Is The DVD Rental Market Saturated? 50 Million Have Tried It...

The Motley Fool has an interview with Blockbuster CEO Jim Keyes, where he talks about how big the dvd-by-mail market might be:

"How big will it be? The numbers say that we have already reached a lot of the potential customers. Between us and Netflix, 50 million American families have tried it, and most of them said it wasn't their thing so they dropped the subscription. Less than 10 million kept it, and the remaining upside is anyone's guess."

Comments

[Firstlawofnature]

Every family in America has tried renting movies from BBI or MOVI at one time or another. Most of them aren't customers anymore. Just how many will continue renting from stores is anyone’s guess.

[Edward R Murrow]

So Black Friday retail revenue topped $10 billion while Cyber Monday revenue was between $600-$700 million. For what it's worth, it appears to me that consumers like to shop in B&M.

[Scott]

Have to agree with Ed, B&M still seems to be preferred.

As for "every family in America has tried renting movies from BBI or MOVI", as First said, I'd take exception to that blanket statement unless "family" is defined as including, grandparents, aunts, uncles, cousins...in which case, sure, every family HAS tried renting, including from Netflix (didn't mention that one). And yes, that also means most of them aren't customers of Netflix anymore, either. So with that, yes, most aren't customers anymore of B&M or online rentals. Just how many will continue renting from stores and online is anyone's guess to be sure....I doubt there's much more upside to it, though (natural population increase excepted).

Nobody seems to take into account returning previous customers, who may have stopped their account for any number of reasons, and then return at a later date. I've quit both services more than once, how many others have done likewise?

[Old Timer Too]

I question whether the market has been saturated (and what did Keyes mean by "saturated?), but I do think it has reached the peak growth and any new growth will be lower, if not minimal. Furthermore, I believe that some people rent in cycles and therefore drop a service for a while and then come back to it.

Keyes came to Blockbuster knowing little, if anything, about the rental market. He was an outsider and he hasn't been there long enough to fully understand the ups and downs. He may be misinterpreting the fall rental trend as having reached a saturation point where it may simply be seasonal.

To answer Mike's question, while I haven't quite BB (yet), I did quit NF and then come back after more than a year off.

[Hunter McDaniel]

In order to really break through on subscriber growth, NF needs to position themselves as the better, cheaper alternative to cable. They already are, IMHO, but too much of the public think of DVD-rental as a way to watch a few special "movies" on the weekend, not understanding that the USPS is the fattest pipe available for delivering bits to the house. I have a sister who pays $100 a month to Dish but won't consider NF because "we just don't watch that many movies".

When and if NF ever comes out with their long-rumored STB, there are several things that could make it a real cable-killer.
1) Include an over the air digital tuner, with some minimal DVR capability. Most people don't realize how much of their TV watching is actually stuff on the free channels.
2) Include a DVD carousel which can hold 3 or four discs, which covers the most popular subscription plans.
3) Develop queue management screens optimized for use on a TV screen.
4) Organize titles in major categories that can be presented to users as "channels", for users who are familiar with that model and are put off by the concept of a queue. So when they go to the "classic movies" channel, they just get the next readily available recommendation from that category (which they can then skip if so desired).
4) Integrate all of these features under a single menu system, so a user can switch seamlessly from watching a disc in the carousel, watching live TV, or streaming a title with WatchNow.

Now I have most of this capability already with my home theater PC - a MythTV box that dual boots to Windows for Watch Now. But for most folks it needs to be in one package that "just works".

[Firstlawofnature]

Keyes does fail to consider rejoins. I don't like his comments here - not very dynamic. More important than current subs versus those who have tried the service at least once in the past is this: renting will be ~$9 billion at retail. What will the respective market shares be? What cost structures win? Low like redbox & netflix or high like BBI & MOVI? Can milk, cookies and xmas CDs make rentailing stores profitable?

I think low cost model will gain share versus high cost model. No great insight as I'm extrapolating what's already been occurring.