Comments on: Why it's time for Blockbuster to give up

Now that Netflix has inked a deal with Microsoft, Don Reisinger thinks Blockbuster is out of options. But does Blockbuster have something up its sleeve?

[gsmiller88]

iTunes Movie rentals is where it's at.

[bsalus01]

if netflix was really smart they would buy hulu or start their own version of it. the market is moving to downloads (obviously) and its already started the next phase which is ad supported movies (like hulu). the subscription model will die along with netflix dvd rental business and be replaced by pay per download. in 5 years we will all say how foolish netflix and how they are doomed to be replaced by hulu (which for them would be trivial to add a non ad supported pay per download service.)

[The_Decider]

In the US it is going to take longer than 5 years to get even 10% of the population with enough bandwidth to make streaming movies over the internet viable. Try 20-30. There are other countries that are much closer to this, but the US is lagging way behond due to allowing greedy corporations to have control of the networks.

[somone_else]

@ the_decider
It's got nothing to do with "greedy corporations" that us bandwidth is lagging behind. It has to do with population density. it simply too expensive to build the infrastructure. In my opinion, north american strategy for high-speed access has to be wireless. Where I live, 6 miles outside of a medium sized city, I have only 3 options for high-speed access, and they are all wireless. Places like South Korea and Japan can afford to install a lot of very high speed infrastructure because there are a lot of people around to pay for the service. outside of major metropolitan areas in North America, there is simply no way of turning a profit.

[Akoloski]

You didn't even mention RedBox - they are the real reason Block Buster is doomed. I'll never have to drive 15 minutes to Blockbuster because I can go to my local supermarket and get the same move in 30 seconds! And it's a buck a day!

[The_Decider]

RedBox is a good idea but it is fundamentally flawed for several reasons:

They only have a very limited amount of movies. Or do you actually think RedBox can compete on selection?

Idiots take 10 minutes to decide on a movie making the wait intolerable. It is fine if there is no line. Double that time when you return it.

Netflix is substantially less than $1 per day per movie, which is why it is eating Blockbusters' lunch and RedBox is a little niche service with little value.

[Kev Orng]

You know what sucks? I go to Blockbuster instead of renting online, because Rogers (of iPhone overcharging infamy) and their evil traffic-shaping makes online rentals a little expensive.

If Blockbuster were to go out of business because of online movie rental services, then if I wanted to go out to a store to avoid overage charges on my Rogers internet service, my major local choice would be.... Rogers video.

[miroslodki]

You presume that Blockbuster isnt smart enough to recognize the changing modalities of entertainment consumption.

I assure you that is not the case. Its simply a matter of them being 'stuck' with a retail footprint that they need to sustain/justify.

The question you need to ask yourself is
1. why cant they get into the streaming business themselves
2. why can't they get into a subscription service vs rental model
3. why can't they offer USB download keys (as being tested in Ireland via IBM) for their retail stores
4. what else can they use that floorspace for
5. who else might want to split the rent with them - regardless of which delivery mechanism they chose.

their recently hired CMO has a challenge on her hands
its a matter of what they are allowed to do that is at stake
not what they can/have to do.

cheers
Miro
http://miroslodki.wordpress.com

[deecee]

Here's why Blockbuster can afford to do streaming:
a few thousand brick and mortar stores that's the majority of their capital investment as well as the core value of the company.
The management is not willing to let that go to embrace the future, AND that my friend is Blockbuster's archilles' heel.

[CoderForChrist]

Honestly, I really hope Blockbuster doesn't go under, because Netflix and online downloads just don't do it for me. I don't watch a whole lot of movies, but when I do, I'd prefer to wander down to the local rental store, pick up the DVD, and return it after a few days. I just don't do that enough to justify a Netflix subscription.

And online downloads aren't really interesting to me, either. I don't have an XBox, or a PC hooked up to my TV. My surround sound system only provides surround sound for DVDs (the DVD player is built in); other inputs only get stereo. So, if I'm to watch a downloaded movie, then either I have to be able to download it and burn it to a DVD playable in a standard DVD player, or I'm stuck at my computer with my 19" monitor.

And, honestly, I'm pretty sure there are a *lot* of people who are the same way. They don't want a subscription service, and they aren't set up to watch movies from their PC on their TVs, and, for these people, brick-and-mortar stores are the best option.

[squarejp]

I agree with you regarding to not everybody likes subscriptions. But don't you forget, in 5 years, things are going to be all downloading and streaming in HD. Moreover, HDTVs are going to be everywhere espeically by Feb 2009 analog signal ceased to be broadcast. Those of you who are not in that trend to download and or stream videos are not going to go to local store to rent movies. If I'm doing business in 21st Centur, my strategy is to obsolete the local store physical rental and don't even do business with people who does things traditionally.

[The_Decider]

Stream HD content in 5 years?

I don't know what country you live in but it isn't happening in the US in less than 20.

[crashkup]

I switched from Netflix to Blockbuster. the combination of being able to order most any film -- but for no more money run down to the store for the last minute idea has been great. I'll give Blockbuster time to get on the downloads.

The one thing that may send me back to Netflix is the better selection.

[johnbuker]

If Blockbuster's mail subscription service was half way decent, I'd likely still be with them over Netflix because I really liked the addition of getting a couple of free movies every month from their brick and morder store. But their mail order service was horribly slow and I was charged $15 for my "free" monthly trial (4 phone calls complaining about being charged for a "free trial" netted me an extra 2 weeks of service and I only received 6 movies from them in 6 weeks before canceling). Due to my experience with them, I'll never ever give any money to Blockbuster again.

I haven't used Netflix's streaming capabilities yet, but when they become available via my Xbox 360 soon I'll definitely give it a try. What's going to kill Netflix's streaming business (as well as a lot of other similar services) is if my ISP (Time Warner) enacts those download caps like they're trialing in Texas. I've been downloading a couple of HD movies via Xbox live every month and that coupled with game demos, trailers, etc. will definitely put me over the cap if it gets enacted.

[btravitz]

We are a long way off from either streaming or downloading HD content. It will happen, just not within the next 10 years. both Netflix and blockbuster should remain relevant for anyone wanting high quality video. What we can download or stream now is a joke regarding resolution.

[emil serban]

Netflix is not a home run. As one user commented, only a minority (less than 5%) have their PC's hooke-up to a TV. Ther may be another 1% with an XBOX 360 hooke-up to their TV.
Netflix' online selection sucks (too old to seriously consider) and in Vindows Vista at least it's anything but instant. It chokea every five minutes so you're better off waiting for a good couple of hours for a good download (see Apple model) than using the so-called instant view. Quality of the instant movies is low as well, especially when using a larger (50 or 60 inch TV).
Another frustation with Netflix: lack of access to the new releases: every time I want to see the latest and greatest release I have to wait for at least a week... verry frustrating. With Blockbuster I can go to their store and have it same day... BIG difference.
Also, waiting for the mail to come is no fun either. As previously mentioned, it would be all godd if, like in Apple's model, I could wait for 45 minutes for the latest release to download rather than enywhere between two days and two weeks - depending on Netflix' availability...
The wholy grail (for now) is a combination between Apple, Netflix and Blockbuster: Online availability of the latest release, monthly subscription for unlimited movies and DVD quality that can be upconverted to 1080i resolution. None of them delivers that and I suspect they won' mainly because it doesn't depend on them alone. They are at the mercy of film studios to approve to such approach and so far seem very resistive.
I've tried all of them and I must say that from a quality standpoint, blockbuster won for now with their one movie per day monthly subscription. The only drawback is that I have to drive to the store. Instant gratification trumps selection ... sorry Netflix, couldn't bear the wait... and your online selection sucks (did Imentioned that already?)

[ev61]

emil, you have some flaws in your critique. 1% of 360 users connect their box to a TV?!?!? Must be a typo. I would bet that 99% of 360 users are high speed internet users...

"online selection sucks": new releases are not all that is out there. Also, it is the studios that are limiting this, not Netflix, so it will definitely be coming.

Waiting times: not an issue one bit with a solid connection. I wait about 30 seconds upon requesting from my Roku, and then no stops.

Image quality: very good, actually. Here on CNET and everywhere else, the reviews of the picture quality have been great.

Streaming is the future, BB is dead, but there is always the possibility that something else will pop up and overtake Netflix. Until then, 'flix is king.

[robbtuck]

I'm with you on this one! I don't want to commit money whether I watch movies or not, I don't have a fast enough internet connection to stream movies in a reasonable time frame, nor is my computer hooked to my TV. I use RedBox for newer releases cause it's a buck, and older movies I go to Hollywood Video, because Blockbuster doesn't carry a wide enough variety for long enough - and BB charges $4 whether it's old or not.

[jeff909]

Downloads and streaming are just not practical for the average user yet. Until we are able to get streams and downloads that will support blu ray comparable picture quality and audio (without the hassle)...DVD's and rental services are not going anywhere.

However, Netflix is the superior subscription service. I've been a member for about 4 months now and it's great. They have a larger selection and I can get new releases pretty quick. Sometimes even on the release day. I'll take that over a download any day. I own an XBOX360 and I doubt I will even try this new feature when it comes available. Most people prefer their entertainment glitch free.

[rdelfin]

I don't know about the author's neighbourhood Blockbuster store, but in the 2 - 3 stores near where I live, I rarely miss having to make a line due to all the people that go for the same reason I go. This only shows how much "knowledgeable" the author is in the matter.

As far as service comparison, I love the fact that the Blockbuster approach allows you to exchanged your mailed movies for new rentals without any additional cost which guarantees not having to wait to watch a DVD, something Netflix will never be able to do with it's current mail-in approach.

Now, about the downloading of movies, Netflix clearly has the upper hand here, but this is so different than giving such a premature "diagnosis" of BlockBuster being already doomed to dissapear (I'm very confident that they are working in developing ways to compete in the download world).

[alexacker]

Don, I'm having a very busy day at work BUT you're article has forced me to comment (which I rarely do, mind you).

1. First off, on a personal level, I was a Netflix brand ambassador for many years but they forced me to switch. Throttling me getting my movie selection because I had a high turnover rate didn't bode well for corporate and they automatically put me to the bottom for months. Bad for business, bad for me, so I switched to BB.

2. I'm curious what gives you right to write this article and deem them out of business? Do you get up from your computer and look around our world. There are actually people still here who (a) can't afford all the hi-tech toys that we (I) enjoy, (b) are not tech-savvy enough to but into this whole Blu-Ray/1080P/PS3/box/1080i/online movie revolution (like seniors, remember these people?(c) have kids, and like the flexibility of grabbing a movie with them, actually leaving out house and (d) very tech-savvy (like me) who like 1080p BR movies on my flat screen Sony Bravia. Have you considered that?

Like everything, things take time to organically grow, develop and find their place. Are you going to write an article about how 'cars that run on gas should be shut down because of hybrid or electric technology'?

Don, open your eyes. Walk down your block, smell a flower, speak to a senior citizen or someone else outside your circle of tech geeks and people on the iPhone line and take a look at the world we live in before you make such a foolish claim. You lost a couple of notches of credibility here to me, my friend.

[BCF1968]

Let's see 35% of the population doesn't even have internet. Another 10-12% only have dial-up and half of the rest have 2 Mbps or less. Not to mention ISPs are seriously considering caps and yet somehow brick and mortar stores are dead?

[FOSyay]

I own an Xbox 360, so to me Blockbuster is now obsolete (or at least when Microsoft actually starts the streaming of Netflix).

[Ischyros]

I've long thought that Blockbuster needs to take a lesson from Family Video, especially when it comes to pricing! As a new member at Family Video, all your rentals are half off for the entire first month. Movies that aren't new releases are only $1 for 7 days. They have a midweek special Tuesday, Wednesday, and Thursday where if you rent one new release, you get a $1 movie free. Kids movies and documentaries are always free. And new releases are usually in the $2.75-3.50 range. I used to live just down the road from Blockbuster but I'd drive 15 minutes across town to Family Video because I enjoyed it so much more and it was so much cheaper. Even with a Netflix account, I will still go to Family Video occasionally to rent movies!

[gerrrg]

Somewhat an aside:

I think dl is the future, to be sure. Problem is, the DRM will be a pain in the butt - aka Apple. That is, until the dust settles and the studios have figured out that DRM only encourages people to circumvent DRM by finding content that was stripped of DRM...for free.

If the studios were smart enough, they'd offer their wares for free at low resolutions, and a fair price for high res / standard res stuff, without DRM. I don't care how much people think watching movies on a 3.5~4 inch screen (on their i-whatever) is great, no way would I ever pay for that crap. Not $0.99, not $0.05...nada. I don't want to pay for crap....do you?

The future is variety - free crap and pay for the good stuff. Free crap draws you in, the good stuff is what you want to keep and are willing to pay for.

[stepyourgameup]

The author is right. Just look at BB and how well they are doing financially. It will only get worse, not better. I can see BB going broke and shutting down and then smaller B&M rental stores, i.e. Hastings, Hollywood Video, will cash in on those who don't want to enter the netflix/streaming world. BB is just too bloated with too much fat to stay in business for a long time. Unless they cut the fat and dramatically improve their online mail service.

[alexacker]

They've already made substantial cuts to stores. I now have to drive 2 miles to get the closest BB store. Still worth it if you want family movie night AS WELL AS on high quality BD movies. The bandwidth just isn't there for 1080i or p movie dl's. Why did I buy a BD player? To watch crummy downloads? I think not.

[LenSp]

I have to agree that video stores aren't dead yet. It isn't a growth business (outside of rural areas being surbubanized), but many people aren't going to use the Internet for shopping due to personal preference or lack of internet or slower connection speeds. And while the Red Box is great for the most popular videos (and sucking off the higher profit margins on them), there's still a need for a physical store with a greater inventory for many consumers.

The problem for Blockbuster is that they were a growth business and they've yet to adjust to a business model for mature and/or shrinking markets. Also, anyone buying the company isn't going to pay a premium -- they'll know not to expect huge profit margin growth down the road.

The X factor in any sale would be real estate. Does Blockbuster own any of their stores? Or do they just lease? If they own buildings, then they have a real asset that could be quite valuable to retail chains outside of video rentals. Some big box store chains are more valuable for their real estate than they are for their actual business.