Video Rental: A New American Revolution?8 Jul, 2003 By: Holly J. Wagner
In working with executive editor Stephanie Prange on the subscription model story this week, I had a few, more abstract, thoughts about subscriptions, Netflix and the home entertainment market in general.
The overarching theme that came to me is that the rental market, which was pretty predictable for 15 or 18 years, became unpredictable along with the rest of society. In fact, the changes in the rental market are a reflection of changes in the rest of society and particularly the economy.
First, there was the Internet Economy. I'll concede that in many cases you could also call that the Big Lie.
On the other hand, it increased consumers' desire for immediate gratification, which led to "Guaranteed to Be There" and revenue-sharing to deliver on that promise. It also led to a lot of overtime and hence, I believe, to Netflix -- the anti-"guaranteed to be there."
Last week Blockbuster spokeswoman Karen Raskopf told me that only about 10 percent of Blockbuster customers want a subscription. Of course, that's based on testing in a few cities at various $20- to- $30-a-month price points. If I'd heard that from someone at Movie Gallery I'd believe it right off, because Movie Gallery stores are mostly in pay-as-you-go country. But there are a lot of Blockbuster stores in heavy-credit-debt cities.
Blockbuster's taking the same position on the self-destructing EZ-D, Buena Vista's planned four-city test: "It'll never work." That's contrary to the logic the chain applies to subscriptions. Pay-as-you-go customers will want pay-as-you-go video.
Coming from Blockbuster, given its presence in urban centers, you would think they would be more aware of how the general economy affects our home entertainment choices.
Not long ago someone said the studios work their salaried employees 50-60 hours a week. Now, how do employees in that situation know when they will have time to watch movies?
The same thing happened to computer programmers -- software engineers like Reed Hastings -- in the '90s. One of those computer geeks figured out they needed a service that caters to them and to us -- the working people who don't know what time we'll get home or when we will have two hours together to zap some zapcorn and watch a whole movie.
Has anybody looked at the national layoff/unemployment figures lately? You have two groups of people: those with too much time on their hands, and those without enough.
For the marginally or unemployed, an in-store subscription is a blessing. Unlimited entertainment, pretty cheap. Way less than the cost of cable or satellite. For the overworked employed, it lets you keep the movie you want until you have the time to enjoy it.
The subscription model that Netflix pioneered appeals to both, either for economic or temporal reasons, or both.