It has been over two years since I last posted on the word-of-mouth lessons learned from bad profits and the battle of Netflix vs. Blockbuster. I wrote a series of three posts on the subject, on Feb. 18, 2006; Dec. 6, 2007; and Jan. 17, 2007.
Yahoo! Finance tells a dramatic story since then. Blockbuster’s total market cap, as of the close of trading on Friday, is $73.25 million. Netflix, by comparison, is worth $2.24 billion. Netflix is worth more than 30 times what Blockbuster is worth. And to think that just two years ago, Blockbuster was worth the same as Netflix, based on Blockbuster’s launch of Total Access (see my Round Two post).
It is worth revisiting my posts (linked to the dates cited above). The lessons of bad profits apply more today than ever. The psychological cost of buyer’s remorse is the highest it has ever been, with U.S. unemployment now at 8.1% (and California’s unemployment rate at 10.1%).
Unfortunately, our entire global economy has been significantly challenged by bad profits, mostly stemming from financial firms’ overly engineered and incredibly complex derivative trading products based on mortage-backed securities to Madoff’s actions that will fundamentally change regulation of the entire hedge fund industry. We will persevere, as we always have, but the costs of bad profits will hopefully be remembered like never before, especially as we live in this age of global connectedness and word of mouth transparency.
Is Brett Looking at Blockbuster vs. Netflix in 2D or 3D?
http://bit.ly/5Y0tzU
I think the author is correct Blockbuster is on their way out. The future IS in the download side and Blockbuster is not even in the hunt. Netflix is slowly adding more and more media and that is the key to all future success. Netflix has also done a great job of securing an outlet in the American living room. Look at the RoKu for example they offer Netflix, Amazon on Demand, and MLB. Whats missing here? It starts with B and ends with Bust…er…. So who offers Blockbuster on-demand? TiVo and Samsung both of which also offer Netflix. The mail delivery market is on its way out, the future is the web, no shipping fees, no late fees, no waiting, just a huge market and Netflix is going to own it.
I have been an online movie renter for quite some time now (originally Netflix and for the past few years Blockbuster). I’m frankly surprised at what people say about Blockbuster being slow. I suspended my account a few weeks ago because I received a free month with Netflix and can’t believe how slow they are! With my “3 at a time” plan through Blockbuster, I regularly receive 6 dvd’s in the mail per week. With Netflix it looks like 3 is all I can get. Here is my recent activity copied from Netflix’s site:
YOUR RECENT ACTIVITY
Shipping today – He’s Just Not That Into You
06/19 We received – The Men
06/17 We shipped – Revolutionary Road
06/17 We received – I’ve Loved You So Long
06/17 We received – Milk
06/16 We shipped – The Lives of Others
That is awful! Blockbuster has never been so slow (they routinely receive and ship on the same day) and if I don’t feel like waiting for the mail, I can just go and exchange the movies in a store.
BTW, I’m in a major city and the distribution center isn’t more than 10 or 15 miles away from my home, thus shipping time isn’t the issue– it’s Netflix.
For me, Blockbuster wins hands down (although I do think Netflix has a much better recommendation system on their site).
I work for Blockbuster and I think their online SUCKS! I have had Netflix for years and the price and service cant be beat. Blockbuster thought they could compete then realized they couldnt so they have done everything they can to get people to cancel their subscriptions. When I had Blockbuster online, everything I wanted had a long wait or VERY long wait, Netflix never does that! I have to deal with unhappy customers everyday. I refuse to defend the program!
[...] it takes, get humble and reflective. Ask the tough questions. Don’t sit comfortably with bad profits. A lack of humility almost caused another Great Depression, but this time on a global scale. It [...]
I have been a Netflix customer for over 2 years without even looking at Blockbuster. Awhile back I was told out of the blue that I would be charged a dollar more to get my blu-ray movies. I accepted it begrudgingly and moved on. Wait times were huge. Sometimes over 2 months to get certain titles. Today I got an email from Netflix and they are raising their fee for Blu-ray by 4 dollars. After searching the site for 15 minutes I finally located a number for customer service and called them to see if they can not charge me the $4 since I have been with them so long. The rep told me that there is nothing they can do and when I mention that Blockbuster only charges 15.99 per month for the 3 dvd’s at a time compared to the 20.99 I will have to pay with Netflix. He just told me to do whatever I am comfortable with. I felt that was great advice as I prefer to save 5 bucks a month for the same service.
My Netflix account is going on hold and I will be trying out Blockbusters free trial.
Blockbuster’s online service is very poor (i.e., availability of tittles, turn around), I overlooked this for the past few years as the in-store options with no late fees IMO made up for this.
However now that they (Blockbuster)have done away with their previous in store policy (reinstating late fees) with short rental period and pulled back brick and mortar store hours (e.g., Tampa Florida) the total costs have gone up in my case. The value of the in-store option (primary distinguishing factor) has diminished and I will be going back to Netflix.
To make matters worse all these changes in policy were made with no formal mail/email notification. I found out when I turned in my tittles and they were late… In addition, No clear terms of in-store service are listed anywhere (online or at the physical store) regarding returns. I had to learn the hard way that returns are due before the close of the store that day. Got wacked with late fees twice with this one as the 2nd time it was after store hours pulled back another hour… Fool me twice!
Blockbuster just changed their premium total access policy so that Netflix will now make more sense for me because of their better selection.
Blockbuster’s revenue may be higher, but its earnings per share are much lower. Netflix has a P/E ratio of 28.9 vs. Blockbuster’s 4.75.
Blockbuster’s structural problems are tied to their franchise, physical infrastructure (buildings + rent + in-store staffing expenses + local advertising), and the varying confusing rules (see my Round Two post on Total Access for some of them).
Netflix has streaming, yes. So does Blockbuster. And so does Amazon. And so does cable. And so does Roku for your TV (via Amazon and Netflix).
Revenue of Blockbuster is still more than 3 times of Netflix.
I think Blockbuster have some structure problem. Like high cost of store, staff. And online DVD rental service is not as good as Netflix.
They have to adjust them hardly.
Netflix now have lots of steaming thing, which seem to kill cable. If Blockbuster want to survive, they just keep head on steam thing.