Apple's Entry into Movie Rentals Is Good for NetFlix and Bad for Blockbuster

There was a very interesting omission in the coverage of Netflix's (NFLX) decision to allow most users to stream unlimited internet content. The omission? The word Blockbuster (BBI).

Under the most popular plan that charges $16.99 per month to rent up to three DVDs at a time, Netflix customers can currently watch as many as 17 hours of entertainment each month on the streaming service, dubbed "Watch Instantly." Now, all but the $4.99 a month plan subscribers will be able to stream as many movies and TV shows as they want from a library containing more than 6,000 titles. There will be no additional charge for the unlimited access.

What word has replaced Blockbuster? Apple (AAPL). This is both very good news for NetFlix and very bad news for Blockbuster. Apple will be offering 24 hour downloads for $3.99.

This will obviously cause the fees Netflix pays to Hollywood and for bandwidth to jump, but it should also mean fewer DVDs sent in the mail, which would lower some logistical costs and postage.

Blockbuster has been pushed to virtual oblivion as they are still toying with the download service and stuck trying to figure out how to get people to go to stores in conjunction with a download. Am I the only one who just does not get this? Isn't the very reason to do one so that you do not have to do the other?

While the competition is taking it to the next level, Blockbuster is still in the starting blocks.

Disclosure: None

Comments

[Richard Alv...:]

"This will obviously cause the fees Netflix pays to Hollywood and for bandwidth to jump, but it should also mean fewer DVDs sent in the mail, which would lower some logistical costs and postage"

This should cause a huge jump in bandwidth cost. BTW, it's way cheaper to send things vai mail then to stream things.

2008 Jan 17 07:44 AM

[Todd Sullivan:]

not if you consider the warehousing , personel at locations, energy cost etc..

there are a ton of ancillary costs involved

2008 Jan 17 07:53 AM

[JohnG:]

Have you been to Blockbuster lately - The Blockbuster customer will have trouble streaming content to the PC and directing it to the TV. How many Blockbuster customers will put a PC or Xbox in the living room to stream movies. I just dont' see that happening. 3 DVDs by mail is just catching on. Blockbuster's plan to educate the customer with downloading stations at the store will be the better plan - Time to load up on BBI will be in the near future. I want to see how Keyes execute his plan.

2008 Jan 17 08:26 AM

[ballsschweaty:]

Blockbuster is hosed and should just close up shop right now. There is now way they stay out of bankruptcy with their massive real estate liabilities.

2008 Jan 17 09:15 AM

[Macbth:]

"it's way cheaper to send things vai mail then to stream things."

Maybe some one should tell the junk email senders that. I know one's a tiny file and the other one is gigantic.

2008 Jan 17 09:20 AM

[JohnG:]

Keyes says Blockbuster will make the all loan requirements for this qtr and in the future. BBI is on the comeback not Bankruptcy!

JohnG

2008 Jan 17 09:38 AM

[Tom B:]

NetFlix's DVD in your mailbox scheme makes a lot of sense, but they will fail big time in downloadable content, just like WalMart.

2008 Jan 17 11:27 AM

[JohnG:]

Netflix failure in downloadable content assumes that netflix will offer the latest movies available. Right now the only Netflix content available is older movies. Should Netflix offer new movies the subscription price will have to go up by usage. Just a thought.

2008 Jan 17 12:02 PM