Thursday, May 15, 2008
The Rental Business
The story goes like this: A computer-science test had a question that asked the taker to calculate the "bandwidth" of a truck carrying DAT's down the highway. Even though it was moving slowly, it was carrying a huge amount of data, and in numbers, the bandwidth was ridiculously high. One of the students realized that it would be a very cost-efficient to send discs of data through the mail. Thus was born Netflix.
Who's to say whether the story is true or not? I don't think it is, but it's a good story. Regardless, Netflix is certainly a net-juggernaut. Its impact on the video-rental industry is so profound that Hollywood Video is going under and Blockbuster had to develop it's own version. The secret to this business model? People like to rent movies. People hate movie rental stores. People hate driving to a store for a movie only to find out that it's not in stock. People hate scouring for a title and not finding it because it was listed as a "drama" rather than a "comedy". People hate late fees. Fans of foreign films and anime and other obscure sub-genres hate being left in the cold because there's not enough demand for their local branch to stock them.
The Netflix model is based purely on customer convenience. You give it a list of movies you feel like watching, they mail you whatever's next on the list. Send it back whenever you're ready, and they send you the next one.
It's not really any cheaper than going to a rental store (unless you rent a lot of movies--and there are folks that do), and you may or may not be able to get the latest new releases, but it's extremely convenient. You never have to leave your home to do it, and they have everything, no matter how obscure..
Bonus: The video rental business is (obviously) fairly young. Prior to 1970's, the idea of renting or even owning a commercial movie was pretty strange, and when the VCR first came out, they sold it as a "time-shifter". It was intended to let a person tape television shows and watch them later. The video rental market didn't really flourish until the early 90's.
Who's to say whether the story is true or not? I don't think it is, but it's a good story. Regardless, Netflix is certainly a net-juggernaut. Its impact on the video-rental industry is so profound that Hollywood Video is going under and Blockbuster had to develop it's own version. The secret to this business model? People like to rent movies. People hate movie rental stores. People hate driving to a store for a movie only to find out that it's not in stock. People hate scouring for a title and not finding it because it was listed as a "drama" rather than a "comedy". People hate late fees. Fans of foreign films and anime and other obscure sub-genres hate being left in the cold because there's not enough demand for their local branch to stock them.
The Netflix model is based purely on customer convenience. You give it a list of movies you feel like watching, they mail you whatever's next on the list. Send it back whenever you're ready, and they send you the next one.
It's not really any cheaper than going to a rental store (unless you rent a lot of movies--and there are folks that do), and you may or may not be able to get the latest new releases, but it's extremely convenient. You never have to leave your home to do it, and they have everything, no matter how obscure..
Bonus: The video rental business is (obviously) fairly young. Prior to 1970's, the idea of renting or even owning a commercial movie was pretty strange, and when the VCR first came out, they sold it as a "time-shifter". It was intended to let a person tape television shows and watch them later. The video rental market didn't really flourish until the early 90's.
Labels: technology
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