7 ms·

Blockbuster CEO 'Confused by Fascination' With Netflix

71 points by cstejerean 18y ago

jrockway 18y ago
"I've been frankly confused by this fascination that everybody has with Netflix," Keyes told Rafat Ali, in an interview with PaidContent.org. Translation: "I am not qualified for my job. I know nothing about my industry, or what my customers want. I get a nice paycheck though." I'm frankly confused as to why a CEO would think that being confused about his competition would bring him more business.
- OneSeventeen 18y ago
  Yeah. Way to fail completely at your job, Keyes. This is a guy who can't imagine anyone using his product in a way different from the way he uses it. Fail.
  - jrockway 18y ago
    This is a guy who can't imagine anyone using his product in a way different from the way he uses it. There is really a different problem here. It's probably true that most people want to see new releases. The problem is that Netflix has new releases and old movies also. So if you go with Blockbuster, you are stuck with only new releases. If you go with Netflix, you get everything. Why bother with Blockbuster? Also, I guess there is an agile-ish mantra like "design products for yourself first". He is doing this, and is proof that it doesn't work for everyone. :)
    - cstejerean 18y ago
      It works well when other people also like what you're designing for yourself. The solution is not for this guy to start doing something he doesn't understand, but for Blockbuster to get a new CEO.
    - netcan 18y ago
      "Design Products for Yourself" works in the brave new world of the long tail. 'You' are probably representative of a bunch of consumers worldwide. Enough to make a market. 'He' isn't in that world. He's in the mass market world where you need 'market share' and 'mass appeal.' So being very appealing to some people is no good. In that world, you needed to be 'good enough' for lots of people. Problem is people will move away from good enough to good when it becomes available. And it almost impossible to be good for everyone.
- cdr 18y ago
  He might know what his customers want, but the problem is his customers are becoming Netflix customers. The market has changed, but his target customer hasn't.
  - staunch 18y ago
    I think Netflix simply identified a big gap in the movie rental market that this guy is still unable to see, even when it's eating his business alive.
  - dmix 18y ago
    That is exactly how disruptive technologies take over big markets. While they are developing a great service, the big company is still completely focused on the ways of their old customers.
- babyshake 18y ago
  Reminds me of how the GOP is "attacking" Obama by ridiculing his popularity.
- sysop073 18y ago
  This was good too: "Why would anyone want to watch anything other than new releases" And this is why Netflix's share price is a good 15 times higher than Blockbuster's right now
  - rudyfink 18y ago
    At the heart of it, I think the "new release" is a market strategy rather than a consumer goal. Creators want consumers to believe that they should forget everything in light of the "latest and greatest". The creators' strategy is to attempt to drown out all other consumer thoughts with marketing. Consumers just want a good trade-off for their time. In the past, information was substantially easier to find on things that were new. Finding good movies in the so called "long tail" of a video store involved book research, knowledgeable friends, or lucky guesses. You could choose what had been recently marketed to you or the devil or the unknown box. Modern information networks have changed this reality largely in favor of the unknown box. The truth is that a large percentage of new creation is not really worth your time. The biggest advantage the new stuff has is frankly that it is new. As information systems progress, people will have an easier time separating hype from substance. This will effectively make older quality creations more desirable. It is probably fanciful, but I'd expect his statement to be exactly wrong in the long run. The reality may become "why would anyone want to watch new releases"?
  - thorax 18y ago
    Well, I wouldn't worry about share price so much as their overall worth. It's heavily reflected there, though: Netflix ($1.8 billion) has nearly four times the market capitalization of Blockbuster ($472 million). The fact that the CEO is confused really is obvious in the market as well as in the interview.
  - caudicus 18y ago
    Well, to their credit Netflix's market cap is only 4x that of Blockbuster. ;)
  - briansmith 18y ago
    "Why would anyone want to watch anything other than new releases" is pretty much the slogan of RedBox. Why pay $5 for a movie rental when you can pay $1 at McDonalds or the grocery store or the gas station for the same new release? Plus, with RedBox, I don't have to show two forms of ID or fill out an application. I pick the DVDs I want, slide my card in, and the movies pop out. NetFlix has become the premium rental service. RedBox is the budget service. Blockbuster is getting squeezed out of the market from both sides.
- cujo 18y ago
  I'm a bit confused by it too. What does Netflix have/do that BB doesn't?
  - akd 18y ago
    price
  - icey 18y ago
    Amazing customer service
  - calvin 18y ago
    The long tail (http://en.wikipedia.org/wiki/The_Long_Tail http://en.wikipedia.org/wiki/The_Long_Tail).
  - mechanical_fish 18y ago
    No leases on brick-and-mortar stores. No retail employees. A first-mover advantage in the online space. No history of charging late fees. This is a really important point - in my mind, the name Blockbuster evokes the image of a scolding librarian who sells used cars on the side. And, of course, Netflix also has a different CEO.
  - dionidium 18y ago
    I had Blockbuster's Netflix-like service. At the time I canceled (to switch to Netflix) something like 17 of the 22 movies in my queue were unavailable with a "long wait".
- biohacker42 18y ago
  It is refreshing that he bluntly admitted his confusion. Most CEOs know enough to BS so that it is not obvious that they are clueless. Give this guy some kind of pity award.
  - tlrobinson 18y ago
    But is he really "confused" or is this a sarcastic attempt at badmouthing Netflix?
    - helveticaman 18y ago
      Yeah, that's what the quote sounded like to me, too.
  - rokhayakebe 18y ago
    If you can admit you are clueless, then the next honest move is to resign.
  - jyothi 18y ago
    yeah, he is the smarter of the dumb CEOs. As he knows he at least realizes that.
richtaur 18y ago
CEO and "confused" in the same sentence is a bad thing. If anybody should know WTF it should be that guy.
alaskamiller 18y ago
Wired couldn't pick the money quote, but it's really this: This is a hypothetical one. Would you be ever interested in buying Netflix? Keyes: Not really. Netflix doesn’t really have or do anything that we can’t and don’t already do ourselves. So, there’s really no advantage in buying. And the reason why Keyes won't is because BBI is worth only $288 million while NFLX is worth over $2 billion. Way to bluster through, Keyes.
- macebobo 18y ago
  Maybe NFLX should buy BBI and fire Keyes! Heck, it is only slightly over $2 a share! It's amazing the arrogance Keyes displayed in the interview and how folks like this are able to stay in power even though BBI stock has been tumbling since mid-2002.
joao 18y ago
How does one get a top CEO job and is just clueless? There are lots of these types of sentences by CEOs that just show they don't understand their target market...
cmos 18y ago
wow. He should be fired. Immediately. Just saying those comments should be career suicide. His PR person is probably freaking out. Why would the board of directors just wait around for a clueless leader to drive them into the ground? They lost the battle. Time for an aggressive plan B to stay in business. Attempts to sell consumer electronics in blockbuster stores are pathetic and have failed over and over again. First radio shack, then circuit city. Putting up a shelf with electronic gear will not move it. http://findarticles.com/p/articles/mi_hb6695/is_200201/ai_n26423260 http://findarticles.com/p/articles/mi_hb6695/is_200201/ai_n2... My plan B for them would be to change store format entirely. Build a nice home theatre that can sit 20 people and have showings of new releases. The catch is they use equipment that is in the $1000-$5000 price range, and it's a great experience that you can 'take home'. Delivery is free. Installation is extra. Show new movie releases. Always have free popcorn!! It costs virtually nothing. Have a kids night. Let local managers be more creative. Still rent movies and games, but change the 'browsing' process. Have large screens and use a wii type remote to navigate a virtual store with slick graphics. Show what's popular, ask what type of movie they want. Make a game that promises to find you the perfect movie. Navigate through actors or scenes. Remember what they have seen. (how miserable is it to walk to the other side of the store with a movie and your wife says 'seen it' over and over again) Make it so people don't say "do we have to go to blockbuster?" when they are in between movies in their netflix queue. It's staggering to think that the idea of putting boxes of discs on shelves and letting people walk around aimlessly picking at random is
- prakash 18y ago
  Why would the board of directors just wait around for a clueless leader to drive them into the ground? Typically, CEO's hire their board and gives them lots of options to essentially align with the CEO. Once I wrote this, out of curiosity, I checked who's on the board of Blockbuster. Interestingly, a one Carl Icahn is on the board. (http://www.reuters.com/finance/stocks/companyOfficers?symbol=BBI.N&WTmodLOC=C4-Officers-5 http://www.reuters.com/finance/stocks/companyOfficers?symbol...) Also, the CEO made $5 odd million last year(http://www.reuters.com/finance/stocks/officerProfile?symbol=BBI.N&officerId=996409 http://www.reuters.com/finance/stocks/officerProfile?symbol=...).
huherto 18y ago
From a consumer point of view. I hate going to Blockbuster because it takes me a long time to choose a movie. I would like to have the catalog online. Mark the movies that I have already seen. Mark the movies that I may like to see someday. Being able to make an online reservation, and on my way home pick it up at the counter.
stcredzero 18y ago
The lesson: if the market confuses you, you are out of touch with it!
- byrneseyeview 18y ago
  There are plenty of times when being confused and 'out of touch' is better than pretending to know what's going on when people are being irrational. This is probably not the case with Blockbuster, but they don't have the resources to emulate Netflix. Their best bet is to hold on to a gradually declining customer base, and eventually liquidate.
  - stcredzero 18y ago
    You don't have to know what's going on when people are being irrational. (And besides, we're being irrational almost all the time.) You only have to know how to charge us for being irrational.
gibsonf1 18y ago
The biggest difference from a value perspective: Late Fees.
weegee 18y ago
I've been with Netflix since 2004, and tried Blockbuster Online a couple of times but always went with Netflix. The reason? Better selection, better website, better customer service. I thought the in-store renting deal with Blockbuster would be a plus, since there is a store within 5 minutes walk from my home, but while in the store, I asked myself, "what the hell am I doing here??"
keyes 18y ago
netflix.confuses.me
aditya 18y ago
Wow. Is anyone reading the article or just going on with Netflix fanboy'ism? This chart explains it all: http://www.flickr.com/photos/13736953@N00/2762004788/ http://www.flickr.com/photos/13736953@N00/2762004788/ Netflix is one segment of Blockbuster's entire getting media to consumer's strategy. Looks like the B&M folks are here to stay, no matter how much we love digital delivery! He's right, Netflix is a small blip on their radar!
- subwindow 18y ago
  I honestly can't tell if you are serious or not. This chart explains it all: http://finance.google.com/finance?chdnp=1&chdd=1&chds=1&chdv=1&chvs=maximized&chdeh=0&chdet=1218744000000&chddm=157581&q=NYSE:BBI&#38 http://finance.google.com/finance?chdnp=1&chdd=1&chd...;
  - aditya 18y ago
    I was being serious -- do you really believe what the market thinks of Netflix vs Blockbuster (ie. suits on Wall Street) or what the reality of the business is (my chart vs your chart, if you may :-)
    - subwindow 18y ago
      "The reality of the business" is that in the past year, Blockbuster has lost $70M, while Netflix has made $60M.
      - aditya 18y ago
        Fair point. But the in-store rental market appears to be almost 10x as large as the market netflix/apple/amazon are in. So, BB needs to be more efficient with its B&M business but that doesn't mean netflix is smoking them. Especially if we're to believe BB that the market Netflix is in is 1/10th the size of the whole pie. So what if Netflix corners the entire market? Am I missing something?
        18y ago
joanou 18y ago
I quit BlockBuster in 1998 after a dispute. I asked the clerk for scissors and cut up the card in front of him. Since then, I been very happy with Netflix, its convenience, and efficiency. Rarely it has problems and has responded well when they occurred. I am fascinated by the BB CEO being so out of touch.
h34t 18y ago
There's a good lesson in here -- if one moves beyond knee-jerk criticism of the CEO for blindness/idiocy. To him, Netflix is a marginal player lurking in a "tiny" $5.6b, while Blockbuster is the giant, going after the $27.2b. From this point of view, narrow as it is, he's not really crazy at all. And obviously some investors agree. There's a lot of money here that Netflix isn't even trying for, and Blockbuster has a foothold in. Yet Netflix is worth 4x Blockbuster. Why? I'm not sure that the CEO has really followed this question to the end. He seems overly focused on the size of his market, rather than on how profitable it is. Put another way: Netflix is worth about 32% of the market it's playing in ($1.8b market cap, playing in $5.6b market). Blockbuster is worth 1.7% of the market its playing in. ($472m market cap, playing in $27.2b market). Physical presence seems valuable, so that's what he goes on and on about -- nobody can compete with Blockbuster in the physical realm, that's their advantage. But maybe that's because nobody wants to. Stores cost too much for what they give you. Just because there's money being spent, doesn't mean there's profit to be made. (all numbers taken from the CEO's own chart-graph of stagnation, at http://www.flickr.com/photos/13736953@N00/2762004788/ http://www.flickr.com/photos/13736953@N00/2762004788/)
- omouse 18y ago
  Physical presence is valuable if used properly. Most stores aren't very inviting and it's hard to shop around for movies when you can only see the cover of the movie. The movie packaging doesn't tell you much. Hm. An interesting idea is to have reviews of movies stickered on the cases.
  - h34t 18y ago
    I agree -- I'm just finishing up helping design a retail store for a new brand here in Calgary. With the right product/market mix, a retail store can be very profitable. (Which is why it's good that Blockbuster is trying to change their retail model to something else -- "We have a physical store network that nobody can match, now let's figure out how to make money off it." It's just a shame that they haven't been able to take their eyes off those stores, so they've missed other opportunities..)
  - abossy 18y ago
netcan 18y ago
This article's a bit unfair. If you read the interview (kinda long) the quotes' are a little out of context. At least they don't really represent the jist of his arguments. Sure, the business model is built on artificial product life-cycles, content-container hybrids that are unnecessary and market segmentation that is being aggressively created to wring as much out of a new flick as possible. He refers to this: http://www.flickr.com/photos/13736953@N00/2762004788/ http://www.flickr.com/photos/13736953@N00/2762004788/ (He segments the market across 2 axis (medium - store/mail/internet/kiosk & method - rent/buy/subscribe) But given that environment, his arguments are reasonable. They want to focus on the big market - Physical Store. VOD subscriptions, he sees as a small market indefinitely. VOD buy/rent he sees as a long term direction so. The point about new releases sounded a little more along the lines of: The new release market is more substantial. We have chosen to focus on those. We can, if needed support the long tail. It's a bit cheap taking shots at everyone & anyone in an anachronistic business. What do you expect them to do throw the business out the window & start over? The in store market still exists.

71 points by cstejerean 18y ago

"I've been frankly confused by this fascination that everybody has with Netflix," Keyes told Rafat Ali, in an interview with PaidContent.org. Translation: "I am not qualified for my job. I know nothing about my industry, or what my customers want. I get a nice paycheck though." I'm frankly confused as to why a CEO would think that being confused about his competition would bring him more business.

OneSeventeen 18y ago
Yeah. Way to fail completely at your job, Keyes. This is a guy who can't imagine anyone using his product in a way different from the way he uses it. Fail.
- jrockway 18y ago
  This is a guy who can't imagine anyone using his product in a way different from the way he uses it. There is really a different problem here. It's probably true that most people want to see new releases. The problem is that Netflix has new releases and old movies also. So if you go with Blockbuster, you are stuck with only new releases. If you go with Netflix, you get everything. Why bother with Blockbuster? Also, I guess there is an agile-ish mantra like "design products for yourself first". He is doing this, and is proof that it doesn't work for everyone. :)
  - cstejerean 18y ago
    It works well when other people also like what you're designing for yourself. The solution is not for this guy to start doing something he doesn't understand, but for Blockbuster to get a new CEO.
  - netcan 18y ago
    "Design Products for Yourself" works in the brave new world of the long tail. 'You' are probably representative of a bunch of consumers worldwide. Enough to make a market. 'He' isn't in that world. He's in the mass market world where you need 'market share' and 'mass appeal.' So being very appealing to some people is no good. In that world, you needed to be 'good enough' for lots of people. Problem is people will move away from good enough to good when it becomes available. And it almost impossible to be good for everyone.
cdr 18y ago
He might know what his customers want, but the problem is his customers are becoming Netflix customers. The market has changed, but his target customer hasn't.
- staunch 18y ago
  I think Netflix simply identified a big gap in the movie rental market that this guy is still unable to see, even when it's eating his business alive.
- dmix 18y ago
  That is exactly how disruptive technologies take over big markets. While they are developing a great service, the big company is still completely focused on the ways of their old customers.
babyshake 18y ago
Reminds me of how the GOP is "attacking" Obama by ridiculing his popularity.
sysop073 18y ago
This was good too: "Why would anyone want to watch anything other than new releases" And this is why Netflix's share price is a good 15 times higher than Blockbuster's right now
- rudyfink 18y ago
  At the heart of it, I think the "new release" is a market strategy rather than a consumer goal. Creators want consumers to believe that they should forget everything in light of the "latest and greatest". The creators' strategy is to attempt to drown out all other consumer thoughts with marketing. Consumers just want a good trade-off for their time. In the past, information was substantially easier to find on things that were new. Finding good movies in the so called "long tail" of a video store involved book research, knowledgeable friends, or lucky guesses. You could choose what had been recently marketed to you or the devil or the unknown box. Modern information networks have changed this reality largely in favor of the unknown box. The truth is that a large percentage of new creation is not really worth your time. The biggest advantage the new stuff has is frankly that it is new. As information systems progress, people will have an easier time separating hype from substance. This will effectively make older quality creations more desirable. It is probably fanciful, but I'd expect his statement to be exactly wrong in the long run. The reality may become "why would anyone want to watch new releases"?
- thorax 18y ago
  Well, I wouldn't worry about share price so much as their overall worth. It's heavily reflected there, though: Netflix ($1.8 billion) has nearly four times the market capitalization of Blockbuster ($472 million). The fact that the CEO is confused really is obvious in the market as well as in the interview.
- caudicus 18y ago
  Well, to their credit Netflix's market cap is only 4x that of Blockbuster. ;)
- briansmith 18y ago
  "Why would anyone want to watch anything other than new releases" is pretty much the slogan of RedBox. Why pay $5 for a movie rental when you can pay $1 at McDonalds or the grocery store or the gas station for the same new release? Plus, with RedBox, I don't have to show two forms of ID or fill out an application. I pick the DVDs I want, slide my card in, and the movies pop out. NetFlix has become the premium rental service. RedBox is the budget service. Blockbuster is getting squeezed out of the market from both sides.
cujo 18y ago
I'm a bit confused by it too. What does Netflix have/do that BB doesn't?
- akd 18y ago
  price
- icey 18y ago
  Amazing customer service
- calvin 18y ago
  The long tail (http://en.wikipedia.org/wiki/The_Long_Tail http://en.wikipedia.org/wiki/The_Long_Tail).
- mechanical_fish 18y ago
  No leases on brick-and-mortar stores. No retail employees. A first-mover advantage in the online space. No history of charging late fees. This is a really important point - in my mind, the name Blockbuster evokes the image of a scolding librarian who sells used cars on the side. And, of course, Netflix also has a different CEO.
- dionidium 18y ago
  I had Blockbuster's Netflix-like service. At the time I canceled (to switch to Netflix) something like 17 of the 22 movies in my queue were unavailable with a "long wait".
biohacker42 18y ago
It is refreshing that he bluntly admitted his confusion. Most CEOs know enough to BS so that it is not obvious that they are clueless. Give this guy some kind of pity award.
- tlrobinson 18y ago
  But is he really "confused" or is this a sarcastic attempt at badmouthing Netflix?
  - helveticaman 18y ago
    Yeah, that's what the quote sounded like to me, too.
- rokhayakebe 18y ago
  If you can admit you are clueless, then the next honest move is to resign.
- jyothi 18y ago
  yeah, he is the smarter of the dumb CEOs. As he knows he at least realizes that.

richtaur 18y ago

CEO and "confused" in the same sentence is a bad thing. If anybody should know WTF it should be that guy.

alaskamiller 18y ago

Wired couldn't pick the money quote, but it's really this: This is a hypothetical one. Would you be ever interested in buying Netflix? Keyes: Not really. Netflix doesn’t really have or do anything that we can’t and don’t already do ourselves. So, there’s really no advantage in buying. And the reason why Keyes won't is because BBI is worth only $288 million while NFLX is worth over $2 billion. Way to bluster through, Keyes.

macebobo 18y ago
Maybe NFLX should buy BBI and fire Keyes! Heck, it is only slightly over $2 a share! It's amazing the arrogance Keyes displayed in the interview and how folks like this are able to stay in power even though BBI stock has been tumbling since mid-2002.

joao 18y ago

How does one get a top CEO job and is just clueless? There are lots of these types of sentences by CEOs that just show they don't understand their target market...

cmos 18y ago

wow. He should be fired. Immediately. Just saying those comments should be career suicide. His PR person is probably freaking out. Why would the board of directors just wait around for a clueless leader to drive them into the ground? They lost the battle. Time for an aggressive plan B to stay in business. Attempts to sell consumer electronics in blockbuster stores are pathetic and have failed over and over again. First radio shack, then circuit city. Putting up a shelf with electronic gear will not move it. http://findarticles.com/p/articles/mi_hb6695/is_200201/ai_n26423260 http://findarticles.com/p/articles/mi_hb6695/is_200201/ai_n2... My plan B for them would be to change store format entirely. Build a nice home theatre that can sit 20 people and have showings of new releases. The catch is they use equipment that is in the $1000-$5000 price range, and it's a great experience that you can 'take home'. Delivery is free. Installation is extra. Show new movie releases. Always have free popcorn!! It costs virtually nothing. Have a kids night. Let local managers be more creative. Still rent movies and games, but change the 'browsing' process. Have large screens and use a wii type remote to navigate a virtual store with slick graphics. Show what's popular, ask what type of movie they want. Make a game that promises to find you the perfect movie. Navigate through actors or scenes. Remember what they have seen. (how miserable is it to walk to the other side of the store with a movie and your wife says 'seen it' over and over again) Make it so people don't say "do we have to go to blockbuster?" when they are in between movies in their netflix queue. It's staggering to think that the idea of putting boxes of discs on shelves and letting people walk around aimlessly picking at random is

prakash 18y ago
Why would the board of directors just wait around for a clueless leader to drive them into the ground? Typically, CEO's hire their board and gives them lots of options to essentially align with the CEO. Once I wrote this, out of curiosity, I checked who's on the board of Blockbuster. Interestingly, a one Carl Icahn is on the board. (http://www.reuters.com/finance/stocks/companyOfficers?symbol=BBI.N&WTmodLOC=C4-Officers-5 http://www.reuters.com/finance/stocks/companyOfficers?symbol...) Also, the CEO made $5 odd million last year(http://www.reuters.com/finance/stocks/officerProfile?symbol=BBI.N&officerId=996409 http://www.reuters.com/finance/stocks/officerProfile?symbol=...).

huherto 18y ago

From a consumer point of view. I hate going to Blockbuster because it takes me a long time to choose a movie. I would like to have the catalog online. Mark the movies that I have already seen. Mark the movies that I may like to see someday. Being able to make an online reservation, and on my way home pick it up at the counter.

stcredzero 18y ago

The lesson: if the market confuses you, you are out of touch with it!

byrneseyeview 18y ago
There are plenty of times when being confused and 'out of touch' is better than pretending to know what's going on when people are being irrational. This is probably not the case with Blockbuster, but they don't have the resources to emulate Netflix. Their best bet is to hold on to a gradually declining customer base, and eventually liquidate.
- stcredzero 18y ago
  You don't have to know what's going on when people are being irrational. (And besides, we're being irrational almost all the time.) You only have to know how to charge us for being irrational.

gibsonf1 18y ago

The biggest difference from a value perspective: Late Fees.

weegee 18y ago

I've been with Netflix since 2004, and tried Blockbuster Online a couple of times but always went with Netflix. The reason? Better selection, better website, better customer service. I thought the in-store renting deal with Blockbuster would be a plus, since there is a store within 5 minutes walk from my home, but while in the store, I asked myself, "what the hell am I doing here??"

keyes 18y ago

netflix.confuses.me

aditya 18y ago

Wow. Is anyone reading the article or just going on with Netflix fanboy'ism? This chart explains it all: http://www.flickr.com/photos/13736953@N00/2762004788/ http://www.flickr.com/photos/13736953@N00/2762004788/ Netflix is one segment of Blockbuster's entire getting media to consumer's strategy. Looks like the B&M folks are here to stay, no matter how much we love digital delivery! He's right, Netflix is a small blip on their radar!

subwindow 18y ago
I honestly can't tell if you are serious or not. This chart explains it all: http://finance.google.com/finance?chdnp=1&chdd=1&chds=1&chdv=1&chvs=maximized&chdeh=0&chdet=1218744000000&chddm=157581&q=NYSE:BBI&#38 http://finance.google.com/finance?chdnp=1&chdd=1&chd...;
- aditya 18y ago
  I was being serious -- do you really believe what the market thinks of Netflix vs Blockbuster (ie. suits on Wall Street) or what the reality of the business is (my chart vs your chart, if you may :-)
  - subwindow 18y ago
    "The reality of the business" is that in the past year, Blockbuster has lost $70M, while Netflix has made $60M.
    - aditya 18y ago
      Fair point. But the in-store rental market appears to be almost 10x as large as the market netflix/apple/amazon are in. So, BB needs to be more efficient with its B&M business but that doesn't mean netflix is smoking them. Especially if we're to believe BB that the market Netflix is in is 1/10th the size of the whole pie. So what if Netflix corners the entire market? Am I missing something?
      - 18y ago

joanou 18y ago

I quit BlockBuster in 1998 after a dispute. I asked the clerk for scissors and cut up the card in front of him. Since then, I been very happy with Netflix, its convenience, and efficiency. Rarely it has problems and has responded well when they occurred. I am fascinated by the BB CEO being so out of touch.

h34t 18y ago

There's a good lesson in here -- if one moves beyond knee-jerk criticism of the CEO for blindness/idiocy. To him, Netflix is a marginal player lurking in a "tiny" $5.6b, while Blockbuster is the giant, going after the $27.2b. From this point of view, narrow as it is, he's not really crazy at all. And obviously some investors agree. There's a lot of money here that Netflix isn't even trying for, and Blockbuster has a foothold in. Yet Netflix is worth 4x Blockbuster. Why? I'm not sure that the CEO has really followed this question to the end. He seems overly focused on the size of his market, rather than on how profitable it is. Put another way: Netflix is worth about 32% of the market it's playing in ($1.8b market cap, playing in $5.6b market). Blockbuster is worth 1.7% of the market its playing in. ($472m market cap, playing in $27.2b market). Physical presence seems valuable, so that's what he goes on and on about -- nobody can compete with Blockbuster in the physical realm, that's their advantage. But maybe that's because nobody wants to. Stores cost too much for what they give you. Just because there's money being spent, doesn't mean there's profit to be made. (all numbers taken from the CEO's own chart-graph of stagnation, at http://www.flickr.com/photos/13736953@N00/2762004788/ http://www.flickr.com/photos/13736953@N00/2762004788/)

omouse 18y ago
Physical presence is valuable if used properly. Most stores aren't very inviting and it's hard to shop around for movies when you can only see the cover of the movie. The movie packaging doesn't tell you much. Hm. An interesting idea is to have reviews of movies stickered on the cases.
- h34t 18y ago
  I agree -- I'm just finishing up helping design a retail store for a new brand here in Calgary. With the right product/market mix, a retail store can be very profitable. (Which is why it's good that Blockbuster is trying to change their retail model to something else -- "We have a physical store network that nobody can match, now let's figure out how to make money off it." It's just a shame that they haven't been able to take their eyes off those stores, so they've missed other opportunities..)
- abossy 18y ago

netcan 18y ago

This article's a bit unfair. If you read the interview (kinda long) the quotes' are a little out of context. At least they don't really represent the jist of his arguments. Sure, the business model is built on artificial product life-cycles, content-container hybrids that are unnecessary and market segmentation that is being aggressively created to wring as much out of a new flick as possible. He refers to this: http://www.flickr.com/photos/13736953@N00/2762004788/ http://www.flickr.com/photos/13736953@N00/2762004788/ (He segments the market across 2 axis (medium - store/mail/internet/kiosk & method - rent/buy/subscribe) But given that environment, his arguments are reasonable. They want to focus on the big market - Physical Store. VOD subscriptions, he sees as a small market indefinitely. VOD buy/rent he sees as a long term direction so. The point about new releases sounded a little more along the lines of: The new release market is more substantial. We have chosen to focus on those. We can, if needed support the long tail. It's a bit cheap taking shots at everyone & anyone in an anachronistic business. What do you expect them to do throw the business out the window & start over? The in store market still exists.