I feel that way now, but I don’t think it was obvious at the time. The idea of getting movies in the mail seemed so archaic that there was a mental barrier to overcome. People had to be educated about how Netflix worked. The original model followed a well-tread pattern that mirrored how people used libraries. The Netflix model was much more innovative, but it is hard to remember this now that we are used to it.
I also think that a huge part of the success of this model was due to how hard Netflix worked to make every aspect of their business as efficient and customer-focused as possible. Look at how much effort they put into just their recommendation engine. I think if the Netflix service hadn’t been as good as it had, then the concept would have died on the vine. Even after it was proven, Blockbuster tried the model and failed. And Blockbuster had a huge advantage of brand name and ubiquitous stores.
I’m not sure how well the model has worked for WalMart.
There’s like three near me. All in dead or dying strip malls.
Oh, except for the one in the mall. And the one that takes over the long vacant former “Toys-R-Us” for a few months a year.
These things are like death. I’ve been in one - they sell balloons, candy, and otherwise just Hallmark party shit. I’ve never seen one with many customers in it.
No, I was being serious. Netflix’s business model was so radically different from anything that came before it that nobody thought it could possibly work. Yet they ended up utterly destroying the video store model, which had worked for decades.
Netflix is the 2000’s version of Xerox. Did you know that before the photocopier, the idea of simply running off a few copies of a document to pass around was considered completely absurd? You had a steno pool with carbon paper for that. Or you had one of those mimeo machines with a fumes that get you high. Anything bigger, you had a printing company for.
No investor could see the point of a copy machine, nor imagine who would rent one. (You were only able to buy them later.) Same with Netflix.
I’m not sure what you mean by “how they can ever monetise the first two”. The answer seems to be ads.
I don’t know how much they make in advertising but that’s how they can make money. It’s not much different than free TV stations or free newspapers. You incur the cost of producing information (in Youtube and Twitter’s cases, the system which allows users to upload information), this gets you an audience. Advertisers are willing to pay to have access to that audience.
Did you mean that even with ads there’s no way they would be able to make money?
There’s a shop in Newtown that sells nothing but buttons. And one across the road that selling nothing but Latin American-themed home decorator items; here in Australia? Where the Latino community is tiny? Odd.
I’m told that Turbine have doubled their profit since making LOTRO free-to-play. The user community has grown markedly (myself among them) and if you want access to certain areas, quest lines, or items you can either play for a decade to earn in-game points, or buy them now. That is, pay real money for something that is literally worth $0 so it’s virtually all profit.
All the non-WoW MMOs are either doing this or looking at it, I’ll bet.
I had a totally different experience. In about 1999, one guy in our office in mentioned Netflix at lunch. Within a month, about 75% of the office had subscribed, and we were all just giddy about it. A lot of people bought Netflix stock when they went public a few years later.
This was a high-tech company, so maybe we were all more open to new high-tech kinda businesses. But I don’t seem to remember much, if any, of a mental barrier.
A pointed out, that business model is almost completely intuitive once you step back a back and think about it. You pay a subscription fee for something like 1 - 3 movies at a time. You effectively pay for one of those movies each month until you cancel. The best thing for them would be if you just order three movies and keep them forever and keep the subscription going. Netflix doesn’t care if you ever send them back but they will put them back in rotation when you do send one back and send you another at media bulk rates prearranged with the USPS. They don’t even have to pay for stores. I admit that I don’t understand how the Watch Instantly revenue stream model works but there is no way they can lose money on that either once they have the IT infrastructure in place. They just make the deals so that the producers get some profit along with themselves and everything is streamed over the internet on demand. That is a sweet business model.
I admit that I am the one that kept late night convenience stores open at some points in my life. They usually aren’t empty and they have high profit margins for items.
It’s only intuitive in hindsight. If you were a VC investor in in 1998, would you have given these people money? (If you say “yes” you’re full of shit.)
Sure that model is intuitive if you assume a significant number of subscribers, but they didn’t have any subscribers when pitching for VC. I am sure plenty of people said, “It would be a nice idea if you could make it work, but you’re not going to get anyone to sign up for that service.” Or, “Let me get this straight, you request movies and days later you get 3 of them (but you won’t know which until they come). And you pay $15 a month for this? For that same amount I could rent 5 movies, get them right now, and know which ones I rented. No one is going to sign up for that.”
Of course, the real value to the customer is that they could watch a ton of movies in a month (much ore than they ever normally rented) and it still only cost $15. And if you’re watching a lot of movies, you don’t really care about the order. I’m not sure that this was obvious to everyone at the time.
One I don’t get is the Honey Baked Ham stores. They seem to do a lot of business at Easter, Christmas and Thanksgiving but who wants that stuff the rest of the year? And of those who do, are there enough of them to support actual bricks-and-mortar stores (400 of them according to the website)?
Well, they probably do as much business around those particular holidays as they do for the entire rest of the year combined. My dad owned a small store with a deli. He built up a fairly brisk business selling platters of finger sandwiches. The margin on these was very, very high. The profit from these platters on something like superbowl weekend could easily equal that of a month or more of cigarettes, milk, and bread.
Sorry - my point wasn’t that I can’t see how Facebook makes any money at all, because the answer is right in front of you in the form of advertising (and all those people who makes apps to put on FB as well, I imagine that’s a major cash cow right there).
What I don’t get is how simple internet advertising, even to the extent that FB’s data matching ability can get them to a targeted audience, can be so lucrative that it makes FB worth tens of billions of dollars. It’s a god damn website!
Let’s not forget that old yarn about FedEx and Fred Smith’s masters thesis.
As for Netflix, though, how many subscribers do they have? I question the veracity of them taking down Blockbuster. When I say The Pirate Bay took down Blockbuster, it’s half in jest; yet I wonder if there are other significant factors. Were their operating margins so tight that they died with a 5% (or whatever figure) loss of customers to Netflix?
OK, so I can get a black horse by playing for free, but if I want a pink horse, which is identical except for the different color, I have to use credits that cost real money to buy?
Yeah, I can see some people doing it, but enough to make a serious profit? And they’re now worth more than Electronic Arts.
I don’t see how Netflix can offer unlimited streaming of apparently thousands and thousands of titles for less than $10 per month. How do the royalties work on that? Also the bandwith costs must be immense.
For several years in the late 90s I worked for an audiobook store that used the exact same model as Netflix, except mail was only a small secondary part of the business. You could either rent audiobooks using the Blockbuster model or sign up for a Netflix-style subscription.
Admittedly, it was hard to sell, because the owners of the store wanted the money up front rather than month to month – Netflix would never have done as well as it has if they demanded people pay $200 for a 12-month sub before they ever got a single disc. But there were loads of customers who absolutely adored the service; rather than have to pay for every single audiobook they took out of the store, they could treat it as a personal library without a concern for due dates. I loved the model myself, and I’m pleased that Netflix has gotten so much success with it.
So yes, had I the capital at the time and knew about Netflix, and was older than 16, I might well have put money on it.
In defense of party stores, the Party City locations around here seem to do pretty well, especially around Halloween when they are absolutely packed with costumes that have a huge markup. They are always very crowded this time of year. My sister gets Thanksgiving decorations there (and she is the only one I know who decorates for Thanksgiving), and they have plenty of Christmas decorations and Easter junk too. Ornaments are big sellers for them as well.
The rest of the year, they cater to every frazzled mother who’s kid says they want their birthday party to be ‘Spongebob themed’, or ‘princess themed’, or whatever, and the mother just wants to go to one store to get all the plates, cups, decorations, etc. Then you have the obligate office motivational celebrations where you need generic streamers and other junk. In both cases, they cater to people who tend to be in a hurry and are willing the spend the money to get the crap they need in one spot, even if it is overpriced. Honestly, where else do you get that junk?
It’s cheaper than mailing out the same discs and while they offer thousands and thousands of titles, each user is only streaming one at a time, and probably only a few a month.
As for their traditional business of sending out discs, they’d prefer that you be the sort of person who receives a title and then doesn’t watch it for weeks or even months. They lose money on people like me, who receive three titles on Tuesday, watch them and turn them around quickly enough to receive three more titles later in the week. I think I read somewhere that each title mailed out costs them about a dollar for postage both ways.