Reed Hastings on Movie Downloads

Netflix Fan Blog found an interview with Reed Hastings on CinemaTech where he talks about movie downloads:

"We haven't felt the need to compete with [sites like Movielink and] CinemaNow," Hastings said, because the studios' "content restrictions are so severe." (Pricing is too high, and the selection of films being offered for licensing is too narrow.) "We're at 3 million susbcribers now. The question we ask is how do we get to five, ten, or twenty million. That gives us a tremendous asset in being the leading company in downloading. The technology is just not that hard."

Update: Fixed spelling error (it's "Reed" not "Red." Sorry!).

Comments

[Becky]

"Red" Hastings?

[Justin]

Mr. Reed is wrong when he mentions that "the technology is not that hard". Well that may be, but it's not about the technology, it's about the brand. There are companies out there that stand for movie downloads in the customer's mind. When I think Netflix, I think DVD rentals through the mail, when I think blockbuster, I think brick n mortar DVD Rentals, when I think Walmart, I think of a large store that I can go to buy DVDs. Business is all about brand warfare. Who camps their flag in the territory first, and builds a solid mental position deep inside the customer's mind.

Mr. Reed is a very smart business-man, but remember he once stated that videostores would be a thing of the past...That clearly demonstrates his misunderstanding of marketing, and I'm afraid he thinks the download arena is all about technology instead of branding.

Netflix didn't beat Walmart because of technology. Walmart simply decided that it was not worth the investment compared to putting money in their strongly expanding SuperStores. Can you blame them?

Netflix had a huge first mover advantage, and will always maintain the position of being the original in DVD Rentals, but when it comes to downloads, I would almost bet that it is not Netflix.

It will be a different company that does not have the DVD Rental end to tie it down.

Here are the predictions that I have made when it comes to branding and marketing. I posted info back in the fall on why Amazon would not enter the DVD Rental market, and even if they did Netflix should be happy.

When I heard Walmart was offering DVD Rentals, I laughed. When the stock of Netflix dipped to 9 dollars because Amazon was RUMORED to be entering the market, I told my friends to buy some Netflix stock.

Amazon still isn't in. Walmart is out.

The Blockbuster situation...

Blockbuster has the money, but they are so late, and their copy-cat position hurts them. Plus who actually is the enemy of the Blockbuster online Model. All good business models have enemies. When Netflix was launched it had a solid enemy; Blockbuster. Why pay late fees, and why drive to the store? That positioning made sense to people.

Now where is the enemy of Blockbuster? It's basically themselves.

Here's their backwards thinking.

We'll promote the online concept to drive people away from the stores to the internet. To promote the online idea well give them coupons that they can use at the store. The enemy of the online model is the store, and the enemy of the store is the online model. If you do both, you make yourself the enemy.

But it gets even worse. Once people try the online concept...They realize from Friends and relatives, that Netflix gives you more. Basically, Blockbuster is spending a lot of money to put customers in the hands of their enemy.

But it gets worse....Blockbuster missed out on one of their largest opportunities. Instead of pushing harder and pursuing the Hollywood buyout...they put their money into the online business.

to Justin,
Although some of the things you say I agree with I don't think you realize that Blockbuster is gaining up on Netflix. Now they ship movies faster than Netflix, I know because I tried both and Blockbuster has less problems with movie availability now. When Netflix started they also had problems at first, but it took them a while to address their issues. I think its Blockbuster that will take Netflix out of business. More and more people are becoming unhappy with Netflix and cancelling because of their business practices of throttling. And when you consider that Netflix spends over twelve million dollars on advertising per quarter, throttling is a very stupid thing to do when they're trying to add more subscribers so that they can manipulate their stock prices.