Wal-Mart vs. Netflix, round two
The DVD I shipped back to Wal-Mart on Tuesday. Today, Friday, they received it and sent me an e-mail saying that had shipped my next DVD. Again, the cycle took three business days. Compare that with Netflix. I mailed them back a DVD on Wednesday and they received it today and the next one is in the mail. Two business days. Again, advantage Netflix.
So far, at least for Seattle, Netflix seems to have a one day advantage both in the time to ship a DVD back to them and to receive a DVD in return. It's not a huge difference, but in a monthly subscription model, time is indeed money.
Given my viewing habits--I like to watch obscure movies, and I watch a lot of movies--Netflix is still a better solution than Wal-Mart. If you stick to big, mainstream movies and watch a moderate number of movies on DVD each month (say 3 or fewer), then Wal-Mart lower prices will probably compensate for their slower cycle times and smaller selection.
I still think Netflix needs to hit a lower price point by offering an option for 2 movies out at a time, unlimited rentals. They make more money for now by not offering that option, but hiding a good option from customers is never a way to build a sustainable long-term business when the barriers to entry are low. Their business model is not difficult to replicate. Wal-Mart is coming in here like Microsoft in software--less innovative but better capitalized. They don't need to innovate; they can simply replicate Netflix and them outprice them. They can easily add selection and distribution centers by opening their checkbook.
I'm rooting for Netflix in this competition. I'm not a Wal-Mart fan, and I like to see the little guy win. But they should earn it by innovating and creating more value for their consumers.
Footnote: What of the disposable DVDs offered by Flexplay and adopted by Disney? These are DVDs that, once removed from their packaging, oxidize in 48 hours, rendering them unreadable. It's an ingenious way to rent DVDs without having to build a returns processing infrastructure, and it's cheap and simple. As a consumer, though, the silent ticking clock of oxidization is a hassle, and that deadline of 48 hours is one of the reasons I found physical rentals from stores like Blockbuster so annoying. Instead of late fees the penalty is that I have to buy another Flexplay DVD to watch the movie. My schedule isn't stable enough to guarantee I can watch a complete movie within 48 hours. If the Flexplay discs are cheap enough, though, they'll be a viable alternative that claims a small market share.
So far, at least for Seattle, Netflix seems to have a one day advantage both in the time to ship a DVD back to them and to receive a DVD in return. It's not a huge difference, but in a monthly subscription model, time is indeed money.
Given my viewing habits--I like to watch obscure movies, and I watch a lot of movies--Netflix is still a better solution than Wal-Mart. If you stick to big, mainstream movies and watch a moderate number of movies on DVD each month (say 3 or fewer), then Wal-Mart lower prices will probably compensate for their slower cycle times and smaller selection.
I still think Netflix needs to hit a lower price point by offering an option for 2 movies out at a time, unlimited rentals. They make more money for now by not offering that option, but hiding a good option from customers is never a way to build a sustainable long-term business when the barriers to entry are low. Their business model is not difficult to replicate. Wal-Mart is coming in here like Microsoft in software--less innovative but better capitalized. They don't need to innovate; they can simply replicate Netflix and them outprice them. They can easily add selection and distribution centers by opening their checkbook.
I'm rooting for Netflix in this competition. I'm not a Wal-Mart fan, and I like to see the little guy win. But they should earn it by innovating and creating more value for their consumers.
Footnote: What of the disposable DVDs offered by Flexplay and adopted by Disney? These are DVDs that, once removed from their packaging, oxidize in 48 hours, rendering them unreadable. It's an ingenious way to rent DVDs without having to build a returns processing infrastructure, and it's cheap and simple. As a consumer, though, the silent ticking clock of oxidization is a hassle, and that deadline of 48 hours is one of the reasons I found physical rentals from stores like Blockbuster so annoying. Instead of late fees the penalty is that I have to buy another Flexplay DVD to watch the movie. My schedule isn't stable enough to guarantee I can watch a complete movie within 48 hours. If the Flexplay discs are cheap enough, though, they'll be a viable alternative that claims a small market share.