NetFlix, BlockBuster

With the BlockBuster Total Access program, I am now a BB customer, at least until BB hijacks the price in the future.

Total Access program is a good example how a brick and mortar store fights back against an Internet based business model. More importantly, how BB can fights back using its physical infrastructure. The netflix effect forces BB to cut its profit margin while providing better services.

Currently, when I return a mailed DVD to the BB store, the DVD goes back to a warehouse before shipping it out again. However, BlockBuster could do better. it is quite easy for a store clerk to verify the DBD, print off the mail label for the next customer and ship it out right away, which not only saves the postage cost but also improves turn around.

Of course, until the next battle realizes, which is the On Demand Download.

Netflix & Shipping Cost

I read an interesting article about NetFlix and the cost of postage. Let’s say, I subscribe to its 3 DVD a time package, which is about $18 per month. Assume I am a cheap movie fanatic, I watch all the movies as soon as they arrive and return as soon as I finish. So, my "turn-over’" is 2 or 3 times per week. So, the postage cost of a hard-core movie viewer, the cost is probably 2.5 (a nice round number between 2 and 3 ), * 3 (#of DVDs) * 4 (# of weeks in a month) * $.30 (average of assumed postage cost) * 2 (round trip to the warehouse), which is $18.00.

That leaves little room for operation, payroll, marketing and a decent profit. Again, we are talking about profit margin for worst customers here.

Can NetFlix do better? Of course. For one, once a DVD is out of the warehouse, what is the point of having it back in the warehouse to be shipped out again? I think this will be a great application for social network web applications, besides their usual dating and job appeals. Imagine LinkedIn partner with netflix and the surprise to receive a DVD from a friend.