I have a sneaking suspicion that my fellow Fools are going easy on me. My first Duel, and I get to be the Netflix
If you haven't heard of Netflix (is that possible?), it's a DVD rental service that lets you set up a wish list online and have the movies from your list sent to you by mail through a network of 37 distribution centers nationwide. Nine times out of 10, you'll get your next movie within two postal business days of sending the last one back. No more trips to the video store, no more late fees, no more frustration over limited title selections in the store. It all adds up to 5 million happy customers, great word-of-mouth marketing, and screaming growth.
Do you know how many titles you can find at your local Blockbuster
Sure, Blockbuster has a similar program in place, but it's nowhere near the equal of Netflix. The queue system gives you much less control over what to watch next, the site is hard to navigate, and even searching for the movies you already know you want is difficult. Netflix CEO Reed Hastings came from an engineering background, and it shows in his attention to detail in the all-important website part of his business.
Blockbuster Online looks a lot like that guy at your party who wants to be cool but really isn't. He's trying too hard, and he's not quite hip, and thanks to a recent patent-infringement lawsuit from Netflix, that kid might have to pack up his toys and go home soon. It's a pale copy at Blockbuster, but it's close enough that the lawsuit could shut it down. And Blockbuster can't even afford to drag its feet in court. It's losing money and heavily in debt, and it's up against a profitable and debt-free operation.
Let's look at Netflix's subscriber growth for a second:
| Year | Subscribers (Millions) |
Growth (%) |
|---|---|---|
| 2002 | 0.9 | 88 |
| 2003 | 1.5 | 73 |
| 2004 | 2.6 | 75 |
| 2005 | 4.2 | 60 |
| 2006 (Projected) | 6.3 | 50 |
Keep in mind that Blockbuster is talking up its online division as the knight on a white horse that's coming to save a drowning business. And that's with 1.3 million total subscribers, a 62.5% year-over-year increase. It's hard to track Blockbuster's subscriber growth over the quarters, since the most recent one marked the first time those numbers were broken out and reported. But I think Blockbuster might go bankrupt under the financial weight of running all of those bricks-and-mortar dinosaurs long before it catches up to Netflix in the online business.
Netflix is pleasing its ever more numerous customers. It's running Blockbuster and Movie Gallery
Amazon.com and Netflix are Motley Fool Stock Advisor selections, and Wal-Mart is a Motley Fool Inside Value pick. Take your favorite Foolish investing service for a free, 30-day trial.
There's more to this Duel! Check out the other three arguments, and then vote for a winner.
Fool contributor Anders Bylund would be a film buff if he had the time for it -- that college minor in film studies has to be good for something. He owns shares in Netflix but holds no position in any other company discussed today. Foolish disclosure is not just a great idea -- it's the law.
