For the gadget lover, the DVD is often the end result of what we do with these super-light laptops, LCD TV screens, brushed metal- translucent exteriors and one of the main reasons companies continually push the capabilities of devices, to watch movies. Since 1999 I have been a member of Netflix in some way, and I am worried, I am worried Netflix isn't going to make it. Now, this isn't an article about Netflix going out of business, this is about Netflix "making it" and by that I mean, making a platform and community, something Blockbuster and Walmart can't do. Netflix backgrounder... Netlfix started in 1999, and according to their fact sheet page, they reached 2 million subscribers faster than AOL. For $21.99 a month, you can rent as many DVDs as you want via the website, keeping 3 out at a time. The benefits are: no late fees, no due dates and you have access to around 20,000 titles. The DVDs are sent out via Postal Mail, usually get to you in a day or so and when your done, you put it in the same envelope it was sent in, bang- you're done. Two giants enter Well, after 5 years of Netflix humming along, Blockbuster and Walmart jumped in to the online movie rental biz. Wal-mart, the world's largest retailer, offers 3 DVDs out for $18.76. They don't have as big of a selection of DVD as Netflix, and of course, it's Wal-mart, the same Wal-mart that has banned selling certain CDs being sold in their stores and "offensive" magazine like Rollingstone and Cosmopolitan. For now, Wal-mart won't make a big deal out of having some "questionable "movies, after all- they need to build a subscriber base, but once they have that, expect to see them not carry certain DVD titles that they deem offensive. In fact Wal-Mart who has over 10% of the domestic CD sales even gets publishers to make a special "sanitized" version for their megastores, a "Wal-mart cut" of a movie might be coming soon. Next up is Blockbuster, they just released their "public beta" site earlier this month. Blockbuster has about 48 million members for their over 8,500 physical stores, they rent DVDs, videos and game titles. Blockbuster's pricing is $19.99 for 3 titles, with a selection of 25,000 (according to their website) and as a bonus 2 free in-store rentals per month. Anyone can sign up now during this public beta. The 2 in-store rental thing is a big deal, there are lots of time when you don't front load your Netflix playlist and just want to rent something that just a came out. Also, Blockbuster has video game rentals in-store, it's only a matter of time until they use their online video rental site to rent out video game titles. There is a service now called gamefly which does that now, Blockbuster might be hanging back to see how they do. Blockbuster has also had some controversy with censoring what movies can be rented, there's even a "Boycott Blockbuster" movement that come and goes every so often. And don't forget, Blockbuster is owned by Viacom, who owns and operates about 1,400 movie screens, Paramount Pictures, Paramount theme parks, many broadcast television and radio stations (Infinity Broadcasting) , outdoor billboards, cable channels, two broadcast networks, and Simon & Schuster books. So there's the overview of the other guys, Wal-Mart as usual has the lowest price, but not the best selection and Blockbuster having a slightly lower price with the added bonus of 2 rentals from their stores per month. They all mail the DVDs out and for the most part, the services seem pretty similar. That's the problem, sameness. Netflix present Last week Netflix got slammed in the market, share dropped almost $9 (or 28%) to $23.02 on NASDAQ. Analysts sited fulfillment expenses as well as an incredibly high cost per new customer ($35.12). That means it costs over $35 bucks to get a new customer on average, and that's up from $30 from the second quarter of 2003. Add to that, they're reporting this is going to go up even more ($37 to $39) as they increase their marketing spend, on TV, TV? They also mentioned spending more on online ads, which we think is a good idea, but it's all about being surgical and going where the most likely new customers are going. I am a Netflix customer and I know that it's the best service with the best selection out there, but that doesn't mean anything, a lot of people are going to go after price (Wal-Mart) and a lot of people are going to hammered over the head with the reach and marketing Blockbuster has (plus the in-store rental deal). When everyone does the same thing, price tends to win, so Wal-Mart might make some gains this year. But isn't what Netflix did pretty novel? Almost patent worthy? Netflix does in fact have a patent, in fact there were tons of stories about "the patent" but none of them actually said what the patent was. So I looked it up, there might be others, but the one I found was the patent on the envelope used. That's right, that self-addressed envelope that Netflix uses is patented, I am pretty sure Blockbuster, Wal-Mart and even Gamefly uses the same thing, so maybe Netflix will cash in on that later, but that's not hard to get around. Here it is. Netflix future So as a customer, a marketer and a developer...I 'm going to outline what I think Netflix needs to do. Yah, Blockbuster and Wal-mart could do this too, but they're too big, but hey- If they pull this off, that's cool too. Open up. Google did it, Amazon did, Apple did it, Netflix??? expose your API so people out there can use www.netflix.com the way they want to, in new ways, in ways you haven't imagined. What do I mean by that? RSS Feeds. See that little XML or RSS button on every site out there? That's RSS feed, the quickest way to deliver updated information to folks. No one wants to log in to the Netflix site all the time, let folks subscribe to RSS feeds that have new releases, reviews and more. Netflix has a newsletter, sure, but that stopped getting to me about 2 years ago when I started using spam filters. My DVD "playlist". If you go to TextAmerica, or use BlogRolling, millions of people add can add a link to their site(s) which is updated from someplace else. For Netflix, it would work like this. A blog site, like this one, or a personal one could easily add their DVD list, what they're watching, what they've watched, and what they're going to watch. Technoraiti tracks about 3 million blogs, these people all index really high in all the things your focus groups are likely telling you. Give them the tools they need to distribute your message for free. There's a reason Apple make the playlist feature, folks upload their playlists, send to friends, everyone has a music mix their proud of, it's really important that Netflix let's folks expose their movie list. Let people add items to my playlist, have "always send me new popular releases" each month, things like that really matter. Integration with Moviefone and Fandango would also be possible. If you're like me, when you buy a ticket to see a movie, you're likely going to one day rent that movie- with an API that others can use, that would all be possible when you buy your movie tickets online. Social Networks. If the Netflix API was exposed when Friendster, Orkut and all the other social networking sites were released, it would have been easy for millions of people to add their movie list (past, present and future to their profile). Heck, in ALL of these social networking sites they have "Favorite movies". Heck, I might even go visit a pal if I knew they had a specific movie at their how, now that's some real peer-to-peer networking in action. AOL Netflix Buddy. People IM more than they email now, there are lots of reasons for that, from Spam to more computers being on all the time. So why wouldn't Netflix have buddy anyone can add to their buddy list where they can query the Netflix database and also rent from there. Then they could even send it along to a buddy on their list. Again, this is part of the "Open up" theme, Netflix needs to provide ways for folks to use its service in ways like this. Here's an example: Add "RecipeBuddie" to your AOL/iChatAV list and tell it you have chicken, it'll give you a bunch of recipes and links to products to buy as well. One year, $199. One month $19.99. The economics of this are tough, but Netflix has gotta stay below the $20 mark per month and they've gotta have a deal per year. It'll lower churn and keep the price sensitive folks from getting sticker shock. Or hey, at least give this deal to people who have been a member for at least a year. No TV ads. That's right, don't spend money on TV in the traditional sense. 30 second ads aren't going to reach the best prospects, really. Sponsor a show and make it "commercial free" so it's more like a DVD. If it cost Netflix $35 to add 583,000 trial users (as reported) that means they spent $20,405,000 in marketing (at least). That's some good media buys. With the summer movie season here, it's cheap and easy to get some movie slides in specific markets around the USA before the movie comes on. And if Netflix needs to do TV in some way, do a 30 second commercial before a movie, they have those now. It's a great surgical way to educate folks on what Netflix is while their in the movie mood. Community. Netflix needs to get their best customers on an advisory board, maybe even pick some well known folks out in the web world and have them out. What Netflix can't do is piss off their biggest fans, like this guy. Wal-Mart and Blockbuster will totally own the whole "ignore the customer" thing with their girth, but Netflix, you can be different, you can be something that folks can rally around. Sponsoring blog sites and sites that talk about movies wouldn't be a bad idea either. Netflix as a platform. Last up, the big one. Anyone can call up Amazon and make a deal to re-brand their platform (like Target has) same goes for google, Amazon made a deal with them to use google's search for A9, Amazon's search engine. If Netflix made the move to make their system a plaform, anyone could come along and rent any type of DVD media. Video games, specific movies, instructional courses, you name it- it's possible. And in the end, Netflix makes money while still sticking to their core business. More? Sure, there's lots more which would really get Netfix away from the pointless street brawl they're in with the 2 big guys???from leading the charge in downloadable movies, to partner deals with iTunes + Netflix integration, to working out a system of movie viewing on the new Portable Video Players??? all these things will happen in time, maybe with Netflix, hopefully not Wal-Mart, but probably Blockbuster. No matter what, Netflix can open up and should???what's the point of all this unless more people can share their favorite movies with each other, in better ways, using all of what technology has to offer. Movies are just as much a part of our lives as childhood memories and shape our culture, even defining it at times, it would be good to see the company that has fueled my movie addiction for the last 5 years continue to do so in amazing ways for more people. Phillip Torrone can be reached at his personal website www.flashenabled.com
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