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Next Match: RedBox vs. NetFlix

Thursday, April 28th, 2011

Few years ago, we started off with a BlockBuster service to get DVDs by mail and also pick up a couple of in-store free rentals. I liked the in-store deal because I could rent newer movies which usually have a long wait for home delivery.

And then, NetFlix came, conquered BlockBuster with streaming movies and TV shows in addition to the mailed DVDs. They really nailed the deal for me when they streamed via my Wii console, for no additional charge. When the BlockBuster store around where we live closed, we gladly cut the cord from my BlockBuster and switched to NetFlix. Too bad, BlockBuster didn’t copy NetFlix’s strategies even if they couldn’t creatively compete. The rest of the market voted just as I did and blockbuster is limping its way to RIP.

After using NetFlix service for a while, we noticed we were streaming movies more frequently than we were watching the DVDs. Despite the lack of good selection and low-quality streaming video (on 56′ TV), we preferred to pick and chose to watch whatever and whenever we want. Laziness chimed in too, NetFlix DVDs would lie around our entertainment center for days before we got to it. Over time, I figured we weren’t watching more than two movies a month through mailed DVDs. Besides, NetFlix had same queuing issue when it comes to newer movies available for immediate shipping.

Redbox One Billion Movie Rentals!

Around this same time, we finally bought a Samsung Blu-Ray player. Not wanting to wait for NetFlix shipping, I tried renting over night Blu-Ray rentals from RedBox. Blu-ray is spectacular – if you haven’t tried it, run, not walk, to check it out soon, RedBox solved the one problem I had with both BlockBuster and NetFlix: instant access to newer movies. So the combination of RedBox + Blu-Ray, I was royally sold.

We have since discontinued NetFlix DVD mailing service, but staying with streaming, though its usage has gone down even while NetFlix is beefing up its digital catalog. I have written about NetFlix before and I continue to use them as lessons on strategic thinking.

First, RedBox is available in locations that are practically a shout away from where we live. This one idea in itself might be a big winner. It’s ironic that the fast-disappearing BlockBuster stores could have easily stayed to do this cheap, over-night rental thing! In any case, until the other guys can provide Blu-Ray quality streaming and newer movies, RedBox neighborhood kiosks will continue to be prosper. I won’t be surprised if other companies soon flood the market with Kiosk-based services. CoinStar, which owns RedBox, had long established strategic partnership with retail establishments that helped introduce this potentially golden-goose innovation.

Second, by virtue of overnight rental, RedBox is eliminating a typical lazy consumer behavior. At the risk of paying more, I am forced to watch the movies overnight and return them, opening up more revenue for RedBox from the same DVD. Not only that, I am now more inclined to rent (even more revenue!) another newer movie from RedBox sooner than later. What used to be BlockBuster and NetFlix’s proposition, “Keep the DVDs as long you want”, is now wasted asset which otherwise should be making money! So RedBox is re-defining the a strategy which NetFlix previously re-defined which BlockBuster had previously defined. May be RedBox didn’t do this consciously, but at least a good strategy is emerging. This is classic business strategy at work.

Third, RedBox is aggressive about promoting the newer movies, in spite of the studios forcing delay between the day home video is released and the day kiosk rental is available. Nothing beats the joy of watching a good new movie late at night in your own cozy family room, that too on blu-ray and 56′ wide-screen home theater. Add to that the magic number of a $1 rental ($1.50 for Blu-ray) – I think we have a wholesome deal as sweet as mass-market American deals are supposed to be.

While NetFlix and the dozen or so aggressive competitors are vying for the online streaming business, RedBox, in my opinion, is firing on all guns around American neighborhoods. Especially around communities where internet streaming may not as popular as urban centers.

And don’t forget an important, but somewhat subtle proposition: RedBox is silently gaining brand awareness through well-designed, well-placed kiosks across high-traffic locations. If the same spots were to go for advertising, I bet they cost a boat load. Just take Wal-Mart alone; Millions of Americans who walk in and out of Wal-Mart everyday bestow their eye balls on a RedBox kiosks. More and more of these by-standers will be tempted by the site of people queuing up in front of attractive kiosks. Within America, RedBox may soon be as recognizable as Wal-Mart or McDonald. In the marketing world, that awareness is priceless.

Blu-Ray quality streaming may come soon but the idea of renting discs will stay at least for another few years. That is a compelling reason for RedBox’s to keep a watchful eye on the streaming technology as well as consumer wants and behavior choices. If CoinStar can could keep up with both, I am certain they can become the smartest innovator in the self-service segment converging convenience, retail and entertainment.

Next Match: RedBox vs. NetFlix

PS: There is one competition that usually goes unmentioned: Local libraries. They rent free rentals (mostly DVDs, very few offer Blu-ray) but they have the same queueing problem as NetFlix, especially since library rentals are usually for a week. Perhaps, RedBox will soon hit the queueing issue as more folks start embracing it.

Why I like NetFlix – and lessons on business strategy

Friday, September 3rd, 2010

I was hooked to NetFlix when they launched – Of course, need I say I love movies? NetFlix kept my appetite going for many years. When BlockBuster made a move to offer online rentals, I had no reason to notice. When BlockBuster made a move to exchange online rentals for in-store selections, I was impressed. As a student and practitioner of strategy, I think this is one of the brilliant business moves. Right when everyone was dismissing video stores as useless brick and mortar assets, Blockbuster brought an innovative solution that converted a supposedly wasteful asset (stores) into a strategic one.

Alas – BlockBuster couldn’t sustain its strategic thinking. If you search for Blockbuster in the recent news, there are going down the drains – possibly bankruptcy soon. Among other reasons, NetFlix is definitely one big sucker kicking their butts.

I can’t stop praising NetFlix. Their collection of movies, documentaries, TV shows etc is more than enough for any above average movie/TV buff. They offer streaming at the same cost (Blockbuster was charging separately!). They offer streaming to TV via Wii – no extra cost or extra hardware, Do you want more? Now, I can watch NetFlix streaming in my damn iPhone – again no extra cost. I’m loving it. I really think future of customer service and retention is this – offer your products and services around the customer’s convenience.

I imagine the guys in the boardroom of BlockBuster still think they know what they are doing. I bet they don’t. As they were ignoring NetFlix, another innovator – RedBox is killing them. If you ever think of renting a movie in BlockBuster, think again…and perhaps, look around, you will find a RedBox and that’s all you need for the night. In my opinion, Blockbuster is letting RedBox and NetFlix kill it, rather consciously. Pick any business consultant from the street he could tell you to how to handle it (leverage you brand strength, buy one or both of them or offer the same services – just ridiculously better and cheaper).

These guys are all in the dog-eat-dog business so let’s face it and fight to win. Watch out – Folks are already saying NetFlix won’t have this business for too long. I have been expecting NetFlix should buy RedBox. Then, YouTube, Apple, Amazon, Hulu and a host of others streaming movies, TV shows and user content left and right. Besides, TVs already have built-in internet so streaming is going to be as simple as flipping channels. So I won’t be surprised if NetFlix gets killed or sucked into Amazon or some other big dogs.

But something tells me these guys are smart and will continue to innovate and play the game. As for rest of us, let’s enjoy those documentary on NetFlix that we would otherwise never to get see and along the way, watch for some real world lessons on business strategy.