Digital Media Wire interviewed Netflix Chief Content Officer Ted Sarandos.
When you talk about Blockbuster’s brick-and-mortar as a good differentiator, I would argue that it’s building a bridge to the past. Because the very thing that makes Blockbuster work are those stores being in your neighborhood, but it’s the fixed cost economics of those stores that’s killing them. So they can talk about brick-and-mortar being a competitive differentiator, but at the same time they’re closing those stores, while we’re expanding our online presence both with DVD and internet viewing.At the end of the day, Blockbuster doesn’t have the ability to change the existing merchandising policies that create demand. They’re purely in the demand fulfillment business, and we’re squarely in the demand creation business.
Tidbit from the story: Sarandos says that Netflix now has 75,000 titles (and he should know).
I see where he's coming from but I've always seen it. Nobody has yet explained satisfactorily how giving away free rentals is supposed to keep their brick and mortar stores afloat (More movies going out + Less Money coming in = ?). And they won't make ends meet by selling an extra Hershey bar.
And the 75,000 titles makes a difference too. The difference is that Netflix has a much better distribution of titles among its distribution centers and having to wait for one to come across country is the exception rather than the rule. This is the main reason I began renting on line was to access titles I couldn't get at the BB brick and mortar store.
BB on the other hand, can advertise as many titles is they want, but you can't rent a good many of them. And I'm not talking obscure titles either. I'm simply amazed at how many titles they skip over in my queue every single week. And again this week I returned three films in the store early on Tuesday, here it is Friday and nothing has been sent out yet. And I have 300 movies in my queue. Their Internet rental service is simply awful. But this is the last month for me for BB anyway. I'll cancel by the end of the month when I start closing in on the next pay date.
Posted by: eazyguy52 | February 02, 2007 at 06:15 AM
The profitability of Total Access does seem to be the elephant in the room that no one talks about.
Posted by: gir | February 02, 2007 at 07:52 AM
The rest of the article talks mostly about how Netflix will acquire and distribute lots of independent films. While I'm glad to see Netflix doing this, I think there's a limit to how much of their subscriber base they can really get interested in such films.
Posted by: Hunter McDaniel | February 02, 2007 at 08:51 AM
"The profitability of Total Access does seem to be the elephant in the room that no one talks about."
Well said. Everyone is focused on the sub number growing not realizing monthly spend for active renters goes from ~$25 or more to $17.99.
Posted by: Firstlawofnature | February 02, 2007 at 10:30 AM
Well, not *everyone* is focused on subscriber growth. I could care less how many new people they add each month, although I do hope it is more than NF even if by one subscriber. ;-)
I'm more concerned with the value offered and the efficiency of the delivery/return process.
For me BBOTA is winning by a factor of 4 in value and is a day ahead on efficiency for send outs.
The upper limits of BBOTA, as it stands today, are unsustainable in my mind. It will be interesting to see where we are later this year after BBO rolls out their VOD service. I didn't realize until today that BBO actually tested VOD 6 years ago.
Last night as I was exchanging 6 BBO envelopes for 6 new releases for no charge at our local store, I commented to the clerk about the size of the BBO return envelope pile. It was later in the evening and the pile was right at 8X as big as it was some weeks ago. He said the big issue now is saturation as a very large percentage of their customers have signed up for Total Access. Keep in mind we have one store in a relatively small city.
Who will "win" this war? I'm guessing in the end NetFlix has an edge. Their existing relationships, willingness to brave new ground and frankly, the ego and arrogance of Hastings gives them the edge, however, in the short term the winners are the folks who are smart enough to signup and take advantage of Total Access, while it lasts.
Even though we like to have our Chevy/Ford type debates, it really amazes me if the true movie lovers aren’t signed up with BBOTA. Sure you may hate BBO for whatever reason, but not taking advantage of Total Access seems silly.
I was thinking too, seems like throttling has taken a back seat to these conversations. I wonder if anyone is seeing throttling issues with Total Access yet. After two full months with the program my results have been virtually identical each month with no throttling observed thus far.
Posted by: Rusty Ramrod | February 02, 2007 at 01:13 PM
I'd qualify that. Yes, right now I'd recommend Total Access to anyone looking to join the on-line DVD rental thing, provided:
- they have a BlockBuster store convenient to them
- they'd take the time to visit the store to exchange disks.
If you don't live near a BlockBuster, or if you're a type that just wouldn't use Total Access, then I believe NetFlix would be the better choice. Just my opinion.
Posted by: gir | February 02, 2007 at 01:53 PM
Rusty:
I'll say I have experienced Throttling with BBOTA and I'm about ready to cancel (tonight as my two-week free trial ends tomorrow).
My understanding of BBOTA is that you get to return the movie to the store and then they will ship the next movie in your queue to you.
I returned three movies to the store this past MONDAY. They SHIPPED two movies to me on Wednesday (I expect to get them tonight) and they shipped a third on Thursday.
To me that is throttling. The system has shown that they are been checked in, yet it takes TWO to THREE days to ship the next one.
Posted by: IowaHawksFan1 | February 02, 2007 at 02:59 PM
Blockbuster is a public company and has to accounce financial results. We're all going to find out how much Total Access is financially "building a bridge to the past".
I think that Web Van argued the same way about people having to go to the grocery store as being the past. Most of us are social animals and enjoy getting out amongst other people. Each to their own - I imagine there are some folks who enjoy sitting in a dark room by themselves watching a streaming movie that starts, then stops for buffering, then starts, then stops for buffer, etc. on a 15" computer screen.
Posted by: Edward R Murrow | February 02, 2007 at 03:56 PM
IowaHawksFan1,
Two days is pretty much what I have found to be normal for me. The key is, though, the wait time was actually zero days because you received replacement movies right then and there in the store.
How many days do you typically keep discs and about how many did you get last month? (assuming you kept track)
A clerk told me the reason for the delay is that they don’t ship you more discs until the ones you handed in at the store are physically received back at BBO. I have no idea if that is accurate or not, but it is in tune with the way it ran before Total Access kicked in, if I returned a disc on Monday they would typically ship me one on Wednesday.
Certainly we would all like the discs to ship the next day, but to be honest, there is no way I could watch that many discs. It is a struggle as it is now with the current plan. My kids watch a lot of movies and I rent a lot of music and documentary discs which I run as I work, otherwise there is no way I could watch the ~50 discs a month BBOTA is providing. Another concern is that I am running out of titles I think I might enjoy.
That is why it was a treat discovering the last series I watched. It allowed me to fill up a whole bunch of queue slots in just a few minutes, plus it was an excellent series. ;-)
Posted by: Rusty Ramrod | February 02, 2007 at 05:20 PM
Rusty:
I will grant you that you are right you do receive replacement movies immediately. I just found it funny that they didn't ship the next ones right away.
The reason I am canceling the account (I didn't address way I was going to cancel...I just mentioned it above) is because of the fact that they don't ship movies in queue order (I'd understand if a movie said short or long wait, etc) and for me (and this is just me) taking the time to drive a little out of my way to get extra free movies is not worth it.
But getting back to the post isn't the fact that they don't ship out a movie for a couple days after you return one to Blockbuster indeed a form of throttling? The movie has been returned to its owner (maybe not the distribution center it came from, but the same company) and they still decide to wait a couple of extra days before shipping the next one to you.
Once again I grant that in the meantime you are getting extra free movies to help cover that wait, but nonetheless the fact that they don't ship you another movie right away tends to suggest that they are trying to keep costs down, by a form of throttling.
Think about it. If you return a movie on Monday and they ship the next one on Tuesday you should get it on Wednesday OR Thursday at the latest. You can get a lot more movies a month that way then you can the way it is currently setup and at least to me I view that as throttling.
Now I agree with you, I don't know how any sane person could watch that many movies a month, but that isn't the point. They are in essence throttling their customer. At least that is how I see it.
Once again, that is not the reason I am leaving them, I am leaving them because of time it takes to drive to store, browse selection, etc. and the fact that they don't ship movies in queue order. To me those two things are more important then a few extra movies a month.
Posted by: IowaHawksFan1 | February 02, 2007 at 06:33 PM
"A clerk told me the reason for the delay is that they don’t ship you more discs until the ones you handed in at the store are physically received back at BBO. I have no idea if that is accurate or not, but it is in tune with the way it ran before Total Access kicked in, if I returned a disc on Monday they would typically ship me one on Wednesday."
But that is NOT how they promoted Total Access. If you've seen the commercials and read the ads they distinctly tell you that the replacement discs will be shipped out the next day. Since Total access has started, they have succeeded in doing this exactly one time. So are you saying people shouldn't care if Blockbuster can't even come close to living up to their own promises? And if they wait to physically receive the movies, then tell me why does it often take a week and a half for them to remove movies from my shipped list?
As for watching a lot of discs from Blockbuster or having more than I can watch, I think for many people even with Total access it becomes a weekly struggle as it has been for me. Yeah, when they were redeeming Netflix coupons I made out like a bandit but not really before or since. I'm on the three and out plan and as before I returned all three movies on Tuesday morning, and they just now have shipped out one movie which won't make it here until Monday at the earliest. If by chance they ship out the next two today, I probably won't see them until Tuesday or Wednesday.
As for the movies I received after having turned them into the store, they are just so-so cakes as you really have to be into wanting to watch new releases only (that is if they happen to be in the day you happen to be in the store, two big ifs)or movies released within the last three or four years because their selection beyond that in my store is as shoddy as it comes. I started to watch a couple of TV series through the stores, but there were episodes of The Sopranos that were missing (not checked out, they just didn't have them) and the same thing happened when my girlfriend was going through the Sex and the City series. We ended up going through Netflix to get the missing discs.
Posted by: eazyguy52 | February 02, 2007 at 06:52 PM
One the question of whether BBO has throttling - how could anyone tell, when sheer inefficiency is enough to slow their subscribers down?
Posted by: Hunter McDaniel | February 02, 2007 at 07:32 PM
"I wonder if anyone is seeing throttling issues with Total Access yet."
Certainly you have noted my complaints about their throttling. For instance, after a few weeks, they stopped sending new movies right away. Now they usually wait until movies are received before sending the next disc. This means a 2-3 day wait after I return to their store. 1-day delivery is the exception, not the rule. eazyguy52 was right on about that. While Netflix sent about 2/3rds of my movies overnight, Blockbuster sends 1/3rd. So it's almost the exact reverse.
"After two full months with the program my results have been virtually identical each month with no throttling observed thus far."
I noticed them slowing down in the first few weeks of Total Access. I'm not using them as heavily as you seem to be, either. They have been limiting me to 3 a week online. It's a good value, still, compared to Netflix. They have things that Netflix doesn't have. (Vice versa.) I think they are under-staffed in my city right now, because of Total Access. The service used to be a lot faster.
Posted by: type-cast | February 02, 2007 at 09:05 PM
"the fact that they don't ship you another movie right away tends to suggest that they are trying to keep costs down, by a form of throttling."
I got next-day shipments for the first weeks of Total Access. After that honeymoon, I was seeing 2-3 day waits for shipment. Factor in their slow shipping and poor availability of titles locally. I am waiting 4-6 days to get the next shipment after they have my return.
Posted by: type-cast | February 02, 2007 at 09:13 PM
"Blockbuster is a public company and has to accounce financial results. We're all going to find out how much Total Access is financially "building a bridge to the past"."
Well, eventually. The reason they haven't had to reveal any of the financials behind BBO so far is because it hasn't been considered "a material part of the business" - yet.
Not to worry, their fire sale of international assets to finance BBOTA will help them.
Posted by: superfunhappy | February 02, 2007 at 09:31 PM
I was surprised to see virtually the same service the 2nd month with TA (4th continuous month with BBO). A couple discs less but that was mainly because I didn’t need to report any discs the 2nd month.
I reset the first of this month as I tried to accept their $16 for 6 month deal 4 times, but it didn't seem to take, so instead of spending 30 minutes on hold with one their CSR's I simply quit and signed up again. Fringe benefit is the free month I guess.
I also sent an E-mail letting them know their process was not working.
In reference to one of the posts above I didn’t think they had ever stated they would send movies out the next day, but a quick run their website shows they indeed do.
Direct copy from Blockbuster.Com
“When you exchange online DVDs at your local BLOCKBUSTER store your next movie is shipped within one business day right away, but it may take 2-3 days for the title returned to the store to clear from your Shipped Movies list queue.”
One other thing a “friend” pointed out to me today. I had been wishing to be able to check instore stocking online and DOH, it was there all the time. For others that may have selectiove blindness the link is on the movie details page, upper right corner. Of course, mine doesn’t work as I checked it on several movies *that I rented from said store* last night and the web says “This title is NOT carried in this store” on them, even though I have them my greedy little hands.
Posted by: Rusty Ramrod | February 02, 2007 at 09:48 PM
"Of course, mine doesn’t work as I checked it on several movies *that I rented from said store* last night and the web says “This title is NOT carried in this store” on them, even though I have them my greedy little hands."
I had to laugh when I saw that. When I was putting in movies in queues for both Blockbuster and Netflix, they both said that the mini-series Roots was no longer available anywhere. So one day I'm browsing around looking for things at BB to use my Netflix coupons on and there was Roots right there. I told the manager the story and she checked and seen that they didn't have it on line either.
So I took it home, did have trouble with getting it to play as it was quite worn, but a few good cleanings took care of that. I checked what used copies were going for on Amazon and it was a $120.00. I asked the manager how much they were going to charge me if I didn't return it and she told me $39.99. I was tempted but I did take it back to the store.
Posted by: eazyguy52 | February 02, 2007 at 10:11 PM
"I didn’t think they had ever stated they would send movies out the next day, but a quick run their website shows they indeed do."
They advertised this service by saying you'd get faster turn-around, but instead they add extra delays. I predicted this would happen. It wouldn't be so bad if the shipping wasn't so slow. One-day shipping is rare, even with mainstream DVDs. Poor queue predictability.
The new site is awful. Removing things takes forever, and you can only remove one item at a time. No check box to remove, like the old site and Netflix. How is it better? Removing things you don't want should be easier. They made it harder. I can no longer access their website through moviefone. The only reason I stay with them is for titles Netflix doesn't have. They've done all they can to RUIN this service, and things are getting worse.
Posted by: type-cast | February 02, 2007 at 10:22 PM
"But that is NOT how they promoted Total Access. If you've seen the commercials and read the ads they distinctly tell you that the replacement discs will be shipped out the next day."
Oh, but it's ok for Netflix to advertise "unlimited" rentals for the past 5 years and continue to do so today when we all know there's nothing truly unlimited about their service?
Sorry, just had to point out the bias here.
Posted by: vio | February 03, 2007 at 12:09 AM
And I was going to say it's nice to see some equal-opportunity complaining.
Posted by: gir | February 03, 2007 at 07:21 AM
Sorry to take this on topic, but that article was very interesting. I'm guessing that Ted is the #2 guy in shaping Netflix behind Reed.
With 'Watch Now' and Red Envelope, Netflix really seems to be on an accelerating path to becoming an online version of HBO. If they are the largest buyer at Sundance next year that would really be something.
By having a subscription business with Hollywood's best stuff, they come in the back door on monetizing long tail content. Whereas everyone else has to rely on ad revenue or micro-charging per transaction, Netflix can just roll it into the subscription price.
Posted by: Aron | February 03, 2007 at 04:04 PM
i've been able to rotate about 6 titles a week through BBTA - which works out to 12 DVDs a week.
NF has been a pain over the past few months. it takes an extra day to ship out my titles - and it does it for DVDs that it has to ship from Boise and Tacoma (I live in NC). So it's an extra day on top of the four days in the mail. On top of that - it has been skipping around my queue.
both of these systems have major customer service problems.
Posted by: corey3rd | February 04, 2007 at 11:57 AM
"i've been able to rotate about 6 titles a week through BBTA - which works out to 12 DVDs a week."
Yeah, 48 or so rentals a month on the $17.99 plan sounds about average for BBOTA.
Sometimes a few more because they arrive in single day. And then there is the coupon each month for one free rental.
I just returned a huge pile of free store rentals to the store today. Our local branch has no late fees, so you don't have to worry about getting them back the second they are due. I never keep them very long, maybe a day or two past the "due date" and then really only on new releases.
Posted by: Rusty Ramrod | February 04, 2007 at 06:37 PM
"With 'Watch Now' and Red Envelope, Netflix really seems to be on an accelerating path to becoming an online version of HBO."
Very good point. I don't think anyone really gets that aspect of it. HBO was the first pay network that figured out to dump hollywood content. Others trying to follow now.
Posted by: Firstlawofnature | February 04, 2007 at 09:48 PM
I don't subscribe to HBO, but the HBO original series Six Feet Under we are in the middle of watching is outstanding. Much better than a lot of the mainstream movies we have watched lately.
Anyone know if there are any decent Sci-Fi's due on DVD anytime soon. Hoping for something along tha vein of Minority Report, iRobot, or The Island.
Posted by: Rusty Ramrod | February 04, 2007 at 11:31 PM