kiosks, Blockbuster, Hollywood Video, etc) can't be bothered with . To that end, I've never had to wait for a movie to become available.

Now on the other hand: if all you want to do is see the major releases and not pay $10 to see it in a theater, then cruising the video kiosk is certainly the way to go.

Re:Thank Big Tel/Cable

[emtilt]

The corporate agenda is the deal breaker for me. Blockbuster's service is actually a better deal strictly in a movies-per-dollar sense, but they refuse to carry certain types of unrated films and most things rated NC-17. Their foreign and independent selections suck compared to those of Netflix, as a result.

Re:Needless to say...

[GWBasic]

This means that even though the same total amount of renting happens, the movie studios see fewer dollars as a result.

About a year ago, I stumbled into a forum where film makers were talking about current distribution trends. Apparently, Netflix is considered a major distribution venue, and is quite profitable for films that normally wouldn't see a wide distribution. Some independant filmmakers see Netflix as a godsend.

There was some discussion on some of Netflix's constraints; Netflix will only carry DVDs that are at least 1 hour in length. This causes some documentary producers to stick 10-15 minutes of filler into a special edit for Netflix.

lost my business, too

[david in brasil]

Their hidebound corporate culture prevents the use of common sense. Several years ago, my wife rented a movie from Blockbuster that she promptly lost. Three months later, she found it again, and we returned it. By that time, our fees had run up to nearly $100. Blockbuster wouldn't allow us to rent again until we paid the fee. So we just switched to a local movie rental store. Two or three years later, I found myself again inside Blockbuster, but again, I couldn't rent a movie without paying the years-old fee. No amount of discussion or logic would sway the manager - that we had made a mistake, we had returned the movie, we had been using a competitor's services ever since, that they could decide to have our future business or send us back to the competitor forevermore, but either way, we weren't going to pay the $100 fee. The manager said that he couldn't/wouldn't dismiss the fee and that we couldn't rent from Blockbuster without paying for it, etc. At that time, Netflix was just gathering momentum. But on that day, I knew that Blockbuster was destined for a death spiral. They could have had our continued business if they had just been willing to let logic prevail and set aside a hidebound corporate policy, but they preferred not to. Even a few yeas later, when they announced their "no late fees" policy, they wouldn't make it retroactive. I wonder how many other stupid policy decisions turned away customers that they so dearly need now.