If someone told me a few years ago that I would pay $20.00 a month so that I could get up to 3 movies at a time - in the mail - I would have laughed. I would have been laughing at the “in the mail” part of the statement. How, in an era of digital delivery is a traditional mail service laying the lumber to Blockbuster? I laugh thinking about the Blockbuster execs that spent all of their time (hopefully) worrying about how they were going to compete with the On Demand services from cable providers only to have Netflix come out of nowhere and steal their cookies with a mailbox.

How did that happen? And what made the folks at Netflix think that they could even do it? If I was the one that had the Netflix brainstorm, I would have stopped the moment the two way necessity of the United States Postal Service came into the picture. It just doesn’t make sense.

Netflix beat Blockbuster despite the need for mail for 3 reasons:

1. Browsing and searching and cross referencing movies, actors, directors and key grips is easier, faster, and more effective when done online. Going to a physical store before deciding what movie you want to watch is the stuff that ends relationships. Who really thinks in terms of Drama, Action, and Comedy when they get to the store? I don’t. I want to see another film by David Fincher. I want to see something kinda like Cidade De Deus. I want to see anything that my friend Luke recommends. Blockbuster doesn’t make this possible. Netflix does.

2. The Netflix Queue has changed my life. It isn’t perfect yet, but it has transformed the way that I consume movies. I have 350 movies in my queue at anytime - movies my friends recommend, movies that star actors who’s work I enjoy, movies that are recommended by Netflix after seeing my rating activity of movies that I have seen. No more walking into the store, a tabula rasa. No more trying to remember the name of the movie that Luke recommended to me 2 years ago. Forget browsing the suspense shelves, hunched over like Quasimodo, only to realize, after looking at every title, that Panic Room is actually filed under thriller.

3. Late fees. Nuff said. Actually. No. This one is huge. Even Blockbuster tried to do away with late fees but they couldn’t. They couldn’t because if they let me keep the Broadway and 8th copy of Raging Bull for 2 months, then no one else could watch it. Their model of physical locations prohibits them from allowing me to keep a movie for a lengthy (and it is lengthy) period of time.

While not an exhaustive list, Netflix’s queue, their open and cross-referenceable database, and their open ended rental periods are what allowed them to beat Blockbuster. But interestingly, On Demand and other digital delivery mechanisms have the same advantage over Blockbuster and they have obvious advantages over Netflix. When the cable companies or the content providers learn the Netflix lessons, they might very well make Netflix obsolete.

Cable needs to immediately implement the following Netflix lessons:

1. Give me the option of paying a monthly fee. This would eliminate the cable version of a late fee whereby after 24 hours I can no longer view the movie that I purchased. I paid for it, let me watch it when I want to watch it. Hell, let me watch it twice.

2. Let me see any movie ever made (or at least the 50,000 that Netflix offers). When I had cable, nothing was worse than going to OnDemand only to realize that I had seen all of the movies that they were currently offering for the month (50 or so).

3. Offer me the queue function as a service. When I turn on my T.V. I should see a channel - my channel - that has a browseable list of the movies that I have said that I want to remember to watch.

4. Add good search functionality. Make it easy for people to find good movies. This need not be on my television. As evidence by Netflix, users are willing to go online to search and choose movies and then have them delivered in another medium. If they are satisfied to keep a queue online and then wait for movies in the mail, they will be thrilled to choose movies online and then walk into their living room, turn on the television, and watch it.

Once cable companies have implemented the features above, then their natural advantages should knock Netflix out of the box. Digital delivery has several natural advantages. Digital delivery is instant. The one problem I have with Netflix is that my “movie mood” sometimes shifts (drastically) while the movies are in USPS transit. If I add a movie to my queue and it is instantly available on my television, my movie mood is synched to my available movies. Digital delivery is inconsumable. Blockbuster has late fees because they need that damn disk back so they can sell it again. While Netflix has a better distribution structure, they still are still hampered by physical assets that can only be in one place at a given time.

In the end, it is weird that we had to go to a middle step between physical stores and digital delivery - and even weirder still that the middle step involved the mails, but if cable learns the Netflix lessons, then consumers will get an amazing service, one that has been in the wings for a long time now.

This entry was posted on Sunday, February 26th, 2006 at 9:33 pm and is filed under Movies, Innovation, Business, Netflix. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.