Tuesday, January 16, 2007

Netfilx or Blockbuster? He who innovates faster and better wins!

Netflix will begin offering some of its customers the ability to watch movies through their PC's via streaming video. This is not revolutionary but it does send a signal to others that there will be a steep entry price into the movie rental business and that those who choose to enter must be ready to change, innovate and move at the speed of the internet! More on the details here.

Netflix has been able to outpace some stiff competition. It was 2002 when Wal-Mart announced it would enter the online DVD rental business. They dropped that initiative in 2005 and now refer customers to Netflix. Last year Apple and Amazon announced they wanted to play in that same sandbox. Blockbuster made changes to their rental policy when they began giving its online subscribers the option of bypassing the mail and returning DVDs to a store so they can obtain another movie more quickly.

I'm sure the amount of customers willing to sit for hours and watch movies on their PC is currently a fairly small number. Considering the increasing convergence of media, PC, HDTV and high speed internet, those numbers will rise exponentially over the next few years. It wouldn't take much for those with a computer with TV out capability, broadband access, and an HDTV to take advantage of this innovation and be loyal to Netflix for some time to come.

Although their earnings went from $6.5 million in 2003 to an unofficial $44 million in 2006, the stock is down 40% in the last three years. Analysts say the competition in DVD and movie rentals is too strong for Netfilx to keep their 12% of the market. I say this is one step ahead for a market leader. They'll have to be planning their next innovation now so the competition keeps busy with this one.

The competition in this market will be good for consumers and will be a good show to watch in its own right. Grab the popcorn and smile!


Anonymous said...

I used to work for Blockbuster. My former manager told me Blockbuster is trying to take Netflix out completely. That's why Blockbuster now allows online movies to be traded in store for a free rental, as you've said. That's something Netflix cannot offer and is a clear advantage for Blockbuster. However, this new move by Netflix is an excellent counter move, if it works.

I was ready to call Blockbuster the winner. But this announcement from Netflix means we're in for at least another round.

Dave said...

Netflix has been counted out before, as you probably know. It should be interesting to watch the DVD and online movie rental business wrestle with the new development.

Reed Hastings is a very interesting character and an innovator, for sure. You can read about how he started the company here. http://www.inc.com/magazine/20051201/qa-hastings.html

thescoundrel said...

The package sounds a lot like what they offer guests in hotels. I haven’t rented a movie in years. I have never liked renting movies, even when I used to be an avid renter (LMAO I spent $500 for my first 2head monophonic VCR) at several of the local video stores (though not so much Blockbuster). Years of experience taught me that you just never know who has had the videotape or DVD and mishandled it before you put it into your own expensive video equipment. It wasn’t worth the danger. I started drastically reducing my rental usage and closely inspecting any movie I did rent. Plus everything always revolved around the stores inventory (not to mention store employees hiding back new titles for friends and families, I witnessed this at the local Blockbuster several times), then returning the movie on their schedules or facing a public flogging and a day in the stocks facing more public humiliation. I have Direct TV with the Starz/Encore package that costs me about ten bucks a month extra. Now that does not mean I am completely satisfied with the product, but for my personal needs it offered me the biggest bang for the buck. One problem I face is the recent trend of industry created exclusivity rights to certain titles often means I cannot expect to get newer Paramount movies in my package. I can rent a movie from the on-demand movie rental area. (Isn’t that hooked up with Blockbuster?) That does get pricey and I am still tied to their schedule, though they do offer some all day tickets where you can rent titles offered by the service and if you get called away go back and watch it again for no extra cost. Plus I do not have to worry about finding time to return my titles. Until Direct TV offers up a better monthly subscription package this is probably what fits my needs the best. I know I will not be downloading as I do not have a broadband system nor do I like the pratfalls that accompany downloading media of any sort. Although (here comes the foot-shuffling)I am considering looking into the idea of switching to broadband mostly because I understand that it is becoming possible to download books. That is something that would appeal to me if I can download the books and then be able to use my computer to read them so I can adjust the fonts, something I cannot do with a book I buy at the store. But as long as Direct TV offers me up something of the quality of a Starz package along with a “movies on demand” rental package I do not see me returning to the video stores or downloading movies.