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Blockbuster CEO 'Confused by Fascination' With Netflix

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Re: Blockbuster CEO 'Confused by Fascination' With Netflix

#51

Post by abossy »

_csoo wrote: post #42
h34t wrote: post #38

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…

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.

"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.

Re: Blockbuster CEO 'Confused by Fascination' With Netflix

#52

Post by aditya »

subwindow wrote: post #49
aditya wrote: post #46

Earlier quoted context omitted.

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 :-)

"The reality of the business" is that in the past year, Blockbuster has lost $70M, while Netflix has made $60M.

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?

Re: Blockbuster CEO 'Confused by Fascination' With Netflix

#53

Post by briansmith »

sysop073 wrote: post #10
jrockway wrote: post #2

"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.

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

"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.

Re: Blockbuster CEO 'Confused by Fascination' With Netflix

#54

Post by jonknee »

aditya wrote: post #52
subwindow wrote: post #49

Earlier quoted context omitted.

"The reality of the business" is that in the past year, Blockbuster has lost $70M, while Netflix has made $60M.

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?

> Am I missing something?

Yes, the retail rental market is plunging and has tons of fixed costs. The online retail market is surging and much higher profit potential (no retail space, much much fewer employees, etc). Additionally the fixed costs for the online rental market are dropping, namely servers and bandwidth, but also the hardware to make set top box devices.

What's so good about Blockbuster that I'm going to get off my couch and drive to a store if I can get the same product instantly with little more that moving my remote? They have a serious problem looming.

Re: Blockbuster CEO 'Confused by Fascination' With Netflix

#55

Post by aditya »

jonknee wrote: post #54
aditya wrote: post #52

Earlier quoted context omitted.

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?

> Am I missing something? Yes, the retail rental market is plunging and has tons of fixed costs. The online retail market is surging and much higher profit potential (no retail space, much much fewer employees, etc). Additionally the fixed costs for the online rental market are dropping, namely servers and bandwidth, but also the hardware to make set top box devices. What's so good about Blockbuster that I'm going to…

Ah, I see. You're saying that the online market is growing and eating into the B&M market, that makes sense. Do you have any sources to back this up other than your personal observations?

Re: Blockbuster CEO 'Confused by Fascination' With Netflix

#56

Post by FreeKill »

cmos wrote: post #14

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. Fir…

Great idea. A theater chain here in Toronto offers VIP theaters which are basically 20 person theaters with smaller screens and much nicer chairs. They offer tables to put your stuff on, space between seats, and also servers that deliver you drinks and popcorn or whatever you want (prior to the movie starting).

I could definitely see blockbuster going that route. Setup a couple private screening rooms and let people book them for their friends/family/co-workers. Then as you say, make a point of showing them how reasonable it would be to make that kind of experience a reality in their own home, but only before and after the film.

Re: Blockbuster CEO 'Confused by Fascination' With Netflix

#57

Post by h34t »

aditya wrote: post #52
subwindow wrote: post #49

Earlier quoted context omitted.

"The reality of the business" is that in the past year, Blockbuster has lost $70M, while Netflix has made $60M.

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?

The short answer is yes -- you're missing profit. Doesn't matter how big a market is if you can't make money.

The long answer:

Let's both start businesses selling Miracle Fruit. Assume they cost $1 to produce no matter how many we buy, and the market will support a price of no more than $3.

I start a Netfruits.com mail-order company, sell 500,000 berries/year and absorb $1 each shipping/handling. Total size of this "online/mail market for Miracle Fruit": $1.5 million. My profit: $500,000 (I make $1 per sale).

You open up 200 retail stores and sell 15 million berries per year, but must absorb $2.10 each for retail overhead. Thanks to the fact that you exist, the total size of this "retail market for Miracle Fruit" has become $45 million (who knows, maybe with enough retail stores the market could be this big). Your loss: $4.5 million (You lose $.10 per sale).

For your investor report, you create a fancy chart about how you are the biggest retail game in town, and I'm just a tiny blip on your radar.

But you'll still lose money.

So, you'll probably do what the Blockbuster CEO is doing -- change your retail model. Sell something else, because obviously Miracle Fruit alone can't support the costs of your retail network.

That's why he's planning on flooding Blockbuster stores with TV's and blu-ray players. Because the existing business model doesn't work anymore. There's no profit.

But if he can figure out how to leverage the one thing Blockbuster has that others would find hard to beat -- physical coverage -- then maybe he can turn the business around.

Re: Blockbuster CEO 'Confused by Fascination' With Netflix

#58

Post by netcan »

jrockway wrote: post #11
OneSeventeen wrote: post #5

Earlier quoted context omitted.

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.

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…

"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.

Re: Blockbuster CEO 'Confused by Fascination' With Netflix

#59

Post by rokhayakebe »

biohacker42 wrote: post #36
jrockway wrote: post #2

"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.

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.

If you can admit you are clueless, then the next honest move is to resign.

Re: Blockbuster CEO 'Confused by Fascination' With Netflix

#60

Post by netcan »

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/ (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.

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