Blockbuster Revenue Drops 5.7%; Focusing On Membership Gain

Posted Nov 3, 2007

Netflix, Inc. (NASDAQ:NFLX) pulled the rug out from underneath where Blockbuster Inc. (NYSE:BBI) was standing these last couple years. Netflix, the Los Gatos, Calif.-based online movie rental company, boasts 6.3 million subscribers and a library of 70,000 movies.

Based on an e-mail survey I received from Netflix a couple days ago, Netflix is also continuously finding ways to improve their transportation supply-chain. The e-mail survey asked me when I returned The Rundown starring Dwayne “The Rock” Johnson and Sean William Scott (a.k.a. “Stifler”).

Dear Amit,
Thank you for your recent return of The Rundown. Please tell us when you mailed back this movie by clicking on the appropriate link below.
* I mailed the movie Thursday, Nov 01, 2007
* I mailed the movie Wednesday, Oct 31, 2007
* I mailed the movie Tuesday, Oct 30, 2007
* I mailed the movie Monday, Oct 29, 2007
* I mailed the movie before Monday, Oct 29, 2007

My lazy side appreciates having movies brought to my door. There are three factors that I use to determine where my business goes between Netflix and Blockbuster. Two of them are price and speed. The third reason is the user interface. Netflix’s UI is a lot more friendly because they utilize AJAX-like tools to recommend movies and rate movies.

When Blockbuster released their third quarter financial results a couple days ago, shareholders of the company may have questioned how sustainable the company’s current business model is.

Jim Keyes, Blockbuster’s Chairman and CEO responded by providing a glass half-full perspective of the situation:

During each month this quarter, over 20 million customers around the world used the BLOCKBUSTER(R) brand to satisfy their needs for media entertainment, and that customer base presents us with a tremendous opportunity.

Keyes added:

Our goal is to continue to increase our membership base by providing even more ways for customers to get the entertainment they want through our stores, through the mail and through new technologies.

In my opinion, to increase membership, you do not close 526 stores in one year alone and do not pull the plug on the Total Access program. You increase membership by function as good as Netflix’s, reduce prices, and give a further incentive for its current members to stay. Another potential form of revenue that I have not seen Netflix or Blockbuster use is advertising.

Digital advertising companies are now backed with billions of dollars from companies as big as Microsoft, Google, Yahoo, and AOL. These companies must be anxious to find ways to get access to businesses that have large memberships. Will their a public outcry if ads show up on Blockbuster and Netflix’s homepages, not likely. Even if ads show up briefly before a streaming movie, I highly doubt that users would complain too much.

As a happy Netflix customer that doesn’t want to see Blockbuster forced to shut-down, those are my two cents. As a movie rental consumer, I want to continue to have my options.

Information Source:
[1] CNET Say goodbye to Blockbuster