Blockbuster and Netflix Take Their Competing Models Online

Posted by: Stephen Wildstrom on November 25, 2008

blockbuster.jpg
Blockbuster and Netflix have very different visions of how the residential movie distribution business works in the physical world. Netflix customers pay as little as $5 a month for as many DVDs as they want to watch, the different prices determining how many disks they get at a time. although it has a relatively small Netflix-like offering, Blockbuster relies primarily on rentals from its brick-and-mortar stores, where customers pay for each title they watch.

Now the two companies are moving their warring business models online. Netflix has offered subscribers unlimited streaming at no extra charge to computers for some time, but has been moving into the living room by providing the same service on TiVos, the Xbox 360, and a $99 dedicated Netflix box from Roku. Blockbuster is partnering with 2Wire, which is providing an Internet-connected set top box to provide online movie rentals.

The 2Wire MediaPoint costs $99, but comes with a credit for 25 movies, meaning the hardware effectively is free. After the initial credit is used,customers will pay for each rental with prices starting at $1.99 for older titles. As is usual for online rentals, customers can watch a title within 30 days of renting it, but the rental expires 24 hours after it is first played.

The subscription vs. rental shootout isn't a straight-up fight due to restrictions imposed by the studios. The Netflix streaming catalog of about 12,000 titles is weighted heavily toward older titles and relatively obscure independents and foreign films. Blockbuster gets new movies in the online rental window, which provides for a much greater availability of near=-current titles, but fewer classics.

The studios still locked into complex distribution contracts that impose all sorts of temporal and geographical windows on who gets what content when. Until that changes, consumers will continue to face a confusing situation where different titles are available at different times from different online providers.

TrackBack URL for this entry: http://blogs.businessweek.com/mt/mt-tb.cgi/

Reader Comments

Jon

November 25, 2008 01:18 PM

More outside the box thinking... when are you morons going to realize there is no box? Additional hardware? Subscriptions? Access time-frames? Stupid...

LucidGoldfish

November 25, 2008 01:53 PM

Well you need a box of some sort... at the very least a PC... which is still a box. Even TV's that could be made to have such services directly integrated into them, are essentially a box that has been incorporated into the tv. And frankly, I dont want to buy a new tv, thank you oh so much. I will settle for the xbox, or a hundred dollar box that I have to hook up. Cheapest way to get hidef on your tv.... other than bunny ears. So what are you saying? No box? No additional hardware? No subscriptions? What the hell do want? Free DVD's handed out at a brick and mortar store?

Tom

November 25, 2008 01:54 PM

Blockbuster just doesn't get the Internet. Netflix's streaming model is much more desirable to the average consumer.

Unlimited streaming with no fee compared to $2 per viewing. It's a no-brainer.

Yes, Netflix doesn't offer the newest movies on streaming, but it does offer lots of great TV shows from recent (or even current) seasons. Some shows are available for viewing the day after they air on TV (Heroes for example).

Also, you don't need additional hardware for Netflix to play on your TV if you have a computer. I've got a PC connected to my flat screen TV in my living room. I can play Netflix movies through that.

NEO

November 25, 2008 01:57 PM

There is no box...

I rented a movie from a vending machine for 1 dollar per day... When Im done, i take it back.. no lines, no downloads, no players, no snotty clerks, no 5 bucks per rental, no monthly charge, no usps

BEAT THAT!

Don

November 25, 2008 01:57 PM

idiot.

pon

November 25, 2008 02:36 PM

lol.

CG

November 25, 2008 02:41 PM

The Red Box model (vending machines) is great when you've run out of things to do with your family on Christmas, or you only watch a movie every few weeks. The selection is pathetic and changes infrequently. I prefer my NetFlix subscription because of the very large catalogue. The online streaming is nice, but I rarely use it. Until more media is online in a convenient, less proprietary format, I'll stick with my DVD subscription service. It still costs less than $1 a day per disk.

Bob

November 25, 2008 02:47 PM

I've been on Netflix for years, recently adding Roku. It'd take a lot to get me to give it up.

MichaelM

November 25, 2008 02:48 PM

But NEO--the vending machine IS a box.

And those particular boxes are few and far between. Not everyone in this country lives near a rental machine. In fact, most do not.

Paul

November 25, 2008 02:48 PM

Redbox for new popular releases, plus an Xbox360 or laptop with Netflix minimum unlimited service is what I feel the best combo is.

Redbox gets you $1 new releases in a limited selection. Netflix $9 plan gets you access to more rare titles and Bluray in the mail, while allowing streaming of a number of others through the laptop/xbox360.

Cost effective, timely new releases, convenience. I like this combo.

joe

November 25, 2008 02:52 PM

Blockbuster has to learn to stop nickel and dimming their customer I got charged a whole day for them checking in the movie a half hour after 12 in spite of the fact I returned the movie on time.

Digiboy

November 25, 2008 02:55 PM

It are people like "NEO" that make companies like blockbuster clinch to the "old" model. Just like the people defending offline shops vs online stores. Saying they don't have to wait for ups. Suckers.

Mark

November 25, 2008 02:56 PM

I don't know why BlockBuster doesn't partner with NetFlix rival partners. BlockBuster should be partnering with Sony PlayStation to give their users the ability to rent and stream BlockBuster movies for a subscription fee. We have both the XBOX360 and now have subscription to NetFlix, and we have a PS3, and Sony is missing an opportunity here.

Joe

November 25, 2008 03:01 PM

Easy to beat, Neo. You had to travel to get that movie (unless the machine is in your living room). Then you traveled back to turn it in. All that traveling, and you had to settle for a movie you didn't want, but settled for anyway because of limited choices. Hard to get 12,000 movies in a vending machine. Let's also consider that you chose to visit the vending machine and didn't find a movie you wanted, and chose not to get a movie at all. Wasted time, wasted money. Like Don says, you just might be an idiot. Please turn in your computer keyboard operator's license.

frank

November 25, 2008 03:06 PM

Vending machine movies...... you must mean redbox. I thought you said "There is no box..." okay. Lame. There are lines....you get morons browsing through crap with 5 kids hanging off them, when all you want to do is return a movie. And there are no highdef movies in there. I like my Netflix, thanks.... it works great for me. And whatever the 360 tries to do with HD streaming, will never compare to a bluray disc, so just stop.

Nell

November 25, 2008 03:14 PM

This doesn't seem to ever end --- the two business models, etc.

Al

November 25, 2008 03:22 PM

As far as using the PS3 goes for downloads, their content takes forever to download compared to XBOX. Downloads also pause when you start playing a game or do anything other than watch the download bar. I don't think partnering with PS3 isa good idea.

Wiz

November 25, 2008 03:28 PM

Blockbuster just doesn't understand Internet - I agree with Tom. Netflix = Free online viewing with a the lowest monthly subscription. Hook your laptop/computer to your TV and watch it big.

Or go the not so smart route where you pay roughly $5 per movie.

hmm zee guess what i'll do.... :)

ChimpBush McHitlerBurton

November 25, 2008 03:30 PM

Redbox is DOA. Don't even think about it. Blockbuster is late to the game. Period. If they don't come up with a plan that equals Netflix's Double-Punch of Disc-by-Mail and RokuBox (unlimited streaming, free of charge), Then they will be bought by Netflix some time in the future.

The unlimited streaming admittedly doesn't include the latest/greatest movies; I have to use the DVD portion of my account for those (oh dear, second day delivery? shudders!), but what the unlimited streaming *does* deliver is tons of off-beat and rare programs that I might not have seen otherwise. I've been turned on to *really* fun stuff through the online streaming.

Wouldn't trade *that* for anything.

They started with 10,000 films/shows, and then added another 2,000 a couple of months later. I see another 2k coming soon. You just cant beat that.

Ashtonian

November 25, 2008 03:30 PM

We settled on Blockbuster.
their Website was much better.
The Netflix site is pants. They don't let you easily get to new movies.

Quarrel

November 25, 2008 03:35 PM

Ever since Blockbuster sent me to collection over a $3 late fee while I was in college, I have refused to ever spend a single penny in anything they will ever be associated with. They can't go bankrupt soon enough.

andy

November 25, 2008 03:51 PM

blockbuster model is basically cable tv pay per view. it's not popular and it never will.
netflix is good for old movies but not new ones since they delay delivery of new movies when you rent too often.
redbox solve the problem with getting new movies while netflix help me get the not so new movies. a combo of both is the best.
yes...where is the ps3 streaming?
anyway, streaming is slow and have download caps (think comcast) and even if it's fast, you have to think storage to backup ...or else you are just renting it.

rakekiller.com

November 25, 2008 03:52 PM

as i understand it, directv will be reintegrating with TIVO in the first quarter of 2009, and when that happens directv/tivo/netflix will be available from one single unit. That will kill blockbuster

vaporland

November 25, 2008 03:52 PM

@nell, there is a 3rd business model which is very popular: thepiratebay.com has a pretty good deal - no charge to download, and watch them for as long as you like.

Most TV shows are available the same day they are broadcast, without advertising!

My wife likes netflix online viewing since it became available for the mac because she likes crime dramas and we don't have cable or even a TV...


Jay

November 25, 2008 03:58 PM

Different solutions for different people... What works for NEO works for me, because the local Redbox is close to home, and "on the way" to every place I go. I need to supplement it with something else. I have tried Amazon Unbox, and will consider Blockbuster set-top. I have a real aversion to adding any sort of "subscription" to my limited budget. That is why I like the way RedBox lets me control costs.

anjenaire

November 25, 2008 03:58 PM

Not to get too picky with the math but 25 movies @ 1.99 = $50 (or so) thus the player is net $50. But I would be tempted if there is HD/Blu-Ray content. I don't watch many movies per month so the pay as you go model is probably a good deal for me. Especially in the winter when I don't want to go outside and get the movie. In the summer I don't watch that much TV period. The $9 Netflix plan would be equal to 4 1/2 movies a month versus the BB plan. I'll go visit the movie list to see the quality of movies (my experiment with Netflix was a lot of old movies and quality was poor even with mid grade DSL... granted it was on a large screen HD TV, it looked much better on my laptop).

Mark Ricard

November 25, 2008 03:59 PM

Its simple... renting is stupid. What they should do is simply say "Pay $1.99 to own the movie and we will stream it to you whenever you want, as much as you want, forever." Face it, people buy DVDs and rarely watch them anyways. This would kill all of the bit torrent stuff because, frankly, having to buy and backup all that disk space is costly. Making it that cheap would motivate people to buy more than they need and rarely stream it.

Keep it simple, stupid!

Coilte

November 25, 2008 04:14 PM

With the ability to return the movie sent by mail to a brick and mortar store and get a free in-store rental in return for it while they send me the next movie in my queue is a great feature and one that Netflix just can't offer. I can exchange it for a free game or movie rental and it even removes the movie from my queue so I don;t get mailed a duplicate to one I got in-store.

josh

November 25, 2008 04:14 PM

wow that article was so biased. you fools do know that blockbuster has the same service as netflix except instead of 12,000 obscure movies, you just take your movies into a blockbuster and exchange them for any movie/tv show they have(like the new ones, gasp!). AND the turn around time is _1_ business day because they send the next movie when your movies are scanned in at the register. no need for you to wait until the movies are mailed back to netflix.

so to sum it up: you get your movies in the mail, you watch them, a new movie comes out, you exchange your movies and get the new releases. then your next mail movies are there the next day.

but i guess "unlimited" downloads of a highly limited selection is really neat too.

Nasair

November 25, 2008 04:20 PM

I use NetFlix so I'm partial to it but between NetFlix and Hulu.com I don't see any reason for Blockbuster because I'd rather pay a subscription then pay per movie, or nothing at all like on Hulu.com

cihan

November 25, 2008 04:21 PM

blockbuster sucks..netflix rocks!!

the only downside of "instant play" is that they are using microsoft's video player, it has obviously lots of bugs and only works under IE.

This market is getting really interesting and competitive.. Hulu's excelent video quality HD streaming, netflix's 12000 titles instant play archive and now youtube is going to start streaming MGM studios movies..I think blockbuster is going to go out of business.

Che

November 25, 2008 04:33 PM

Rebox would have been brilliant business model 15 years ago. That's what I thought when I first saw those machines - 'WTF? Is this some West Coast retro-90's hustle? As if!' If they went partially online ($1/day streaming) they'd beat everyone. Have them spit out codes to access through your computer/Tivo/game system along with discs. That'd mean they'd have to setup/outsource sizable data centers along with tying all the vending machines to them (to track/expire codes, etc). Maybe partner with Netflix, combine their inventories.

I dumped Blockbuster because of their 'nickel-and-diming' mentioned above. With Total Access their "no late fee" returns had a 30 day return "restocking fee' that cost as much as a stand-alone cheap rental/purchase! @$$-holes.

Streaming has been firmly in place for some time a la bit torrent and more recently sites like Hulu. BB & Netflix are both just playing catchup, BB pretty badly. I've seen 2 or 3 stores close in my area.

What would be neat is if you could *permanently* purchase space and titles online to access as you wish...jump on the cloud computing bandwagon for those who want to 'do it legit'. In reality it would come from the same storage pool but you'd have to pay for the privilege of having permanent access to that selection. If it exists I haven't seen much mention of it.

The_Spartans

November 25, 2008 04:39 PM

Are we discssing this with someone in Europe who uses a catalogue? At least we don't have to call on the telly...

Gary Smith

November 25, 2008 05:03 PM

Why doesn't Nexflix steam it's whole catalog? The cost to ship and return compared to stream. Not to mention shipping materials, labor,& postage. Save the planet and make more profit. Netflix put the new releases on stream, we will pay our monthly dues and you will make more money!

Fez

November 25, 2008 05:27 PM

In a few years , all the Media - Movies and Songs will be some where on the cloud servers. The subscribers will buy a multi-pass to the Albums and movies. They can get them any time, any place ,any device. The days of Steve selling Hard Drives and NAND Flash at insane markups will be gone..lol

Mark

November 25, 2008 05:29 PM

I agree with the other Mark, but Netflix should also be partnering with blockbuster competitors like HollyWood Video. They could then offer the in store exchanges, in addition to the streaming and mail rentals...

mike

November 25, 2008 06:04 PM

What do you think the cable companies are going to do? Sit by while their pay per view revenue goes to netflix? No, they will institute bandwidth download caps, like Charter is already doing. Get ready to pay more for internet service if you want to download or stream movies.

Steve Wildstrom

November 25, 2008 06:23 PM

@Vaporland--At the risk of subjecting myself to all manner of flames, I have to protest the notion that the Pirate Bay is any sort of business model. What it is is organized thievery or at a minimum an organization that facilitates thievery by others and its operators are awaiting trial in Sweden on criminal charges.

The fact that people don't like the copyright laws doesn't give them the right to break them. And I hardly think that the desire to watch a movie without paying for it rises to the sort of right for which civil disobedience can be justified.

Jerry

November 25, 2008 06:31 PM

Blockbuster made me pay for a movie I never rented. I could not convience the store that this was a mistake. I had to pay for the movie. From that I leared that Block Buster does not care about good will. I will never ever go back to them. Netflix 2 years and I am happy, they are the best!

Steve Wildstrom

November 25, 2008 06:31 PM

@Gary smith--An important point of clarification: Netflix doesn't control what movies it gets to stream, nor do any of the other download or streaming services. That's why most of the Netflix catalog of 120,000 or so titles is not available for download from Nextflix or anyone else. Who gets what titles for what use is determined by the content owners, the studios. That's why no two services have the same offerings and why on the same service, some titles are available only for sale and others for sale or rent. The studios impose a complex system of windows that governs what content is available in which geographies at what time. The folks who run download services spend a great deal of their time negotiating deals with studios, sometimes on a movie-by-movie basis.

Mabuse

November 25, 2008 06:34 PM

LACKLUSTER has been a millstone around the necks of consumers and artists alike since its great Imperialist Days of the mid-90's. Don't forget that this is the same company that edits releases for content and length to promote its own ethical views and save a few sheckles in production costs. Since most true, educated, discriminating devotees of cinema eschew the lion's share of big "blockbuster" new-releases as mindless, artless pablum, Netflix is a sound source for films. LACKLUSTER on the other hand ought to be content with its actual role as the corner video-crack dealer to the mindless, stimulous-response driven masses and stop its constant imperial conquest policy. If it weren't for Netflix, I'd buy most the the same titles I rent from Half.com or maybe Amazon, but I would NEVER rent it from LACKLUSTER. Since we are entering a "new age" that rejects hyper-capitalism, imperialism and just plain mean-spiritedness, its time to vote now with your pocketbook and send LACKLUSTER packing alongside Dick Cheney.

John

November 25, 2008 07:53 PM

Doesn't Blockbuster offer a free trial of this at this site? http://blockbuster.lgs4.com

I use it all the time and it seems to be one of the most cost effective for me. But everyones situation is different I guess.


/

Cheapo

November 25, 2008 11:23 PM

Have done Blockbuster and Netflix...

Blockbluster by mail 2.99/mo 2-disc is fine for me. I even got $25 for signing up plus two months free through an incentivized offer (one of those trialpay things), so I basically get like a year free, lol..

I only have time to watch movies a couple times a month, and any more i get with free coupons for ppv or redbox mondays, lol...

fletc3her

November 26, 2008 12:41 AM

Redbox is fantastic. If they can just make the process a bit faster and make returning a lot easier then they have a winner. $1 for a new release is great, and as some have said, it's a great addition to a Netflix account when you want to get a movie today for the kids without futzing with your queue.

Netflix has a lot of great movies to stream, not many new releases, but still a real solid catalog. With the addition of Starz movies they are getting some pretty good new titles as well. The Roku box works well and I'm happy they now support Macs with the streaming.

PLUS, they have practically every movie ever released on DVD. I just finished watching Hancock which Netflix mailed to me on the same day it became available in the stores.

bob

November 26, 2008 02:01 AM

I live in Belgium where cable tv sucks. It's simple, I wont invest for it, nor a box, a device or whatever it is that I would need except a software on my pc. I want to pay and legally download and own movies on my 19 inch screened pc. The best I found is wizzgo.

Juan

November 26, 2008 02:09 AM

Don't get me wrong. Amazing movies exist and they are worth watching. Services like Netflix facilitate the process, particularly since most of them are independent or foreign. However, don't you think there is a risk that all these services will take over our lives to the point where we are passively watching a screen for hours every day as opposed to playing sports, conversing with friends, attending theater and so on?

ala_frosty

November 26, 2008 03:17 AM

Blockbuster limits their film selections to "appropriate" films and even edits the films they do offer to make them more palatable to "their audience." I'm definitely more interested in watching the original film rather than the Blockbuster censored ones so I'm sticking with NetFlix. Make no mistake, there are partisan politics behind these business models.

Robynn

November 26, 2008 05:04 AM

I gave up on the dvd vending machines because half the time all the movies in it are rented, and the selection is very poor. The real deal breaker came when the machine itself was down half the time when I needed to return the movie. You then have to call some shmuck on your cellphone from the grocery store (because the folks at the store have no responsibility for the machine) and wait forever to get the stuff straightened out.

Surprisingly no one here has mentioned Apple TV, which came out long before the Netflix or Blockbuster set top boxes.

Additionally, you can hook up your Macbook or any laptop with video out and watch any of the tons of movies and TV on iTunes, many that are free and a good selection to rent. Also all the major TV networks have their shows already on line, again - for free.

Most of our local video stores (including several Blockbusters) have closed, the future of television viewing and movie rentals is all online.

james pierce

November 28, 2008 11:34 PM

At the end of the day, Hollywood will license to any company that is willing to pay. More the better from studio's perspective.

Unless blockbuster has something better than recycling defunct Movielink up their sleeve, Folks such as MatrixStream make starting vod service a breeze. Netflix is moving fast with their subscription service and vudu is pushing over 1000 HD titles.

BB future looks pretty bleak in the digital area.

Barbara

December 3, 2008 11:41 PM


I recently came accross your blog and have been reading along. I thought I would leave my first comment. I dont know what to say except that I have enjoyed reading. Nice blog. I will keep visiting this blog very often.

Barbara

http://www.ipodepot.info

Jared Conley

December 23, 2008 11:06 PM

It Really Comes Down to Just One Thing:

And that's whether or not you like the convenience of in store returns. BB has made it very easy for in store renters to try out the occasional online rental. Netflix edges them out in most online rental areas (except the throttling of new releases), but can't compete with the physical locations of BB. I've used both and am a current Netflix user, but finding myself at Redbox a couple times per month when I really want to see a movie.

Found another good overview here:

http://www.joefission.com/2008/02/movie-rental-death-match-blockbuster-online-vs-netflix/

I'd love to see an alliance between Netflix and Redbox. I've used both BB and Netflix and am a current Netflix user. But BB has recognized their strength and their newest plans cater to folks who are primarily instore renters, and might dabble online. I love Netflix, but often find myself at Redbox for rentals. Netflix with any kind of physical presence could be the nail in the coffin.

Post a comment

 

About

BusinessWeek writers Peter Burrows, Cliff Edwards, Olga Kharif, Aaron Ricadela, Douglas MacMillan, and Spencer Ante dig behind the headlines to analyze what’s really happening throughout the world of technology. One of the first mainstream media tech blogs, Tech Beat covers everything from tech bellwethers like Apple, Google, and Intel and emerging new leaders such as Facebook to new technologies, trends, and controversies.

Categories

 

BW Mall - Sponsored Links

Buy a link now!