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Empire Strikes Back: Netflix version

Netflix (see case study in the case study portion of our web site) did a great job of capitalizing on the dissatisfiers/enragers in competing offerings. Blockbuster, for instance, drove good customers crazy with their practice of charging late fees. Netflix has created a business with over 5 million subscribers, who list the movies they want to watch, get them in the mail, and return them when they are done. No late fees — when the movie is returned, Netflix sends the next one on the list. So it seems that this idea (that customers might actually prefer to have their choices unaffected by late fees) was so compelling that it started to eat into Blockbusters’ business.How to respond? Better innovation? Better customer service? No — what about complete and total imitation of the Netflix model? Blockbuster has started to offer the same type of service. How to respond if you’re Netflix? The company (founded in 1999) has taken out patents on its business model. Now, it finds itself in the position of having to defend those patents against an aggressive competitor who wants to imitate what they are doing. How will it end? We don’t know.

I’m willing to make one bet though — both Blockbuster and Netflix are not going to know what hit them when video-on-demand becomes a reality. Think about it – as soon as broadband pipes become widely available, you won’t even have to deal with postage or a trip to the video store (or late fees). Just dial in the codes, pop your popcorn and you are THERE.

Honestly, if I were Blockbuster, I’d be a lot more worried about that model than I am about the Netflix model. So now, instead of coming up with something that gets customers to want to come to the stores (better service? Store experience? Games? Personalized shopping advice? Mocha latte’s with your choices?) they are imitating a business model that is clearly going to be threatened in the not so distant future.

Where is the imagination out there, guys????

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