E-Commerce Scripts Itself a Blockbuster

Few things are more gratifying for fans of e-commerce than seeing a traditional company — especially a muscular, dominant company — break into a cold sweat over the possibilities of online retail.

That is why so many people should be thrilled by Netflix, which is threatening to do to Blockbuster what Blockbuster did to the neighborhood video store.

OK, Blockbuster isn’t an endangered species just yet. It still has its hands wrapped firmly but ever-so-gently around the neck of the video rental marketplace. But there can be no doubt that it is at least distracted by Netflix’ success.

Been There, Sort Of

Why else would Blockbuster be testing its own online and mail version of the Netflix model? Imitation might be the sincerest form of flattery, but it can also be an effective defense. Can’t beat ’em? Join ’em.

The fact is that Blockbuster still has the upper hand. It can — and should, post-haste — offer a brick-and-click combination to blow away the pure-play Netflix model. But it might have waited a beat too long to stomp out this upstart effectively.

Actually, to its credit, Blockbuster tried to be at the forefront of the video revolution. But it, like many video-on-demand cheerleading analysts, was way, way ahead of the curve. Blockbuster, you may recall, partnered with an Enron subsidiary in a mad rush to install fat pipelines that would pump the movie of your choice into your living room whenever you wanted it.

Missed Step

Only a funny thing happened on the way to video-on-demand: The DVD became the medium of choice for video. It might well turn out to be only an intermediate step, but it’s a big one, and it’s going to be a while before anyone rushes to take the next one.

Why? It’s elementary. The DVD player is still selling like mad. And before Joe Consumer dumps it in the landfill in favor of on-demand movies, he’s going to get his money’s worth. So here we sit, on pause, as it were, waiting for the next stage in movie-watching’s development.

In the meantime, Netflix has found a niche. It might well be a temporary one. But how long is temporary? Two years? Five? Ten? What if it’s 15? How many millions of dollars will Netflix make — and how much will Blockbuster lose — before the video revolution reaches its ultimate and logical destination?

Now, Blockbuster must do the frustrating but necessary thing and backtrack. It tried to leapfrog into a wired world but now finds itself back in the early 21st century, sticking DVDs into envelopes and mailing them to customers, testing a market that Netflix has already proven will work.

Keep My Movie, Please

But you don’t have to live in a Blockbuster-by-mail test area to know Netflix is having an impact. Have you been to a Blockbuster store lately? If you have, you’ll know they’re letting you keep movies for a lot longer now. Coincidence? I think not.

The Netflix model fits people’s busy lives better. If you’re late in returning a movie, you don’t get whacked with fees. Blockbuster recognizes that’s a good deal and is trying to respond.

But the company has a lot of catching up to do. The fact that it must go backward to catch up is just one of many ironies in this delicious scenario. Whatever happens to Netflix in the long run, it has already delivered a big, fat poke in the eye to a dominant old-world company. And that’s never a bad thing.