By Steve Rowen, Partner
11/6/2007
I remember having to drive to the video store to rent VHS tapes. It’s true.
But just as Paula points out in her article this week, shift does indeed happen. And the latest shift for the entertainment industry appears to have quietly taken place sometime this September.
Netflix revolutionized the entertainment delivery model. The company single-handedly forced Blockbuster into its “Total Access” program just to keep up, as it became fairly apparent that time-starved people like the option (at least) of avoiding stores. And earlier this year, Netflix was still on the lips of well-savvy investors the world over. Unfortunately, the boon appears to be over.
Netflix and Blockbuster’s Q3 numbers reflect that the home-delivery DVD audience has finally peaked – and shrunk. While Netflix actually took on 286,000 new net subscribers in the third quarter, Blockbuster’s mail delivery program dropped from 3.6 million subscribers down to 3.1, bringing the total number of mailed DVDs down from 10.3 million a quarter to 10.1 million a quarter.
Netflix still predicts that the online subscription business will weigh in at 20 million customers in 5 years’ time. To help meet that goal, Netflix continues to offer new, low-cost and low-use plans for those who aren’t using the service enough to warrant an $18.00 a month fee. Yet it is difficult to imagine that market number as maintaining relevance after a quarter when online subscribers disappeared by the hundreds of thousands. And I should know. I was one of them.
I’d had a Netflix subscription for years. I originally opened it to watch several older out-of-production TV series that I’d been nostalgic for. But Comcast has actually done a fairly decent job with on-Demand here in Boston that I was barely using the service at all. Make no mistake, I will certainly end up spending more now. And while most of the content I can watch via Comcast is newer, I’ve been told that’s probably a good thing for me. I guess no one really appreciates Baa Baa Black Sheep anymore.
But while my decision to leave the subscription model was based purely on convenience and enhanced technology-enabled delivery methods, I have to imagine that many are leaving for a different reason. With a decidedly tight holiday season on the horizon, it makes perfect sense for families eliminate monthly costs that aren’t 100 percent necessary. The company’s efforts to offer lower cost programs confirms this notion.
In some ways, I feel a little bad about leaving Netflix. The company served me very well for all the years I was with them, operating a class business model whenever issues (scratched, broken, missing DVDs) arose. They keep sending me emails saying they want me back, and I’m sure they do. But I have to admit, while they did a great job of keeping me entertained, I’ve already shifted.
What do you think?
|
