I'm going to describe an actual Netflix (NASDAQ:NFLX) publicity stunt. Let's see how many flaws you can spot.
Last Thursday, Netflix placed eight movie buffs inside a see-through house in the heart of New York City's bustling Times Square. As a movie-viewing endurance stunt, the Netflix Popcorn Bowl challenged the eight contestants to outlast their rivals by sitting through enough movies to crack into the Guiness World Records book. They were given 10-minute breaks between flicks.
And … 123 hours and 10 minutes later, the two remaining contestants were crowned winners. That's more than five days spent basking in the glow of unreality!
Netflix certainly milked this: It had fitness guru Richard Simmons stop by to give couch-potato contestants a little workout. And Susan Sarandon stopped by to drop off the final film, her classic Thelma & Louise.
I count four flaws.
The first two are just stylistic blunders. This contest concluded with a movie that ends with the titular characters driving a car off a cliff. The winners of the contest were a German and a Sri Lanka native now residing in Canada. Netflix is not even available in those countries.
Flaw number three is more biting. Endurance challenges aren't typically very flattering to the subject matter being endured. Does Netflix really want to associate DVD-viewing with swallowing goldfish or walking on hot coals?
Flaw number four is a model-killer. If the stunt inspires Netflix subscribers to consume massive amounts of celluloid, the model goes kaput. Blockbuster (NYSE:BBI) learned the hard way about offering up unlimited rentals at Netflix prices. Between studio royalties and the shipping costs on mail-delivered films, Netflix eventually loses money on its most active renters.
It's a delicate balance. When even a cost-control freak like Wal-Mart (NYSE:WMT) bows out -- and digital mavens like Amazon.com (NASDAQ:AMZN) and Apple (NASDAQ:AAPL) draw the line at Web delivery -- you know it's not an easy business.
A perceived Netflix delaying tactic called "throttling" is always a touchy subject. Check the first reader comment in my Netflix guidance article for a little color on that colorful term. However, the end result is that Netflix is able to juggle expectations and slow down the speedsters to the point where it can turn a profit. Hosting an endurance contest to test our limits of DVD consumption? That's just stupid.
I know that folks in see-through houses shouldn't throw stones, but as an investor, I feel I have to call it as I see it.
In this story, is Netflix Thelma or Louise?
Be kind, rewind these earlier stories:
