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Netflix Model a Growing Concern

22 Mar, 2004 By: Stephanie Prange

For the longest time, Netflix was considered an upstart, an also-ran in the failed dotcom bubble by many in our business. But as I write this, nearly half of respondents to our online poll about online rentals say the trend will have a big affect on their business in the future.

Blockbuster, which has on many occasions said the Netflix model was merely a niche business, in its recent filing noted that it is spending about $250 million to $280 million on “capital expenditures” to improve systems in preparation for the chain's national rollout of a in-store rental subscription model. The chain reported, “We may test other alternatives to our standard rental model to respond to competitive alternatives that do not have extended viewing fees [read late fees].”

Who knew customers hated late fees so much? Netflix entrepreneur Reed Hastings, that's who.

Retailers seem to be waking up to this — as evidenced by our online poll. Netflix VP of acquisitions Ted Sarandos said “profitability was elusive” when the company tried brick-and-mortar subscriptions. I'd be interested in hearing from any of you who've made a go of it with a subscription model — either online or in-store.

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