There are several reasons most Netflix (NASDAQ:NFLX) subscribers might not want to switch to rival online rental outfits such as Blockbuster (NYSE:BBI), Wal-Mart (NYSE:WMT), and the probably-upcoming Amazon.com (NASDAQ:AMZN) service. Chief among them are Netflix's poignant, custom-tailored recommendations, already-established long movie queues, and faster disc-turnaround times.
I'd like to add one more to the list: member reviews.
I don't know about you, but I've long given up on finding a movie critic whose tastes match -- nay, resemble -- mine. Instead, I read reviews by other subscribers and their explanations of what they liked or didn't like about a movie; I've found this to be a much better indicator of whether I'm going to like a movie or not.
So how do Netflix and the recently launched Blockbuster DVD-rental service compare when it comes to member reviews? (Wal-Mart's service allows only two reviews per movie.) Let's not mince words -- they don't. Netflix wins hands down.
Since Netflix has almost a half-decade lead on Blockbuster, I randomly sampled five recently released movies to control for the amount of time members have had to leave comments -- in other words, to be nice to Blockbuster, I'm ignoring Netflix's huge lead and focusing on the present. While my research technique wasn't too scientific, I think the findings allow us to see whether there is a nascent community of dedicated movie watchers forming at Blockbuster. And so far the answer is no.
Here are the tabulated totals of movie reviews:
| Netflix | Blockbuster | |
|---|---|---|
| Saved | 47 | 9 |
| Eternal Sunshine | 170 | 7 |
| Fahrenheit 9/11 | 384 | 30 |
| The Alamo | 39 | None |
| Man on Fire | 135 | 20 |
And what about quality? I don't mean to imply that Blockbuster subscribers are any less intelligent or expressive, but for these same five movies the reviews on Netflix.com were, on average, more detailed and contained fewer spelling errors. It's also worth noting that Netflix has the option of clicking on the "helpful/not helpful" button next to the review to let everyone else know whether you agree with the reviewer. The best reviews make their way to the top of the listing, so you don't have to wade through the fodder.
With 2.2 million subscribers (Blockbuster's service is brand-new, and Wal-Mart won't disclose how many subscribers it has), Netflix.com should be expected to offer up more -- a lot more -- member reviews of its movies at any given time. But that's the point. Such a large initial membership translates into the ability to more accurately tailor recommendations to a viewer's tastes and to offer a mountain of member reviews. And since the recent price war has practically negated the cost difference between the two services, I would argue that small differences in quality of service will become all the more important.
It's also true that the law of diminishing returns applies to movie reviews -- the difference between 100 and 300 reviews is negligible since you are unlikely to read them all anyway. But at current levels the difference between half a dozen -- or none -- and several dozen reviews is very noticeable. At some point in the future, Blockbuster may have enough subscribers to render this point moot (or Wal-Mart might change its review policy), but my guess is that this day won't arrive until Blockbuster's service surpasses at least 1.5 million subscribers.
Until that happens Netflix has a moat of more than two million subscribers that may have already grown too wide for competitors to leap over.
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Fool contributor Marko Djuranovic subscribes to the service and owns shares of Netflix. You can give your own review of this take on our Netflix discussion board.
