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Blockbuster's Offensive Against Netflix Flops 302

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?"
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Blockbuster's Offensive Against Netflix Flops

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  • Netflix... (Score:5, Insightful)

    by lasmith05 ( 578697 ) on Sunday December 25, 2005 @08:29PM (#14337496) Homepage
    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.
  • by OrangeTide ( 124937 ) on Sunday December 25, 2005 @08:33PM (#14337505) Homepage Journal
    DVD-by-mail is neat and will overtake DVD rental at a brick-and-mortar location in the near term. But the DVD-by-mail industry (which consists of mainly Netflix now) is going to have a fight on it's hands when video "rental" over the network takes off. (maybe 2007Q1?)

  • by iPaige ( 834088 ) on Sunday December 25, 2005 @08:36PM (#14337517)
    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.
  • The Red Envelope (Score:5, Insightful)

    by oGMo ( 379 ) on Sunday December 25, 2005 @08:36PM (#14337518)

    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.

  • by oGMo ( 379 ) on Sunday December 25, 2005 @08:40PM (#14337536)

    Eh the lawsuit in question is total BS. I was a customer within the window, I received the email, and I decided that the lawsuit was full of crap and I wasn't going to cash in. Seriously, read the claim... anyone who is semi-literate and halfway-intelligent can understand that when Netflix says "unlimited rentals, 3 at a time" it's not the same as "unlimited rentals, send them all at once".

    My guess is the settlement was done because it was really cheap for netflix... upgrade everyone's plan for a month (giving customers a taste of the higher plan and possibly having some switch) vs continuing a pointless lawsuit. Netflix: 1, Lawyers: 0.

  • by HardCase ( 14757 ) on Sunday December 25, 2005 @08:41PM (#14337539)
    Market value and debt don't really tell enough. Earnings and cashflow are bigger tools to gauge the success of the companies. If Blockbuster is making enough money to service the debt (and other obligations), then they're doing fine. If Netflix has enough cash reserves that they don't need debt to keep operating, then they're doing fine. Debt is just a tool that businesses use.

  • by Chris Bradshaw ( 933608 ) * on Sunday December 25, 2005 @08:52PM (#14337566)
    With all do respect, utill you have had this (throttling) happen to you, you're really not qualified to defend them or thier position, and quite frankly are talking out your rear. Dollars to donuts you don't rent enough movies from them to be a victim to this garbage, and that's fine. But to come out and respond like this is just plain Flaimbait. I could go on-and-on about some of the crap I've dealt with from Netflix, suffice to say - it was enough to inspire them to give me $40 worth of complimentary services, just to remain a customer. So before you go and question peoples "intelligence", and "Literacy", get your facts straight.
  • by Stubtify ( 610318 ) on Sunday December 25, 2005 @09:00PM (#14337590)
    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.
  • by Cherita Chen ( 936355 ) on Sunday December 25, 2005 @09:03PM (#14337599) Homepage
    For those of you who think that $videoBymail vendors will suffer when Video-on-Demand hits the market, think again. You need to remember that quite a few folks out there that are building up impressive home video libraries thanks to services like Netflix and Blockbuster.

    Couple unlimited rentals with the ability to download the jacket [] to any movie ever made... Well I'm sure you get the point.

  • by markh1967 ( 315861 ) on Sunday December 25, 2005 @09:17PM (#14337637)
    As the old saying goes 'never underestimate the bandwidth of a station wagon full of magnetic tapes'. In this case it can be updated to 'never underestimate the bandwidth of a bunch of DVDs in the mail'. Netflix's days are numbered so long as bandwidth continues to increase. They've probably got a good few years yet though until they are overtaken, especially if HD disks become popular; demand for higher quality should give their delivery system better bandwidth than online connection for some time. In the meantime they'll continue to make a lot of money.
  • by slashname3 ( 739398 ) on Sunday December 25, 2005 @09:33PM (#14337684)
    From the looks of the local Blockbuster here they are at best about 18 to 24 months from going out of business. At least as a movie rental operation. They appear to be reinventing themselves as a game rental outlet. I doubt it will be enough to save them.

    But from what one of the managers said they are about to go out of business. I suspect that Netflix was not the the only reason for Blockbuster to be in decline. I find that buying the DVDs I want to watch is not that bad at the local wholesale club. As such I no longer have a desire to rent DVDs.

    I wonder what store will replace the Blockbuster up the street?
  • by toddbu ( 748790 ) on Sunday December 25, 2005 @09:37PM (#14337699)
    Nice but Blockbuster does not charge for late returns anymore.

    But how much damage did they do to their reputation when they did charge late fees? I will never deal with Blockbuster again because of their policies. I can't trust them to do the right thing. Let's face it - they drove the mom & pop stores out of business but never established themselves as a member of my community. They were stupid not to build loyalty, and eventually they'll go out of business or get snapped up. The only thing is that Netflix could be undermined by the download market when it becomes legal and widespread, so they have to have something more than the "red envelope".

  • by Anonymous Coward on Sunday December 25, 2005 @10:14PM (#14337796)
    Blockbuster has probably only ever regarded Netflix as a minor pest. You all are seriously misjudging the size of Netflix's business by looking at market value. Blockbuster is doomed and bleeding money, but still pulls in 10x Netflix's revenue. Only three or four years ago, Blockbuster was still collecting a billion dollars in late fees per quarter or something like that.

    No, Blockbuster's latest moves -- mail rentals, changing late fees, rental subscriptions -- have all been lame attempts to fend off a monster called Comcast. This is the same monster that will always keep Netflix a fringe player.

    You have to essentially watch 4 movies or more per month to make Netflix a better deal than Pay Per View (PPV). Generally speaking, Netflix is for people who know what they want to watch in advance and watch a ton of movies. That's not most of the public. Most people realize they are going to be bored that day and see what's on. They want instant gradification.

    How many of you subscribe to netflix and then let the movies sit for a long time without watching them? Most people I know with Netflix do that, then are basically paying $18 a month for watching less movies than they could watch on PPV for less money.

    Face it, Netflix is a fringe player for obscure DVDs and movie junkies. Blockbuster was wasting their time trying to do it. Comcast rules the entertainment market, everyone should be extremely scared of them. Movie studios, theater owners, Blockbuster, Netflix, and those dudes on the streets of NYC selling Kramer-like recordings of movies. Comcast is poised to pwn them.

  • Netflix (Score:3, Insightful)

    by the eric conspiracy ( 20178 ) on Sunday December 25, 2005 @10:27PM (#14337829)
    I've stopped buying DVDs because I don't want to re-buy once HD DVDs become available - Netflix is a terrific alternative to building your own video collection.

    I have had some annoyances with Netflix though - damaged (out right broken or cracked DVDs) are about 15% of what I recieve, and sometimes I have to wait several days to get a movie from across the country. But all in all it is super convenient compared to the alternatives, and very inexpensive for what you get.

    I suspect that Netflix is in a great position now because it would cost a heck of a lot of money to start up a competitive service.

  • Th problem is... (Score:5, Insightful)

    by Belial6 ( 794905 ) on Sunday December 25, 2005 @10:35PM (#14337853)
    The problem is that BB has a reputation for fake late fees. I know what finally made me stop renting from them years ago was that they would charge late fees on movies that were returned on time. This combined with their editing of movies, and the fact that it was clear they were trying to trick their customers by offering 3 'night' rentals, and counting both the rental and return nights as full nights, just made me give up on them. When they started their 'no late fees' scam, I didn't even bother to look into them. Apparently that was the right move.
  • by jp10558 ( 748604 ) on Sunday December 25, 2005 @10:59PM (#14337930)
    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).
  • by krunk4ever ( 856261 ) on Sunday December 25, 2005 @11:56PM (#14338103) Homepage
    I had a discussion with a friend sometime ago and I had some suggestions on what Blockbuster could do to have save more money and make customers more happier.

    Offer customers both the option of sending it back by mail or returning it back to a local store. That's an advantage of having a local store in almost every city which Netflix doesn't. Of course, if convenience is your thing, you're still allowed to drop it in your mailbox and have the postal service ship it back. But by offering both return methods, both parties will benefit from the user returning to the store. The user's queue will be emptied by the following day (instead of waiting ~3 days for the mail to be delivered and scanned), therefore that means more movies per month. Blockbuster saves money by shipping all the dvds back to the central office together, saving on shipping.

    Another feature they can offer customers is the option to allow the subscriber to have 1 dvd out from the local store at any given time. They can even subtract that 1 dvd from the # of dvds they can have out at a time. They can even restrict it to 3+ months old movies, where if the subscriber wants to watch newer movies, they'll have to go through the online store. I mean, every Blockbuster has a bunch of movies that hardly ever circulate much. There's really no point in letting them sit there to collect dust. By allowing users to have access to the local store, this will make them happier and actually give those old dvds some worth in the store. Sometimes you might want to watch a movie that night, but neither netflix or blockbuster would fix that. If the 1 dvd out at a time is too much, you can restrict it to x dvds from local store / month.

    Just my 2 cents.
  • by metamatic ( 202216 ) on Monday December 26, 2005 @12:14AM (#14338144) Homepage Journal
    Blockbuster is doomed and bleeding money, but still pulls in 10x Netflix's revenue.

    Let's see... A billion dollars of revenue and big losses, or a tenth of the revenue and millions in profit...

    Netflix is for people who know what they want to watch in advance and watch a ton of movies.

    Or people who want to watch their movies uncensored. Or people who care about video quality, and don't want to pay out the ass for HD. Or people who actually like the extra material found on DVDs. Or people who feel they already pay too damn much money to the cable company, who keep jacking up their fees every quarter, unlike Netflix.

  • by Anonymous Coward on Monday December 26, 2005 @01:22AM (#14338354)
    Because it's not the investor's fault that you have no health care. They saw a market space with one dominant and thought a competitor could do well.

    Stop wasting time posting to Slashdot and do something about your own situation, loser.

  • by jmichaelg ( 148257 ) on Monday December 26, 2005 @01:35AM (#14338395) Journal
    ...well did ya really think the 7 dollar plan was gonna be the same as the 20 dollar plan? I mean, come on.

    It's called fraud when you sell one thing and deliver another.

    Had Netflix sent a letter out to their customers saying "We have to cap the number of DVDs you can rent on plan Y to X per month. If you want to see more than X DVDs then we have these upgrades available," the suit wouldn't have had any basis. However, Netflix advertised they offered "unlimited rentals" on their least expensive service when, in fact, they didn't.

    Your post implies you think that honesty in day to day business is too much to ask for. It'll be too bad if that becomes a common sentiment.

  • by Anonymous Coward on Monday December 26, 2005 @03:37AM (#14338721)
    I hope you're joking... timeshifting a DVD?
  • by Anonymous Coward on Monday December 26, 2005 @04:00AM (#14338766)
    The plural of "Attorney General" is "Attorneys General".
  • by Nugget ( 7382 ) <> on Monday December 26, 2005 @12:37PM (#14339821) Homepage
    Man, you score +1 for attitude, but you're still brutally wrong when it comes to actually having a valid point.

    For the vast majority of consumers, no video rental mechanism is bandwidth-throttled. Consumers don't want an entire station wagon full of movies delivered every night, so the higher bandwidth potential of USPS-delivered movies versus downloaded movies is not relevant to them.

    The pacific ocean has a lot more water than lake michigan, but you can't fill up a bucket faster in the ocean than in the lake.

    I also think that you'd have a tough time demonstrating that b&m video stores are still in business because they offer the ability to rent more movies at once. b&m video stores thrive because they provide lower latency than the alternatives -- you can walk in without having already decided what movie you want to watch that night. With netflix or other USPS-delivered rental options you have to decide days in advance what you plan to watch.

    A download model will combine the best of both worlds -- allowing low latency flexibility of choice along with the convenience of not having to leave the house.

    Good show on the attitude, though. I'm sure in some circles that can be an effective alternative to having a well-reasoned position.
  • by Grishnakh ( 216268 ) on Tuesday December 27, 2005 @01:02AM (#14342981)
    So she wound up in the hospital for spilling it in her lap. You think her mouth would be so heat-resistant that it wouldn't also be injured by water of that temperature?

    Of course you boil water to make many things, but you don't serve them at that same temperature. Is this concept really that difficult?

How many NASA managers does it take to screw in a lightbulb? "That's a known problem... don't worry about it."