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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 "ti
by 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 agoPhysical 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 agoI 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"Hm. An interesting idea is to have reviews of movies stickered on the cases." I don't have a Netflix subscription because I've been renting movies from the local mom-and-pop store near my apartment. It's employed by film-school-dropouts and they have hilarious comments stickered on the movies. It always affects my movie-renting decisions! A corporate hog like BB couldn't scale such mom-and-pop personalization, but reviews would be an excellent alternative.