Why though, if this deal was so beneficial to Blockbuster, would Netflix have pushed for it so heavily?
Our research says it's about a $20 billion business for rental and retail, and approximately more than 60% of business for new releases is done in the first 30 days. In the news lately, we've seen Blockbuster seeking $150 million debtor-in-possession financing. We took a little bit longer to introduce an iPhone app, and we will have an iPad app as well. I don't mean this in a sarcastic way at all, but have you had a chance to use Netflix's iPad app? Months ago, the mere mention of bankruptcy in an article about Blockbuster would provoke seething responses from company reps. 1997: Reed Hastings returns Apollo 13 to Blockbuster six weeks overdue, and is dismayed by the $40 late fee. 2002: Blockbuster debuts Super Bowl ad starring the voices of Jim Belushi and James Woods, as a rabbit and a guinea pig. 2006: Blockbuster, now valued at $500 million, surpasses its goal of two million subscribers for its online platform.
2009: Blockbuster rolls out Blockbuster Express, its kiosk system designed to compete with Redbox. June 2010: Keyes compares Blockbuster to Apple, claiming that its On Demand service is the equivalent of the iMac. Given, car salesmanship has always been common among cable providers, which are seemingly intent on selling you more things you don't know whether or not you need.
Dish ought to start treating Blockbuster as a unique asset, with a simple value proposition. Blockbuster is piloting a new movie-rental program that allows customers to load movies onto SD cards and play them back on mobile phones and TVs equipped with SD readers. The SD rentals are also meant to target online streaming, which is growing in popularity thanks largely to Netflix's Watch Instantly feature.
The SD kiosks themselves will be built and operated by NCR corporation, in partnership with MOD Systems. However, when I spoke with a rep from Netflix, he said this was something they actually heavily pushed for years ago. I tried to emphasize before that our customer base is very different—our core focus is very different.
In our case, if you receive a movie in the mail, and then watch it, you can go to the store and exchange it for, say, Alice in Wonderland—and you have immediate gratification.


Do you ever worry that this is a situation where you need to remodel overnight, and that Blockbuster might not have time for a marathon? We've had two successful refinancings in the last 18 months, and we continue to work on finding the right capital structure to facilitate the business itself.
How do you convince an investor to stay with the company, and how do you bring in new investors? Why wasn't Blockbuster on stage at WWDC, instead of Netflix, if you're trying to keep up with this rapidly changing technology? Our more aggressive push has been for download applications rather than streaming for portability.
I know Blockbuster's app is related to managing queues, but do you ever see a time when it could be used for movies?
It's very popular, and I just wonder why Blockbuster would be against that type of streaming offering? Rumors of Chapter 11 began to bubble in August, and Bloomberg reports that Blockbuster will file for bankruptcy Thursday. Instead, the company inks a 20-year deal to deliver on-demand movies with Enron Broadband Services, a subsidiary of energy trading giant Enron.
Subsequently, 48 states launch investigations into the program, charging Blockbuster with misrepresenting its late fee policy to customers. The company also reintroduces late fees, which had been costing the company $300 million in revenue annually. The video-rental company, which Dish Network acquired in April, has been trying to remake itself in the eyes of consumers after last year's bankruptcy sale. If you have any doubt about how complicated it is to sign up for the service, just try it yourself.
But the trend here is moving toward offering simple packages, whether through clean straightforward subscriptions from Netflix, Hulu Plus, or Amazon, or slicker viewing experiences from startups such as Peel.
With an SD rental, the user keeps the SD card, though the content contains DRM which sets a date of expiration. Blockbuster is hoping that the better quality video contained on their SD cards will win streaming video customers back, but of course, you still have the inconvenience of traveling to a Blockbuster SD kiosk.
We want to provide a better long-term platform for our customers to give them the most convenient access whether physical or digital form. If you look at the acceleration of paid digital consumption of content, it isn't moving as quickly as we would all like. The limitation of streaming in a portable device is that you have to be in a strong 3G area or a Wi-Fi hotspot.


Having arrived on the iPad years after competitors with a Blockbuster subscription service tied to purchasing a traditional Dish cable package, it's unclear whether Dish is even trying to compete head on with Netflix and Amazon, or instead trying to gain a leg up against Time Warner and Comcast. It takes time and resources, but we believe the outcome will be a better consumer proposition. After losing a half-million subscribers in the third quarter, Blockbuster announces it will no longer report its subscriber count. Still, renting even the crappiest of movies will cost you nearly the same as a whole month of movies on Netflix; this downloadable copy of Cranked High Voltage is $4. Another problem: not everyone will enjoy the irony of driving somewhere to pick up a data-card the size of a postage stamp. Blockbuster is trying to fend off all these competitors, even as the company is mired in debt.
If you're looking for a new release, you have a better chance of finding that at Blockbuster. We believe in the download capability for Blockbuster On Demand into portable handsets like the HTC phone. Still, SD cards do represent a marked improvement over DVDs in durability and re-usability, so if they caught on it'd hardly be a step backwards for movie buffs.
They were looking for a lower cost of goods, and were willing to accept a delay in the offering.
I don't know if you recall, but there were questions about the long-term viability of that company, and look at the success that they have today. What is the equivalent at Blockbuster?The equivalent for Blockbuster is Blockbuster On Demand, which is the ultimate video on-demand experience. There are hundreds of examples of companies that are traditionally great brands, but had to transform themselves into a new business model. If a company is not able to keep up with the changing needs of its customer, it will become irrelevant. Or, if a Netflix subscriber notices Avatar is unavailable, can't he or she just rent it from Blockbuster that one time?
It's unclear why a customer would need to commit to Blockbuster as a subscriber, kiosk user, and on-demand customer.
What about the fickle customer who might just use Blockbuster for a new release every now and again?



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