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With the studios unwilling to drop the fifteen-dollar wholesale DVD price, Netflix learned to be judicious in how it drove interest and in which films it featured on the Web site. Instead of featuring the latest or most popular DVD releases, movie promotions centered on lists of older films inspired by holidays, popular actors, or news events.
Every night the stores still used satellite technology from the 1980s—the same system Cooper had used at his high school Blockbuster job—to upload cash register and inventory data and download software patches. Wiring the stores to communicate with the online service would be costly and complicated.
Then Hastings laid out a scenario at once alarming and exciting: If Blockbuster and Amazon matched or beat Netflix’s new eighteen-dollar price, video stores in America would be vacant within a few years. The $8 billion in U.S. store rentals would pour into online rentals, setting off a grab for subscribers, he said. The ensuing growth of online rentals would cannibalize video stores faster and faster, until they collapsed. As video store revenue dropped sharply, Blockbuster would struggle to fund its online operation, he concluded. “The prize is huge, the stakes high, and we intend to win.”
an insight, usually very simple. thats what it takes... #netflixed
These users learned from talking among themselves that they probably fit the profile of subscribers that Netflix internally labeled “pigs”—the service’s heaviest users—who made up about 25 percent of the subscriber base.
there was a time when I was a #netflix-pig.A heavy user of their 3dvd tier.:)
The minute you stop the free trades and raise your prices to make a profit, you lose your advantage, and we start growing again. So what do you suggest? Antioco asked. Let us buy your subscribers, Hastings said. We’re better at online rental—more technologically proficient.
“We’re retailers—we open stores. We don’t close them,” Keyes retorted.
Keyes laid out his store-focused strategy to Blockbuster’s top management at a company retreat on July 30, 2007, at the luxurious Rough Creek Lodge & Resort about ninety miles south of Dallas. Blockbuster stores would become “great” again as entertainment destinations that would sell a new mix of prepared foods, such as pizza and fountain sodas, as well as electronics, such as iPods and DVD players. The presentation horrified old hands, who had watched nearly identical promotions crash and burn under Fields and Antioco.
The retreat was so disastrous that a number of senior-level executives—among them Evangelist, Shepherd, and Zine, who had announced his retirement—phoned in sell orders on most or all of their Blockbuster shares during the next “open” period when they could legally do so. Several, including Evangelist, Zine, and Antioco, when he heard of Keyes’s plan, plowed the proceeds into Netflix stock. They didn’t need inside information on Netflix—they knew exactly what was about to happen to Blockbuster.
He also refused to consider Evangelist’s repeated pleas to sell Blockbuster Online—now worth close to $1 billion at Netflix’s original offering price—saying he needed the online service as a bridge to digital delivery. Later, he refused to consider a second offer Hastings made to buy the subscriber base.
