A nice casual Saturday afternoon in Naples, Florida. My kids are on spring break and we decided to leave the cold of Minnesota (although it was 61 degrees in Minneapolis yesterday). In beautiful Naples, it was 80 degrees, but with the wind chill -- 79. My son and I went to the local Blockbuster Inc. (NYSE:BBI) store to rent some movies for the week, and there it was the dirtiest of tricks.
As we were paying for the movies at the check-out counter, I noticed a Dell laptop computer about three feet to the left of the cash register. The laptop was open and properly set on the Blockbuster home page. I wanted to see if they carried an obscure movie that I hadn't seen in a while when what struck me was an "oh my God" expression. In the left-hand margin where you list your favorite websites, this Blockbuster store had three "favorites" affixed-in; Blockbuster's home page, Blockbuster's sign-up for the online, mail at home service, and ... the Netflix Inc. (NASDAQ:NFLX) membership cancellation page!
I couldn't believe it! The laptop was configured in a way that the customer has no ability to visit any other websites, just these three. I clicked on the Netflix cancellation tab and sure enough, right to the cancel the membership page. I asked the manager if he was doing this alone in his store. He said, "No, all the stores have this laptop with the same three tabs. Its our way of marketing our online service." I asked him if he had heard any customer objections to such dastardly tactics? He got a little red-faced and asked me if I worked for Netflix. I said no, but I thought Netflix was kicking Blockbuster's butt in the online business and had the eventual better business model.
He then asked me if I was a movie producer?! After taking off my sunglasses, swooshing back my hair -- okay, okay, got carried away here -- I said no, just a financial type guy. He seemed nervous. I felt like Colombo.
This tactic he claimed was coming from his regional headquarters. Blockbuster is aggressively trying to promote its online business, and what remains is the big question: Is Blockbuster's online customer migrating from its usual store-based business? If it is, then Blockbuster's bet to offer both bricks and mortar and online will not work as effectively as they planned. The same-store sales numbers will be the metric to watch very carefully.
In the meantime, I am going back to watch Rocky Balboa. Yo, Adrienne ...
Georges Yared is the chief investment strategist of Yared Investment Research. Please visit www.georgesyared.com
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Reader Comments (Page 1 of 1)
3-26-2007 @ 3:04AM
Mal Simons said...
Well written article although I have to take exception to the idea that you think it's wrong for Blockbuster to lock down their laptops so you can only visit certain websites. I mean, what did you expect? It's a laptop in a Blockbuster store, surely it's up to them what sites they allow their customers to access?
And it's better than most - at least they're allowing you to compare their Total Access service where you are never short of something to watch to Netflix's service. Surely this is a good thing for the consumer?
3-29-2007 @ 9:45PM
Bill said...
I do notice that you are an investment strategist, therefore, you would know the importance of competition. Netflix has frivilously sued Blockbuster Incorporated numerous times. Netflix has also attempted to "wage war on Blockbuster". Do you really feel it is "dastardly" for Blockbuster to fight back and save its name? Netflix has always been spoken of as almost a giant killer, especially since even the great Wal-Mart could not compete financially with them. Blockbuster now has a superior business model offering a far greater option of more movies in half the time and Netflix has been forced to stop discussing its online program and move towards movie downloads. The only fault of Blockbuster is that they came into the market way too late and now they are fighting from behind. In this case, better late then never. With Blockbuster's stock price more then doubling in the last year, I can't say I see Blockbuster as dastardly. I see them as successfully competitive and thinking outside the box.
I appreciate your opinion, but you have not seen the war emerging between these two. I encourage you to track it and reconsider your automatic disdain for Blockbuster and pity for Netflix.
Finally, it is quite a liability for a company to put up laptops for public use. I feel it is quite a smart decision to program each computer to only specific websites. As an investment strategist, I would appreciate suggestions for a better option. The fact of the matter is, people forget to sign up when they get home, so, have them sign up in store. Please let me know when you have a greater alternative.
3-30-2007 @ 11:10AM
Todd Caron said...
I agree with Bill, why should Blockbuster not be allowed to be competitive and does the mere presence of a laptop in a store limit one's ability to make free choice?
I'm really struggling with trying to understand your point because you were after all in a Blockbuster store by your own free will and accord and you were seeking to rent movies. If you sympathize with Netflix and perhaps actually subscribe to them, why didn't you use their service for your entertainment needs? Oh wait that's right they don't have stores and you wanted movies right now.
As a blockbuster subscriber I can tell you their business plan will work and netflix is scrambling.
Blockbuster has just announced that they will soon acquire Movielink which will give them the full trifecta; stores, home delivery and online VOD.
Short Netflix and save yourself the agony.
4-13-2007 @ 3:52PM
Scott Anderson said...
I'm astounded that you can be an investment stategist in the United States of America with such a loose grip on basic tenants of capitalism. What is so nefarious about a company making it easy for it’s customers to cancel a membership with it’s direct competitor? Are they forcing their customers at gun-point to cancel their Netflix membership? I have no doubt you can be none other than a “Democrat” (I put the title in quotations because of the fact that this title is a complete misnomer). Is this The People’s Republic of China? Blockbuster should be lauded for their acumen. I feel sorry for that poor store manager being bullied for having the audacity to try to turn a profit.
MrArbitrage
4-13-2007 @ 8:08PM
PaulAugust said...
Why would only a democrat react in this way? That's pretty callow to say. I'm not a democrat, but I do think that anyone could react as Georges did. I think that competitors should be able coexist peacefully and that Blockbuster should be able to sustain itself without turning to malicious practices. Though I doubt that Blockbuster's "netflix cancellation link" coerced any customers into cancelling their netflix membership, I do think that it's pretty low of Blockbuster to make such an insinuation.
Practices aside, the consumer's intuition is going to guide them the best. Whether a consumer prefers red to blue, or if they like having an actual building to go to, they'll make up their mind. I myself am a netflix member, and the reason I choose to be is simply because they are the pioneer in the online rental business. It works for me, and I am satisfied.
5-09-2007 @ 2:54PM
Eric said...
Here Blockbuster is providing an in-store service for the exact three web pages I needed at home to switch from Netflix to Blockbuster, and some busybody has to bellyache about it. Indeed, they are providing a service for those who don’t have access or aptitude to use the Internet at home, which would include many elderly and disabled people who would otherwise be stuck going to the store to get their movies.
And I have to wonder, how does anyone survive (in the United States of America or 'People's' Republic of China) being so naïve about competitive business practices? And this coming from a chief investment strategist! As soon as I sobered up from my lost weekend in Florida, I’d see about saving my good name by getting this article permanently removed from the blog sites.