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Confessions of a new ( Streaming ) Netflix subscriber

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I have known about Netflix for some time now – I ignored it.  But since I had $8.99 burning a hole in my pocket, I decided to give it a try.  ( You can get a 2-week trial for free ( http://netflix.com ) )

Using a DSL Internet connection and an older 2.5Ghz dual-core CPU w/4GB of RAM with dual monitors (24in and 26in) I found the experience nothing short of amazing.  Even with a slow internet connection there were no interruptions in the 2 movies that I watched.  The sound was good through my Logitec Z-Cinema speakers.  I am even able to update this blog on one monitor while I watch the Netflix movie on the secondary monitor.  Doing both cranks the CPU to only about 40%.

So it begs the question.  What about your local brick and mortar video store – Blockbuster, Hollywood Video, Family Video, and the like?  What is the future for these stores in an age of high-speed broadband, inexpensive storage, and a legal environment that can allow for the streaming of intellectual property and still keep all the stakeholders that create, produce, and deliver the movie happy?

  1. Why would I physically transport myself to a video rental store if I can get the movie online on-demand?
  2. Why would I go to video store to browse a shelf-space limited selection of titles when the internet could potentially provide an “infinite” selection of choices  (every movie ever made any time)  (see The Long Tail )
  3. Why would I go to a music store when I can download (purchase) any of 3 million tracks from iTunes?
  4. Why, even, would I want to purchase (own) a music track when I can “lease” a track from Rhaposody through a monthly subscription fee.  (Why do people insist on owning this property? )
  5. Why would I even want to purchase a DVD disk (physical media) or even store the bits of a digital version if I can get it online anytime I want?
  6. How about books? Why purchase any physical book when I can search (full text) and read any of the hundreds of thousands of books online for a montly subscription fee at  books24x7 ?

All of this is about disruptive technologies and its affect on traditional business models.  I hear people all the time complaining about executive salaries – they are too high – they are 100x or 200x what an “average” person makes in the United States.

So, the question is this – What are you willing to pay a an executive team that navigate through an onslaught of disruptive technologies, including movements by a sea of competitors and new entrants, and produces a winning competitive strategy and drive the execution of that plan?

How much are these people worth?  Are they any different than sports athletes that make $25M/yr ?  Both are directly responsible for revenue generation.  Why do we seldom hear complaints about the compensation in the sports industry?  But  a CEO and executive team that can generate $12B in profits shouldn’t earn $30M in compensation? ( CompanyPay.com )

Jim Keyes is CEO of Blockbuster ( compensation package )

Blockbuster CEO Has Answers [ Dec 2008  ]

Blu-ray has extended — and enhanced — the life of the optical disc as a movie-serving platform. As an early adopter, I begrudgingly settle for a digital download in a pinch, but I prefer the quality, flexibility, and special features that come with a DVD or Blu-ray rental.

Keyes doesn’t know if countrywide bandwidth will be there to digitally deliver quality movie experiences by the time Blu-ray discs run their course. He sees an opportunity to fill the gap, providing in-store servers loaded with high-quality releases that can be transferred to flash memory cards in 30 seconds. In the end, it’s all about getting folks into his stores or even to potential Blockbuster kiosks at train stations and airports to serve up speedy celluloid.

He’s the only one who sees it that way, and he relishes being a contrarian.

“Let everybody fight it out, kill each other, and spend lots of money on set-top boxes tethered to big screen TVs,” he says. He prefers a portable solution as the heir apparent to the DVD, and one that hopefully entails a trip out to your local Blockbuster store…

… Keyes’ main goal is for Blockbuster to succeed as a media retailer. When I asked him if he perceives his biggest competitive threat to be Netflix (Nasdaq: NFLX) or RedBox — the DVD rental kiosks bankrolled by McDonald’s (NYSE: MCD) and Coinstar (Nasdaq: CSTR) that are popping up all over the country — he dismissed them both.

“Neither RedBox nor Netflix are even on the radar screen in terms of competition,” he said. “It’s more Wal-Mart (NYSE: WMT) and Apple (Nasdaq: AAPL).”

Read more –
http://www.fool.com/investing/general/2008/12/10/blockbuster-ceo-has-answers.aspx

Watch the environment – Mr Keyes… about one year later…

Speaking Jan. 5 [2010] at an investor event in San Francisco, Keyes said the proliferation of “new kid on the block” Redbox’s kiosks and Netflix’s domination in the by-mail subscription business pose formidable challenges in 2010 as Blockbuster spent much of last year establishing new financing ($675 million credit facility) instead of growing its business.

Read more –
http://www.homemediamagazine.com/retailers/blockbuster-ceo-netflix-redbox-taking-demand-out-market-18008

What is Clayton M. Christensen thinking in regard to disruptive innovation?  ( website, books )

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Written by frrl

March 14, 2010 at 5:08 am

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