I was a die-hard Netflix fan. Apart from when I lived in Canada or Europe, I’ve been a Netflix customer for the last five years. There is a very tanglible tingle when a Netflix movie arrives in the mail, packaged up in its red envelope. When I lived in Canada I missed Netflix so much that I co-founded and ran a Canadian copycat service called Zip.ca, that continues to do well in that market.
I learned a lot about how the business works. The biggest variable cost is the two-way postage. And so the best customers are the ones that don’t return movies that often. For the business to work, the average has to be less than five movies per customer per month. If customers return movies too quickly, your only real choice is to slow down their shipments. Netflix and all of the competing services have complicated algorithms that add a day or two here and there to the “received date” when customers return DVDs. One way or another, high velocity customers are slowed down. And if they leave, that’s fine. They weren’t profitable anyway.
I understand the rules, and the deal was still worth it. $18/month for three or four movies. But the bigger issue is that I have a mix of new releases and classics in my queue. Netflix would always (always) send the classics and never the new releases, regardless of how I managed the list. Again, that’s just their algorithm kicking in and maximizing my profitability as a customer.
But that opened the door to Blockbuster. I still go there on Tuesdays when the new releases come out to get the new stuff that Netflix won’t send. Netflix is a great service for library titles, and a terrible service for new releases. Netflix made the mistake of being quite happy with me going into Blockbuster every week to get the movies I couldn’t get at Netflix.
Blockbuster’s Total Access Service
Blockbuster has had a service that competes with Netflix for some time. I tried the service out in 2005. The main advantage was that they gave two free in store movie rental coupons per month with the subscription (it is now just one coupon). But the service felt slower than Netflix, and I cancelled the subscription.
But recently Blockbuster changed the service in a way that can really hurt Netflix. Movies received by mail can be returned directly at any Blockbuster store. You get a free rental on the spot, and Blockbuster still sends out the next movie in your queue. And yesterday they announced that the monthly coupon for a free rental can be used for movies OR video games.
This is all combined with the fact that Blockbuster terminated its late fees a while back, meaning that rentals can be kept at least a week before you have to deal with them charging your credit card.
So I cancelled Netflix and signed up with Blockbuster. I return mailed DVDs to the store, where I can get the new releases for free. And the mail service is great for the library titles that aren’t in high demand.
See all
Post
finally blockbuster has come out with a potentially winning strategy. Netfilx needs some real competition, monopoly is never good for consumers
I’ve been watching the debate between Netflix and blockbuster and got really interested when a neighbor told me Blockbuster was doing the exchange the mail in at the store and get a free video. But now that they are offering free video or game that’s even better. Thanks for the tip, I still haven’t taken the plunge but maybe for 2007
I’m sorry to hear that you canned your NetFlix account, because I, myself, am a die hard NetFlix fan. Here is the reason why I will never go to Blockbuster.
http://www.blockbuster.ca/end_late_fees/faq.aspx
WOW! That is a great deal …. and I hate Blockbuster (i always liked the little mom-n-pop movie rental shops … until, that is, BB moved in and shut them down and charged double the price) … but any who … still a great business move by BB utilizing their physical presence in the market place. This will most def hurt Netflix.
Does Blockbuster really have the catalog that Netflix does, though? Can you save movies not yet out in the theaters to your queue? Is there a friends function where you can view your friends’ rentals and ratings? If not, I’m sticking with Netflix.
The Blockbuster proposition sounds appealing, the only problem is that their in-store selection is very limited. Once you actually find a movie to watch or a game to play, you’re also at the mercy of it’s availability. How do you rate the Blockbuster site? I have to say, the Netflix site is damn good - that’s also a big part of the package for me. All that said, I do think Netflix needs to reduce the price or come up with a better model for encouraging the use and return of movies. I think I spent about $60 for Super Size Me.
Now THAT is how you leverage brick and mortar with technology. Can Blockbuster make this profitable? After all there will be a logistics cost to managing the DVD inventory chaos that is likely to occur. Ostensibly they are hoping to get you to purchase or rent other products while you’re “in-store” to offset this logistics expense. If they can do it, Netflix is toast.
When companies compete customers benefit.
is bloglines down??
One big reason to stick with Netflix:
Netflix gives 72% of its political contributions to democrats; Blockbuster, 60% to republicans.
Source: http://www.buyblue.org/node/1562/view/summary
Blockbuster and Netflix need to get their digital product line in order — they are going to have some healthy competition once Apple’s iTV enters the market (and the TV set top-box) where you’ll stream your purchased movies and TV shows direct to your TV. Ditto on Microsoft, which already has XBOX 360 attached to millions of TVs — and they have begun selling TV shows and movies via their XBOX Live service. TiVo is the acquisition target of 2007 — someone is going to buy TiVo. Prospective TiVo acquirers: Blockbuster, Netflix, Apple (this would be great), or possibly an etailer like Amazon.com or Walmart — although unlikely an etailer would make the buy. I don’t think Netflix has enough cash to do it — thus I’d put my money on Blockbuster or Apple to do it.
You’re right - Netflix SUCKS. I hate that they find a way to delay movies - and now I know why!
I always get the new releases from Netflix. It’s never really been a problem.
But what has always been a problem is going to Blockbuster. I can stay at home and download a movie faster than driving to the store, getting out, finding a movie that’s actually on the shelves, waiting in the long line to ring out and driving home.
Doing away with late fees has only degraded their selection.
So do I spend with Netflix, effortless use their system and get (in my experience) what I want, when I want it
-or-
Sign on with Blockbuster and get an awkward Web experience, a mediocre store experience?
Ultimately I don’t want to leave my home for the video. I want the video to come to me and even though I have a Blockbuster 1 mile from my home, it’s just not worth it.
I was thinking about this yesterday when I got the email from BB, I jumped from Netflix to BB before they had their Total Access Program for online subscribers. And since they started the free DVD with returns to the store, it has worked out really well. If you have a BB just 5 mins away from you, it works wonderfully. I think BB is really pushing towards the right direction and totally agree that it’s gonna seriously hurt Netflix.
In fact, at my subscription level, I get 3 DVDs out at anytime and I have one free rental coupon per week, so that puts me at 4 a month. But the best thing that happened so far is the free rentals for returning DVDs in store. So by taking a 5mins drive to BB, I return the DVD to the store and doing that I can get a free rental DVD and that DOES speeds up the mailing next DVD from my queue and I get to watch the free DVD while waiting for the next one.
The fact is BB is thinking harder and working harder to make the service better and more appealing to its customers deserves some applauding, what has Netflix done? Nothing, except for trying to generate some bust by offering $1M for something that doesn’t really matter - recommendations.
Ray: There is no late fee in the US, so hopefully they will change that soon for Canada.
#6Mike: I’m spending $20 a mth and probably watching twice the amount of DVDs and now I get to try out different games on my Wii too ;). And BB.com just relaunched with a new look, in a web 2.0 way, AJAX, etc.. and it’s better now.
I guess I’m officially a Netflix abuser. I’ve been a member for less than three months, but according to my account, I have watched 35 movies from Netflix.
I have noticed a couple of strange delays…but nothing major. It makes me feel kind of dirty knowing they may have been done intentionally…but I’m still coming out way ahead of the game it seems.
I used to work at a mom-and-pop video store, so there is no way in hell I’d consider switching to BB.
The best service I have found so far ( I have tried Netflix and dvdavenue.com ) is my local public library. I request the movies online through the library’s website. They send them to me free of charge. I drop them off in the library drop box on the way to work. No late fees ( my local library doesn’t charge them ). No threats of charging restocking fees or full price for the movie. I haven’t run into any limits on how many I can have out.
Since the library doesn’t charge any late fees, even if I do return after the due date - they won’t cut me off or screw me with outlandish late fees like Hollywood video or Blockbuster did until Blockbuster got slapped with a class action law suit and faced competition from netflix.
Of course, there are drawbacks. Sometimes I have to wait in a line for the movie. Sometimes people don’t return them in a very timely manner. I had to wait forever ( 1 month ) for season two of The 4400. There isn’t a vast collection with some controversial titles. If I need that, I can always watch cable since I now have that money available since I don’t subscribe to a service that needs to justify limiting my “unlimited” rentals to be profitable.
What’s more, the public library will never “fire” a customer unless the borrower engages in some really egregious behavior with loaned materials - like dstroying the material.
I did the exact same thing!! Total Access is really the way to go, its awesome-
I am a here and now person, sometimes I really want to watch a movie the NIGHT that I feel like watching it.
For 17.99, I pretty much have 4-6 movies in my possession at any given time.
How can you beat that?!
One complaint though. Blockbuster needs to beef up its website. Netflix was a much faster, enjoyable experience.
To #5 Anonymous:
BB is big enough that I’ve never had an issue finding what I want. Does it improve your experience knowing Netflix may have that extra 1000 movies you most likely will never want to see? Maybe I’m weird but just because my friends like a movie doesn’t mean I like it or care to know they do. Plus do you not talk to your friends the old fashioned way? I want a service that delivers on its core purpose - sending me the movies I want. With the new in store service best buy took a crap on Netflix. I want movies not a “cool” web feature.
Did I read wrong or did some idiot above want to add a movie that hasn’t even been finished/released to theaters for its initial run? Have you heard of letting them finish the movie first?
Peace
NetFlix - is a like a chinese buffet; the fun flies out the window when you feel like the more you eat - the better the deal.
- I got netflix but found myself watching every movie the night it came in - Spending every night - watching a movie, not taking it truly in - then sending it away for another :/
Blockbuster although does - leverage their physical buildings - also adds a “Value add” to the franchise -
Richard B
MA, this is your best post in months. I completely agree with your NetFlix experience. I was noticing the same one. I used to live less than 15 miles from one of their dist. centers, and some movies were taking 2 days longer than others. OLD movies were averaging about 1 day turnaround (I mailed it out on a Tuesday morning, new movie arrived Wed PM). New releases were taking 4 days.
I think on average, a new Netflix customer is going to go bezerk with the service. I know I did. You know, renting 5 movies a week. Then once you’ve slowed down, Netfilx will begin to profit from you. Hell, I had “Capote” sitting on my desk for 4 weeks, and I never got around to watching it, so I just sent it back.
I don’t think they should panic. Look at what is happening at iTunes. Lots of customers were loading up on content they’ve missed, & now people are slowing down into their regular routines. Same thing should & will happen with Netflix customers. If they wait it out, they’ll make money on that customer. The WORST thing they can do is f*ck up customer service because word of mouth will kill them.
I agree with Michael 100% - I love the new Blockbuster model. Just watched “All the Kings Men” last night (picked up in store) and looking forward to “Little Miss Sunshine” tonight!
While I think the in-store return is great for me the real game changer (no pun intended) is games. I currently have a subscription to both GameFly and Netflix, but ideally, I’d only have one subscription and one fee.
That said, I’m using a free Blockbuster subscription right now but probably won’t renew. Their online store is pretty bad in terms of ease of use and selection. I have no reason to believe that they will catch up with Netflix any time soon.
Randy Stewart
randy@boxbe.com
I’m always surprised to hear of how many problems people have with Netflix’s shipping. I’m a fairly high user and I never get throttled. Discs generally arrive to and from Netflix the day after shipping if sent early in the day. I also always get new releases sent to me if they are at the top of my queue but maybe that is because maybe only 1 in 12 or so of the movies that I rent could qualify as new releases (
blockbuster is totally leveraging their neighborhood presence to one-up netflix in the business that netflix created. well done!
Anonymous- adding newly released movies to your queue allows you to get when it is finally released on DVD. This is extremely convenient for me, as the movie is more “top of mind” when it’s getting all of it’s release-related advertising, reviews, etc. and it’s when I’ve made the decision to watch it on DVD vs. buying a ticket.
It’s ironic this post came out today, as my wife just sent an email to Netflix customer service last night asking why we haven’t gotten the Superman HD-DVD available “Now” that has been sitting on top of our queue the last week and a half. Their site gives the user impression that something is broken with their queue since they don’t indicate that you’re in some kind of penalty box.
Looks like a caret cut off the rest of my post so here goes again.
Why doesn’t Netflix just charge a per move subscription rate like Cingular with Rollover. That is the could charge you a ~$3 monthly fee and then a subscription rate of ~$2-3 dollars per movie that you rent per month. You can then choose how many movies you like to rent per month on average, 3, 5, 8 whatever and they could charge accordingly. They would also give you Rollover movies for months where you rented less that you could later catch up on. This method allows Netflix to earn money regardless of how quick people return DVDs and quick returners don’t complain that they are getting screwed. Everyone’s happy.
Post #10 above is just sort of a “wow” moment for me. Note to self, stop talking politics before you end up like that dude.
Personally I would not care if BB offered free movies that were hand delivered by the starring actors. Thats right, if Angelina Jolie herself showed up at my door with a copy of Tomb Raider from BB, I would tell her to get the heck off my property before call the police.
Netflix, even with the “mysteriously” delayed shipments, offers a far better customer experience and selection. BB has abused their customer base, myself included, for so long that I think it will take more than free rentals to repair their image.
What several people have reported doing is using Netflix’s multiple queues functionality (i.e. have several different queues under a single account and divide your rental slots among the queues) is to use multiple queues to partition their requests — for example, in your case you could put all of the new releases in a separate queue from the classic movies. Netflix’s algorithm will then run on the new releases queue, will not have any of the lower-priority movies to choose from, and will usually send you something.
It’s clunky, admittedly, and could easily be worked around by Netflix in the future, but realistically as long as a lot of people don’t start doing it it will probably work.
@10
Thanks for the tip. If that’s the case, I’m canceling Netflix today!
@5. “Can you save movies not yet out in the theaters to your queue?”
Uh….how do you get a movie not yet released in theaters?
I completely agree. For almost the same price, Blockbuster is offering the free in-store rental too so it would be a no brainer to take Blockbuster as it is giving you more value for the money. One thing Blockbuster could improve is that it seems that their DVD return-shipping process seems a lot longer than Netflix. When I was with Netflix, I seemed to get my DVDs a lot faster than with Blockbuster. I’ll have to add that Blockbuster has a good customer service department too — polite, friendly and always ready to help. Unless Netflix has something up their sleeve or create an offer to combat the competition, it might serve as the start of the end for them.
I also was a die hard Netflix fan, but Netflix became slow to send me movies because we were one of those “active” customers with more than 5 movie requests per month. They also claimed never to receive two of my movie returns and our service was even worse after that. It didn’t help that I lived a half mile from their corporate headquarters.
I’ve been using Blockbuster for two years now. I got hooked on the two free video game rentals per month, because games are so expensive, even to rent. They finally upgraded their website a couple months ago making it easier to find movies. And now I can return mailed movies in-store for a free rental for a movie or game, and still get the next one on my queue sent to me!
Blockbuster is an excellent example of a company that has found a way to leverage their bricks-and-mortar business with the internet to beat a pure internet play like Netflix. Congrats Blockbuster!
Netflix used to lost my movies a lot, which either placed the blame on me or put me in the position of middleman between them and the post office for finding out where the cause was. No thanks. I don’t plan on putting myself into this situation with Blockbuster, either.
If you’re in the position to return movies to the store, I recommend signing up for their Freedom pass. It’s a bit more, but you can have the movies out as long as you like (even past the one week) without them bugging you. Plus you return the movie and exchange it for another right away. Two movies at a time is all my family of five can handle and we are very frequent customers.
With the Total Access pass, the envelope is actually a coupon for another free movie at that moment you return it, plus they give you an extra monthly free movie coupon as well. However, these free movies are all subject to the 2/3/7 days return policy. I haven’t tested the boundaries of whether this is exempt from the “no late fees” policy, but we were really bugged by having to go back to remembering when something was due, and it was really more movies than we needed. I tried this out with the current 2-week free trial they were offering, but did not canceled my Freedom Pass. I’ve decided to canceled the Total Access after the trial was done and I’m going to stick with my Freedom Pass. But the trial might be a good option for you to find out if it works for you!
Mike get Natalie back ……..your writing and judgements suck today
Blockbuster = Worst. Service. Ever.
I hate Blockbuster, and happily switched to Netflix after a terrible, terrible experience with one of their stores. About two years ago, my dad had a severe stroke. We were told he probably wouldn’t make it through, and was in a hospital a good three to four hour’s drive from where I lived. In my haste to get to him, I forgot to return my Blockbuster movie title by its due date.
I called the Blockbuster store to have it renewed, since I have an account with them on file, explained the circumstances… and they wouldn’t renew it. I even offered to give them my credit card number over the phone. Even though they had the “no late fee” guarantee, if I didn’t return it within a period of time, I’d be billed for the movie, and if I returned it, Blockbuster would be kind enough to “buy it back” from me, and then charging a restocking fee. If I couldn’t be back within a month, I’d be permanently billed for the movie.
I complained to the store, and I complained to Blockbuster Corporate, to no avail. Nothing–I didn’t even get a reply. I have never experienced such callous treatment from a store as I did from Blockbuster, and I’m never, ever going back. Not to mention the fact that I never found what I wanted at the Blockbuster store. I ended up needing to stay with my dad for three weeks while he was in critical condition (thankfully, he beat the odds and is at home now, albeit with substantial paralysis of half his body). I returned the movies to Blockbuster, refused the fines, walked out the door and never looked back.
I love my Netflix subscription. Movies I want are almost always available (I can count the exceptions on one hand, after two years of membership), and I LOVE their selection. I have yet to find a selection from Blockbuster not available through Netflix, but lots of titles not available from Blockbuster are available on Netflix. We have a Netflix disto center in my city, so perhaps that’s why I get them so quickly. Anyway, Netflix has one loyal customer here, especially if Blockbuster is the only real competition. And I never have to worry about late fees–no return date, no “restocking fees,” no worrying about “buying” a movie if you’ve had it over a month.
Michael, enjoy your new Blockbuster subscription, and I hope Blockbuster’s treatment of its customers improves and all goes far better for you. For me, Netflix is the place my subscription will stay.
Blockbuster clearly has the better model since they have physical stores. However I have been using netflix for 5 yrs and never have had new release issues, maybe because i live so close to a distribution center. I find that if i send in a movie first thing monday morning i will get the new release that comes out on tuesday before it becomes a short wait. With 2-3 day turn arounds I am not going to take a chance on another system. Than again i dont have much time to watch movies, so Netflix works great for me.
Hmm. I thought this was a blog that looked at technology with a bent toword the “web 2.0″ experience… Blockbuster has a very nice site (if it was 1999) so I’m a little bit shocked that you would come down on that side of the debate. I suppose that you will now break up with amazon in favor of driving down to wal-mart because wal-mart has totally nailed the whole bricks & mortar thing?
Other comments here covered this ground, but the reason that most of us use Netflix and will not break up with them is the selection of movies. Blockbuster is great if (a) you like movies with Britney Spears or Adam Sandler and (b) you aren’t disappointed when all 57 copies of the latest Adam Sandler movie are gone when you get there. The selection sucks. The rules behind its “end of late fees” promo are totally arcane. And the user experience on their site (supposedly your area of expertise) is horrible. Where is your analysis of that?
Sorry, but this is one of your more lame posts.
good info about the customer profitability model and sly tricks they use to ensure the model works. I always had my suspicions that there was some lag, so I still find myself going to the movie store a few times a month, silver screen video not blockbuster.
To me blockbuster feels like WalMart, I don’t care if it’s cheaper, there just something about them I do not like. NFlix needs to be aware of the customer expereince and not feel like it is invincible, that is what happened to BlockBuster then along came NFlix and took away major market share.
great insight in the post and the comments.
Wow. Seems a lot of people have an interest in movies today
I’m surprised by the amount of bad experience people have noted above with Netflix.
I have used Netflix for a couple of years now. I have a pretty high turnover rate and have never been delayed. The dist center is 50 miles away and it takes one day for them to receive my movie and one day after that to get the new movie. I’ve never been delayed on a new release, and there has only been one movie that never made it to them. I simply noticed after a few days that they hadn’t received it, filled out their online form to report it, and that was that, I got a movie sent out the next day. Similar experience with the 3 or 4 times I’ve gotten an unplayable DVD of some sort: just fill out the form online, and they send out a replacement immediately (I get it the next day) before I even send the damaged one back.
For me, Netflix has been nothing but a positive experience.
In my mind, you can’t beat the Blockbuster deal. Both services offer similar plans at similar prices but Blockbuster has always had coupons for free in-store rentals and now does in-store returns. Netflix just can’t compete with that for the same price.
While I hate Blockbuster as much as it is possible to hate a company, and I will never ever use their services again or give them a dime of my money if possible, I *am* glad they are competing so fiercely with Netflix because competition is always good.
Did you know that Netflix had just raised its prices right before the Blockbuster online debuted? Their prices were lower than Netflix, so Netflix had to lower them back to what they were before the hike to stay competitive. Sweet!
I have only been using Netflix for a year or so but I have never had any problems with throttling or “no new releases”. I’m not a super heavy user but I do have the $15 2-movies-at-once deal, and we go through about 10 per month, so I know I’m certainly up there among the more active users.
Active blogging on Steroids for Michael Arrington these days!!
I think Netflix put out a statement a while ago about how they are more likely to send new releases to people who only rent occasionally, since they usually only go for the new releases. People with higher volume and larger queues get second priority because in theory they are getting more for their money. It sucks, but when I was a Netflix customer I didn’t really make it out to be the dealbreaker.
Why i quit Netflix is like another commenter said - they are almost a victim of their own success. I was renting movies so often and watching them so quickly that I sorta OD’d on the service - I ran out of movies that I wanted to see because it was Netflix’s efficiency that allowed me to watch them all.
Finally BB is getting the credit they deserve! I tried netflix a while ago after listening to friends rave and was really disappointed with the piss poor customer service (slow delivery, etc) so I tried BB and there is no way I will every go back to netflix.
BB truely rules! The movies come fast, the selection is great, and the in store return not only gets me another movie right away, it accellerates the next movie in my queue as the store checks it in as returned and we do not need to wait for the mail.
Even before the in store deal movies came the second day after a previous one was returned.
Go BB!
Mike,
I am disappointed that you did this post. Netflix are the brilliant innovator and Blockbuster is really evil. I mean:
“Welcome to the age of no late-fees!”
This to me is one of the most inslulting slogans I saw as a customer. It demonstrates arrogance and the kind of evilness that makes me angry.
To your point about new releases. I do not see that. Perhaps because I do not try to get the latest action films or whatever, but the stuff that I am interested in is available most of the time.
Netflix to me, exemplifies the kind of innovation and creativity that we as consumers should support. We need companies like this. By you going back to Blockbuster and writing about it so publicly, you are sending out a totally wrong message.
You just choose Microsoft over Apple. And this is, we know for sure now, is not the right choice. So, please…. reconsider.
Alex
I am a huge Netflix fan and have been for a while. I even am on the discontinued “5 out at a time” plan. I have spent many hours refining my netflix experience even to the point of being able to easily manage and pick from my 300+ titles in my que. Yes, I have been “Throttled” (shipments slowed down) many times. I did some searching and found ways to trick the algorithm that works great. (put an not yet released title in the #1 position) My wife and I watch a netflix disc every night. We spread out our watching by renting movies and TV shows. The TV show discs always stick around a couple of days because they are usually longer than a movie and are easier to watch an episode of two a night. This spreads out the turnaround time such that I don’t get throttled. If I do, I just put the not yet released title at #1.
I don’t like blockbuster. They have been calling me for weeks thinking I have one of their movies. I don’t. Someone else put my telephone number when they signed up and did not return the movie. I have called and called, but it is impossible to stop this recording. They finally charged the person for the movie, so the phone calls stopped.
I love NetFlix. Oh, and Internet video too.