Future Implications: Netflix - The Next Monopoly
Just last year, Netflix announced that it owned a patent on its business model and sued Blockbuster for patent infringement.
Why would a company like Netflix -- the proven leader in the "mail me" renting business -- decide to pick on a company who was doing all it could to stay afloat by trying the same business model? Because Netflix smelled blood and business is business. Without Blockbuster nipping at its heels, Netflix would not only be able to rule a business model that will take us into the next decade, it would be free from any significant competition. And as we all know: once competition is killed off, monopolies take control.
As a former Netflix customer, I found the process to be simple and smooth. One day I'm watching Pulp Fiction and Saving Private Ryan and the next, I'm sent Dodgeball and Happy Gilmore. All in all, it's not a bad service for a guy who finds little time to leave his house for a movie run. But after using Netflix for about a year, I decided it was time to do away with the service after the one-day turnaround I was enjoying for a few months quickly became a two or even three-day gap between when I sent my old movies and received my new flicks. Now, I realize this is not typical and many people get that one day turnaround, but for some reason, Netflix didn't work that well for me.
So, one day in a fit of rage and impatience, I logged onto my Netflix account and did away with that $15 per month charge. Now, instead of sitting at home waiting for my next movie, I run down to the local Blockbuster and pick up a new one. Unfortunately, my love of movies knows no bounds and I typically spend twice as much each month on flicks than I did on Netflix. Oh well, that's life I guess, and I refuse to go back to Netflix until I absolutely have to.
But as I drive my way down to Blockbuster, I typically find myself asking when the company will finally move online and do away with all of its brick and mortars. I think it's common knowledge that the brick and mortar movie renting business is dying at the hands of a hip online movement, and the costs of doing business for the Hollywood Videos and Blockbusters of the world are too high to justify all of those locations.
And it's for that reason that I worry about the future of home rentals. Netflix was the first company to see the future and patented a business model that, to be honest, it shouldn't have been able to patent. By patenting this business model, the company is armed with the ammunition it needs to effectively destroy any other company who attempts the same techniques. And now that Blockbuster and Netflix officially settled the case out of court, Netflix has a bargaining chip for any future negotiations with any company that comes along.
Currently, Netflix is trying to weather a number of anti-trust class action lawsuits aimed at modifying or eliminating its current patent. If Netflix succeeds in overcoming these anti-trust lawsuits, the company will enjoy a stranglehold over the entire industry and become what we all seem to fear most - a monopoly.
And it is this monopoly that will control the way you and I enjoy movies in the future. How many monopolies put the needs of the customer first? When Netflix becomes a monopoly (and it will), its rental fees will quietly soar as the current $15 plans may hit twice that before you even know what happened. When Netflix becomes a monopoly, there will be no impetus for the company to do what is right and get the movies to you on time. Simply put, we will be trapped by our own desires to watch movies in our home.
While this may sound dark and gloomy for our future, there is one saving grace: downloaded movie rentals. Downloading movies is currently being attempted by a number of companies, but a few obstacles currently stands in the way of this option: bandwidth, bandwidth and bandwidth.
Although it takes days to get a movie from Netflix, very few people are currently willing to sit in front of their computers for an hour or two to make sure the movie they just rented is downloading properly. We need faster internet! If we could enjoy the speeds people in Asia are currently surfing the web with, Netflix would have a significant problem on its hands. Why wait a day or two for a movie when you can have it in a matter of minutes at the same (if not cheaper) price? Unfortunately we are still at least five years away from speeds that would justify this business model. Some experts even claim that it could take up to ten years to achieve the speeds we need to download HD content in a matter of minutes, but I'm not that skeptical.
So while we wait for ISPs to catch up to our demands, we are left with a host of issues that will dictate how we spend the next decade watching movies. As movie theater ticket prices continue to rise, we turn to Netflix and Blockbuster for all of our movie-watching needs. But with the recent lawsuit settlement, we need to be poised for a significant change in the dynamics of movie rentals. Unfortunately the industry has changed, and we are about to embark on a monopoly that will affect us in our wallet and in our home.
The era has begun; now bow to Netflix.
Don Reisinger is a technology columnist who has written about everything from HDTVs to computers to Flowbee Haircut Systems. Don is a member of the CNET Blog Network, and posts at The Digital Home. He is not an employee of CNET. Disclosure.
As for Netflix's patent. Is the patent on their reusable envelope? Or on their system in general?
Blockbuster and return the movies you got there or in the mail from their online
service but often the choices for your next movie are slim at best. I've had
Netflix for a few years now and I have had to wait a few times for various movies
but there was always something else I really wanted to see that they did have.
Plus, Blockbuster screwed people for years on late fees etc. They deserve to
suffer now that there is a new kid in town that has better service. They didn't
change their tune until Netflix came along...
I can rent a movie from my cable provider record it on my DVR and watch it at my leisure. There is no need to get a scratched up DVD from Netflix. Once these on-line services grow their libraries there will be no need for physical media to be mailed around.
The watch now interface is in fact excellent, with quality easily rivaling DVD's if you have a good DSL connection (3 MBps), I have never seen a buffering pause. And the included 20 hours of streaming a month isn't bad either.
Of course, the cable companies are likely going to catch up to that shortly, so I think it's unlikely you will see a DVD rental monopoly, when they are actually slowly fading away.
However, I'm still a loyal Netflix customer because of how they treated me, and millions of other subscribers, after Hurricane Katrina. Movie rentals were very low on my list of priorities then, and I was surprised to receive an email from the company about a week after the storm. They let me know that they were temporarily suspending my rental service until I was ready to resume. (Postal delivery was one of the many basic services that failed after the hurricane destroyed southern Mississippi.) Also, they credited one month's rental to my account, and gave me another month free when I restarted the service about two months later.
We belly-ache when companies disappoint customers. But we need to speak just as loudly when they exceed our expectations.
able to burn them! I'm sorry but I'm not going to buy a movie if it is going to be
locked on my computer taking up space. If you could burn downloadable
movies I would NEVER AGAIN purchase another one at my local department
store. And the lame part about being able to download rented movies from
Netflix...It only works on Windows. For shame, Netflix.
- Netflix needs to change
- by Gringras July 4, 2007 9:37 AM PDT
- Netflix needs to accommodate Mac OS X and Linux. I used Netflix for over a
- Like this Reply to this comment
-
(12 Comments)year and was happy with the service but I could not use the "Watch Now"
feature. I was using WinXP at the time. I would have stayed with them if I'd
been able to use that feature. BTW, how can you patent a business model?
Imagine if the first person to open a store had patented that business model.
The whole concept is absurd.