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NEWS ANALYSIS — Netflix Versus Blockbuster: Who Wins?

26 Aug, 2011

CNET editors declare Netflix the best rental service compared with Blockbuster. But did they really look at the whole picture?

CNET.com recently released a snazzy video comparing Blockbuster with Netflix to see which is the best service to rent discs and stream video — since each offer variations of physical and digital media.

Featured in the semi-regular “CNET Prizefight” series, the video and related story presented a tale-of-the-tape comparison between the two services’ similar yet disparate offerings of movie and TV show rentals.

Three CNET editors’ blind scores on a scale of 1 to 5 in five categories (by-mail, VOD, device support, overall convenience and combined value) were averaged together to produce an overall winner.

By-mail Rental

Netflix invented the by-mail business model and offers a library of more than 100,000 movies and TV shows with a one-disc plan for $7.99 a month ($2 extra for Blu-ray). Blockbuster offers about 95,000 titles, in addition to about 3,000 video game titles with a one-disc (DVD, Blu-ray or game) plan starting at $9.99 a month.
Getting titles or discs faster through Netflix or Blockbuster By Mail is largely moot considering disc shipments locally for both services appear to be handled by the same processing center in Santa Ana, Calif.

“Throw in the fact Blockbuster gets many of its new releases 28 days before Netflix, and it’s Blockbuster that takes round one with a perfect score of 5 compared to 3.7 for Netflix,” said commentator and editor Brian Tong.

Notably missing from the comparison (although mentioned later) is that Blockbuster allows subscribers unlimited free in-store exchanges. This is a huge plus if you want to watch a new or recent release at a moment’s notice. In the Foothill Ranch, Calif., area, Blockbuster has five locations within 15 miles. This convenience is significant and arguably warrants a higher advantage for Blockbuster.

Video On Demand

The second comparison involved subscription VOD with Netflix offering about 16,000 movies and TV shows. While Netflix re-invented home entertainment through unlimited streaming for $7.99 a month, it doesn’t take a movie critic to realize the digital content currently available is dated and limited.

This glaring weakness has been ignored by digital-friendly pundits and Wall Street sycophants until just recently. It also is why Netflix is leveraging its future acquiring ‘A’-list catalog fare, in addition to bidding for original content. Without that, its streaming service is a performance race car engine driving on vapors.

“[Netflix] shines when it comes to catching up with TV series from the past, but when you are done with that, what’s left?” Tong echoed.

By contrast, Blockbuster doesn’t deliver subscription VOD, offering instead new-release movies on transactional VOD, which typically cost about $3.99 and can be viewed on the computer, TV and select portable devices through a broadband connection.

The criticism here is that the cost of watching content on an a-la-carte basis (even 28 days ahead of Netflix) adds up — quickly surpassing the $7.99 SVOD fee. This would be true if comparing Netflix subscription VOD content with transactional VOD were apples versus apples.

It’s not.

In fact, if it were, Netflix would likely be the only home entertainment option and the studios and content owners would be in the poor house. Nobody gets fat from a $7.99 all-you-can-eat streaming buffet, except the consumer. This is precisely why studios and content owners are only now slowly licensing catalog fare to Netflix at huge premiums.

Still, the CNET judges ruled in favor of Netflix (3.7 to 2.7), which is odd considering the dissimilar services, and the glaring lack of streaming content on Netflix. Maybe they are big “Mad Men” fans, which just began streaming exclusively all back episodes.

Device Support

Netflix literally is available on every major connected consumer electronics devices, such as phones, TVs, game consoles and Blu-ray players. Blockbuster, on the other hand, is playing catch-up on select TVs, Blu-ray players and game consoles.

“With 50% of Netflix viewing done on game consoles, you probably want to get in on that action,” Tong opined.

But what action? Tong previously admitted Netflix streaming content is limited in scope and quality (and largely just standard-definition). Sure, Netflix access is ubiquitous, but limited content choice still is limited across more than 200 CE devices.

Odds are you can access Blockbuster digital content on a CE device near you. So what’s the Netflix appeal other than the novelty of streaming video on a cell phone? Even CEO Reed Hastings has said user adoption of Netflix streaming on mobile phones is minute.

To be sure, Netflix availability at the launch of the Apple iPad tablet computer drew raves in the digital community — notably on CNET. But the same Nielsen study cited by CNET in this “prizefight” also noted that just 1% of respondents in the survey used the device for Netflix.

Regardless, CNET editors gave the round to Netflix by a whopping 5-3 margin, which appeared to underscore obvious biases in favor of digital distribution versus physical regardless of the latter’s overwhelming superiority in content selection.

Overall Convenience

When it comes to overall convenience, it’s hard to ignore Netflix’s state-of-the-art user interface and intuitive features. The company has invested immensely in resources (remember the $1 million Netflix prize?) and personnel to perfect the user experience. It’s a measure of consumer trust Netflix has created on its own.

By comparison, Blockbuster’s online user interface feels bulky and less refined, but it gets the job done. It is at this time that CNET (in the video) mentions in-store exchanges for Blockbuster By Mail subs, which it says sounds great except that there aren’t many Blockbuster stores left.

Of course, with 1,500 Blockbuster stores in operation, the chain is far removed from its halcyon days of more than 3,500 locations in the United States. But again, do you want to watch a new-release movie at a moment’s notice available at a store or kiosk a few miles away or make do with inferior content?

And how did the CNET judges vote? They gave the nod to Netflix by a margin of 4 to 2.7 — again underscoring either sheer laziness to get in the car and visit a local Blockbuster or subconscious digital bias.

Combined Value

In the final comparison, CNET brushed aside Netflix’s pending Sept. 1 price increase. Instead, it combined separate $7.99 monthly disc and streaming-only plans, which cost $15.98 for combined services. It then compared that to Blockbuster’s $9.99 monthly by-mail fee (which includes Blu-ray and games), and added two transactional VOD titles at $3.99 each, sending the total to $17.97.

Interestingly, moderator Tong said the choice between Blockbuster or Netflix came down to “what kind of content you care about.”

OK. But what good is home entertainment if you can’t watch what you want when you want? Isn’t this the genesis behind the cable industry’s TV Everywhere initiative and rollout of HBO Go and related portable platforms?

In addition, Blockbuster stores offer myriad in-store specials and discounts such as rent one movie and get another 99-cent rental for free, and Sunday 49-cent catalog rentals. These deals match or surpass anything offered by Redbox and Blockbuster Express kiosks.

Nonetheless, CNET editors gave the round to Netflix, 4.3 to 3, and overall by a margin of 4.1 to 3.3.

In the end, you see what you want to see.

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