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?"
They each have thier own issues to deal with... (Score:5, Interesting)
well-positioned for downloadable movies... (Score:5, Interesting)
Netflix has already partnered with Tivo, which already has tivo-to-go that works for the video iPod.... potentially they're ready to roll-out downloadable movies...
Seth
The classic online vs B&M model (Score:5, Interesting)
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.
Does Netflix have a future? (Score:2, Interesting)
Re:Netflix...DVD's on wheels. (Score:3, Interesting)
It's not a bandwidth issue, it's a flexibility issue.
Re:There's more to it than that (Score:5, Interesting)
How about some good old-fashioned "profit"? (And we'll have none of the EBITDA crap either!). A quick look at the charts on Yahoo reveals a $603.30M loss.
Inexplicably their market cap is also about $600M, with a $1200M debt. Now, I have a debt that's more than my income or savings, sure, but it's a mortgage, so my creditors can sell my house and reclaim the money. If they sold the company in parts, assuming that strip-raiding it adds 25% in value over market cap, that still leaves $450M in bad debt.
Of course, it might be that all debt is really from one division (say, the DVD posting division) that they're looking to get rid of. But still, things look pretty bleak, seeing as that debt isn't doing anything right now, and their last investment pretty much failed. This kind of company is usually propped up by their creditors to salvage what potential is left.
Death to Blockbuster (Score:3, Interesting)
But I don't like blockbuster. We'll ignore all the scratched discs and such that the stores would give me (almost no problems in that way from Netflix). I recieved 2 broken discs from BB in about 3 years of renting, compared to 1 in 2 years at Netflix. And if you consider how you get the discs, that doesn't look too good.
But what are their prices now? I'll ignore the "2 day rental" scam they run on popular movies. They used to be $4 for everything. Now they are like $6 for a movie and $8 for a game. EIGHT DOLLARS TO RENT A GAME. I also enjoy how they sell anything you keep out too long to you. That is how their no late fees program works. You can reverse the charge within 30 days and pay a restocking fee, but the fact they don't advertise this fact in that no late fees campaign ticks me off.
Mostly it is the price raises that they keep doing. If it wasn't for video games (I don't get enough time to play them to make Gamefly worth my while otherwise I would HAPPILY subscribe) I wouldn't go near the place.
So, from my point of view, here is what happened:
Never tried BB's program. Never thought of it. I'm surprised it lasted this long. Is Wal*Mart still doing this, no, they sold out to Netflix didn't they?
That's right, WAL*MART FAILED. Surely BB could do it where WAL*MART couldn't.
I've only talked to 2 people who tried BB's program. They both (former and current Netflix subscribers who tried it because of the price) said the selection was worse, the availability was worse, the turnaround was worse. Only the price was better.
And at $2 a month (wasn't that the difference?) no one cared. Netflix later dropped their rates in response anyway, IIRC.
Time to die BB. You're like Radio Shack and Toys R Us. You are not even a shadow of your former self. You're a dead man walking. You can try to switch industries (like RS did) and stay as a bit of a joke (and with their GameRush crud, this looks like their plan), or slowly wither and die (like Toys R Us is doing).
Long live Netflix. They (along with TiVo) have completely changed the way I watch TV. They have a great price for the service, and only continue to impress me.
Holy Un-"Settlement" Batman! (Score:5, Interesting)
- Sue a company for something they didn't really do wrong in the first place
- Negotiate a "Settlement" that's really a marketing campaign for that company
- Pocket massive legal fees!
Did anyone read this settlement? If you sign up for it, you get a free month of a one-level upgrade of Netflix service. Then, and here's the cool part for netflix...
After that month, THEY CONTINUE TO BILL YOU AT THE HIGHER PACKAGE PRICE!
What kind of "penalty" is that? Trade a couple rentals to get your customers to upgrade packages? That's cheap advertising is what that is!
Re:The Jugular? *snork* (Score:4, Interesting)
Well... There is geexbox... but I really want my remote control...
Re:The Red Envelope (Score:3, Interesting)
It's only a matter of time... (Score:4, Interesting)
Re:Death to Blockbuster (Score:3, Interesting)
I always used to have trouble getting my wife to get movies she rents back on time, incurring horrendous late fees; now I am able to take care of returning them on the weekends without worrying about it. I have never yet fallen into the purchase/return scenario, because I understand that there is a return deadline, that it isn't a brick and mortar version of NetFlix.
Blockbuster made no attempt to hide what would happen. They may not have made a great effort to call attention to the part that wasn't the main focus of the deal, but it was always available for anyone who took 30 seconds to look. Are that many people really too lazy or illiterate to spend 30 seconds reading the fine print on a deal that sounds too good to be true?
I've tried both (Score:3, Interesting)
I think if blockbuster leveraged it's brick and mortar more, they'd cut into netflix's market share quite a bit.
Re:Death to Blockbuster (Score:3, Interesting)
I have kept a movie too long and had to "sell it back" and pay the $1.25 restocking fee (or whatever it was). If that part didn't exist, I would be thoroughly sick. My family is terrible about returning things on time also (but, that was how they made almost all their money). Even if you waited too long to "sell it back" (30 days after they "sold it to you"), you can then sell it back like you can sell used tapes to them. You'll get some of your money and end up losing only $3-5 (they are also fair, charing you $8 for that old movie instead of the $20 a "new movie" costs).
But they advertised it like it was Netflix: no late fees ever (yeah, a little asterisk but still). The campaign got pulled because some Attorney Generals threatened to sue the for misleading advertising.
My point was more that their "solution" was just as bad, they went about it in a way that wasn't fully honest ("no late fees if you bring it back within a week of the due date, otherwise you bought it" in readable type on the commercials would have been fine). They are the largest video rental company (as far as I know) and I just see them as having lost all focus on the customer.
was there ever really a war? (Score:3, Interesting)
Re:Netflix... (Score:2, Interesting)