rajsekar

Netflix: 2008 Outlook

Good analysis by Dan. I wish to point out that though Netflix and Blockbuster fall under Movie rental domain, their distribution models are totally different. This scenario is similar to comparing Amazon (for just books and media) with Barnes & Noble. The distribution channel plays a very important role for Netflix and their Wow factor has been "No Late Fees". Reed Hastings' trump card was avoiding late fees and ability to keep DVDs as long as you want. Blockbuster literally pulled the rug under Netlix when they eliminated late fees in 2006. Ever since this change happened, Netflix has been losing customers. There is nothing unique about Netflix anymore. I have used both services for sometime and have stopped Netflix now. The main attraction with Blockbuster is that I can get DVDs via mail and can return the media to a nearby store and get another one for free. What more can one ask for? The huge number of Blockbuster stores around the country is a big advantage for them and attracts significant foot traffic into these stores. Netflix cannot match Blockbuster's reach with just online distribution. The planned release of LG Set Top Box for Netflix movie distribution will fail because of "Set Top Box Fatigue" among consumers. I don't want another stupid box in my living room rack with wires running around. 2008 will be a tough year for Netflix - there is nothing unique about their business model and I can get the same service with a wider selection at Blockbuster+mail-in DVD and Hollywood stores. Is Netflix a prime target for takeover? Look out for Jeff Bezos in 2008.