Amazon To Rent DVDs
from the a-bit-more-competitive dept
Along with Netflix’s earnings announcements today, they also revealed that Amazon is about to enter the DVD rental market, requiring them to drop their own prices. First off, it’s pretty interesting to see a company revealing a potential product launch from an unexpected competitor. You don’t see that every day. Still, it says something about the nature of competitive information these days. Furthermore, despite all the hype about Wal-Mart and Blockbuster getting into the DVD rental business, it’s Amazon’s pending entrance that clearly has NetFlix worried. That’s because Amazon is much more able to compete to NetFlix’s strengths: offering movies that fall under the long tail, and coming up with good recommendations for other such movies to rent. Neither Blockbuster nor Wal-Mart were likely to compete all that strongly on either front, but Amazon clearly has experience in both. Amazon also has a pretty impressive logistics team, though, it will have to be adjusted for rental offerings, rather than simply selling goods.
Comments on “Amazon To Rent DVDs”
They're making this too easy
http://www.buzzhit.com/2004/10/more-on-netflix-strategy-and.html
Re: They're making this too easy
Your “paraphrase” (Tony) of the Greenberg article is neither what blockbuster nor Greenberg said … read it again and consider changing your blog to be factually accurate.
When a company has a 95+% market share, it is not surprising when a brand new competitor has more “net subscriber additions.” Blockbuster is misleading you with statistics by using “net additions.”
If Time magazine has a constant number of subscribers from quarter to quarter, and your little sister makes a new magazine that she gives to your mother, then your little sister has “more net subscriber additions” than Time. That doesn’t mean that Time is losing its dominance to your little sister!
Re: Re: They're making this too easy
Anonymous –
You are correct, and incorrect (IMO). More specifically:
You are correct; Greenberg did not say that Blockbuster expected to have more subscribers by the end of 2004 than NFLX. In fact, he said more subscribers than NFLX had after 3.5 years. I’ve corrected that on my blog and appreciate your pointing it out.
You are incorrect (again IMO), in your analysis of the situation, and your example spells it out well. If Time magazine’s numbers are constant from quarter to quarter, they have a problem, as they are experiencing zero growth. My hypothetical little sister still wouldn’t be a threat after selling 1 magazine, but if her magazine’s growth curve continued (and moreover, if it continued to accelerate, e.g., logrithmic/exponential growth) she would eventually represent credible competition (assuming both she and Time were targeting the same audience, advertisers, etc, etc).
The fact is, Blockbuster’s service, from what we’ve been told, is growing subscribers at a faster rate than Netflix. Since this is a zero sum game (i.e., beyond trial, a consumer will choose one and only one subscription rental service), net subscriber additions and corresponding growth rates are, in fact, extremely important and telling.
Re: Re: Re: They're making this too easy
Let me illustrate more clearly why I think Blockbuster’s statistic is misleading.
Netflix gained a certain number of new customers this quarter, as did Blockbuster. The reason Blockbuster highlights *net* additions is because Netflix, unlike Blockbuster, lost some existing customers (you can only lose existing customers–and blockbuster started with zero). Given Netflix’s public release yesterday (see “churn”), that number is in the low-hundred-thousand range, versus their 2.2 million subscribers. So the number of new customers that Netflix gained is somewhere in the two-to-three hundred thousand range, and the net customer level looks like the mid hundred-thousand-range.
I don’t know Blockbuster’s numbers exactly, since they haven’t released them. But to put it more succinctly, I’m saying:
If both Netflix and Blockbuster started the quarter with 0 customers, then right now, Netflix would have more customers at the end of the quarter.
Yes, the net additions fall in blockbuster’s favor, but that is only because blockbuster doesn’t have any subscribers to lose.
Re: Re: Re: They're making this too easy
Blockbuster’s service, from what we’ve been told, is growing subscribers at a faster rate than Netflix.
Many years ago I was watching a broadcast of the Boston marathon. The announcer was exclaming with enthusiasm about the rapid gains women had been making in the marathon (only recently had women been *allowed* to run in major marathons — this is a crucial detail). He confidently predicted that soon women would be running the marathon faster than men, since their times were improving so much more rapidly.
I think you might be making the same mistake. It’s easy to show a rapid rate of growth early in a process, because you’re improving on an immature performance. Early rates of growth are a very poor basis for predicting future performance — that was true of women’s marathon times, and it’s likely to be true of Blockbuster as well. Netflix has been at this longer, and among long-term customers (such as myself) they tend to have high user satisfaction. Blockbuster isn’t going to find it easy to equal that, much less exceed it.
long tail
You’re really excited about the long tail this week arent you?
Netflix and BB
I dont see why Blockbuster is trying to reinvent the wheel no no…they arent even reinventing the wheels they are just being a copy cat, they are copying what netflix is doing…what’s up with that anyway?