Netflix Lunacy Explained

History of Netflix in a nutshell:

  1. DVD By Mail
  2. DVD By Mail with Streaming Added
  3. Streaming with DVD By Mail Added
  4. Streaming and DVD by mail separated

This shows how Netflix completely changed their business model from being a DVD by mail company to a streaming company. Step 3 to Step 4 happened so quickly that Netflix pissed off a lot of its customers and investors and wiped out more than half the value of the company.

Here is my take on their logic. Netflix wants to be a streaming company because streaming is the future. But at this time nobody wants to give them content and those who would give them content want to get paid by number of subscribers.

Netflix: We want your streaming content
Content Provider: How many subscribers you got?
Netflix: 25 million
Content Provider: We want $x/subscriber
Netflix: But a lot of our subscribers don’t stream
Content Provider: But they can
Netflix: But they don’t
Content Provider: Not my problem

At this point a bulb goes off in CEOs head. Ooh what if I could cut that number in half?  What if I can get the non-streaming folk out of the equation? Let’s split the business completely.

Some Customers: We like to do both and you’ve screwed us
Netflix: BooHoo
Customers: Your streaming selection sucks and your DVD by mail is worse than blockbuster and I can also go to redbox. Bye Bye Netflix
Netflix: We’re sorry (read – we’re really not).

A link to someone who explained the customer perspective better than I can

My Take: Netflix had something nobody else had – streaming and DVD by mail and both combined at a reasonable price. Now Netflix will compete with Blockbuster (aka Dish) on the DVD by mail front and Blockbuster doesn’t have a stupid 28 day delay on new releases yet and does not charge extra for Blu-ray either. It will compete with Amazon for subscription streaming and Amazon Prime also gets you free two day shipping on products fulfilled by Amazon. DISH plans to announce a new streaming service on Friday too. Then there are Redbox, iTunes and Amazon rentals. So instead of having no competitors, Netflix now is competing with everyone. And some of those have deeper pockets and more resources than Netflix does. At this point in time the only advantage Netflix has is universal device support but that is nothing a few dollars and a few software updates cannot fix. I wish them luck as I stick with my Blockbuster by mail plan and hold off on streaming. So far Blockbuster has grandfathered me in to my plan and rate even though it is no longer available to new customers. Maybe after Friday DISH will have what Netflix customers had – a discount on streaming and discs combined.

Blockbuster Adds No Added Cost Game Rentals. Still Dying

I logged in to my Blockbuster account today and saw this:


Blockbuster is really throwing everything and the kitchen sink to compete with Netflix and Redbox. But nothing seems to be working to keep the company alive. I’m not sure why they don’t throw in free streaming like Netflix too.

Total Access (exchanging disks in store), no delay for new movies, no extra charge for Blu-Ray none of this has worked for Blockbuster online. I’m not sure how well the kiosks are doing as compared to Redbox.

In my opinion, the problem with  Blockbuster is not that they aren’t doing enough. They are just doing it wrong. None of their offerings integrate with each other and Blockbuster just seems like a combination of separate companies held together by a bandage that is too small.

When Total Access first started, it want very well integrated with the Queue. Finally when they did integrate it with the queue, they removed features that made Total Access attractive in the first place. After blockbuster started shutting down stores and opening kiosks, they made the kiosks incompatible with total access. When Blockbuster started the streaming options after buing a streaming company, there was no option to stream some items for free like with Netflix.

The allure of free streaming from Netflix is that  alot of devices come with the ability to stream from Netflix and it is included. With Blockbuster you have to pay to stream so that is not as nice as Netflix. Of course with Blockbuster you can stream newer movies but if you are getting them in the mail anyway, why would anyone pay to stream? I just don’t get it.

I’m not a gamer so this new game feature is useless for me but this might cause a few gamefly users who also have Blockbuster to possibly consolidate into one account.

Either way I hope Blockbuster stays relevant and I hope they add total access to their Kiosks. That would really make me stay with Blockbuster for longer than I am planning now.