Musings on the world
Ryan Carrigg, posting on Compete.com, demonstrates how the divergent online strategies being used by Netflix and Blockbuster are paying dividends for the former. Sometimes a picture can tell the story more powerfully than any words can:
Rick Aristotle Munarriz speculates on some strategies for turning around beleaguered Netflix, in this column over on Motley Fool: the company should be sold to either Amazon or Microsoft.
More interesting still, some toplines on the addressable universe offered by each potential suitor:
Blockbuster has acuired Movielink LLC, the online movie downloads service established by five major Hollywood studios in 2002. Terms were not disclosed.
The Wall Street Journal claims a source familiar with the deal put the acquisition price tag at “less than $20 million”. paidContent puts it lower still: “we do know that there is a surprisingly low cash amount involved (much lower than WSJ’s)”
Update 15 Aug 07: According to a filing yesterday with the U.S Securities and Exchange Commission, Blockbuster paid just $6.6 million in an all-cash deal.
Studio founders including Metro-Goldwyn-Mayer Studios, Paramount Pictures, Sony Pictures Entertainment, Universal Studios and Warner Bros. are believed to have lavished $100 million on the service, which failed to capture public imagination as a consequence of its owners’ failure to back it up with significant marketing effort.
The acquisition bolsters Blockbuster’s online video services and will likely put troubled competitor Netflix under even greater pressure.
An amusing, if cautionary piece from Bloomberg columnist Jonathan Weil sheds light on the somewhat unusual arithmetic used by Netflix (NMS: NFLX) when calculating its churn rate. Just over a week ago the company’s latest numbers wiped 18% from its stock value (and currently down 32% since the start of 2007).
The logic goes like this:
Try spending your way out of that…
Some interesting (if obvious) quotes in this Ad Age interview with Steve Mitgang, the former Yahoo exec tasked with leading the company’s ‘Panama’ search iniative and recently appointed CEO of online video aggregator Veoh:
Ad Age: Why has it been so hard to create a viable business around online video? It seems to be wildly popular among consumers.
Mr. Mitgang: According to the reports, YouTube only sold $30 million in ads last year because they didn’t build a system to support … that healthy tension between editorial and advertising. They just didn’t build it. They were trying to grow [an advertising vehicle] out of a legacy position as opposed to starting out the right way. We’ve built and are enhancing a discovery and recommendation engine to give users the right video and discover gems. Not just show you what you’re looking for. The flip side of understanding those user behaviors and recommendations is for targeting purchases. We can say, look at the car enthusiasts … [these ones] are primarily interested in German cars or muscle cars. Being able to tell that to the brand manager of Mustang or Mini, we’ll be able to help them better than anyone else. Whether watching user-generated or premium content we’ll help target against the right users.
Ad Age: From a consumer standpoint, how does the recommendation engine help?
Mr. Mitgang: There are big problems on horizon for video that we’re solving. In a world with billions of videos, it’s harder for people to know what’s interesting. That’s why building discovery or recommendation engines is key. Search only solves a transactional problem. Whether you’re shopping at Amazon or Netflix that discovery process is an important one. When people are using video more completely, in a 100,000 channel world, discovery’s important. How you manage videos is important, along with how you manage your bandwidth and disk space.
Days after Google’s ouch moment which saw it shed 7% of its value, comes news that Netflix has reported its first ever quarterly drop in subscriptions, revenue and profit. Investors weren’t kind in their response and 16.5% has been shed from its stock price, since news emerged of weaker trading conditions.
The source of its malaise, says this report, is beefed-up competition from Blockbuster. Clearly Blockbuster has greater brand recognition, so either Netflix markets its way out of the situation or simplifies its aspirations. But competing with US $170 million of Blockbuster spend is going to be a tall order to pull off; combined with the latter’s advantage of a bricks and mortar presence.
The real KO round begins as both companies start seriously ramping up their digital store offers.
Netflix has disclosed that users have watched 5 million movies and TV shows since it launched its WatchNow online downloads service in January. The service was plagued by delays when initially offered, staggering rollout to 25K additional users per week. So far the service is used by 250K people a week, with a choice of around 2,000 titles.
Brexit (The Guardian)
The Beyondness of Things 