Why NetFlix Trounced Blockbuster – It’s all about Consumer Power

Today’s Bankruptcy Filing of former video powerhouse Blockbuster highlights the difference between a company that pays attention to the consumer and respects changing consumer habits and one that worried more about its own problems and not its customers, and instead kept to its existing business model way too long.

While Blockbuster tried for years to justify the bricks and mortar strategy that brought it to success in an era of VCR’s and few alternatives for customers, Netflix embraced the changing world and quickly morphed from sending discs to following the consumer to new distribution outlets and used strategic partnerships with studios and hardware manufacturers to quickly gain access to those customers. Netflix was able to be in the business of streaming video at the very moment that was becoming a favored way for consumers to view films.

In order to get rights to streaming titles, Netflix agreed to pay Paramount, MGM and Lionsgate $200 million a year. That’s a risky investment. But as Ad Age reported this morning, “That sounds like a lot of money until you realize that Netflix spends about $600 million a year on postage.” The idea is that as customers switch to digital delivery, those costs drop and fund even more future content deals. Even today, Netflix announced a new content deal with NBCU!

But Netflix didn’t stop with the content providers. By strategically partnering with hardware manufacturers and offering them easy access to content for their customers, Netfilx was able to put its product, in a consumer-friendly way, on TV’s, set-top boxes, video games, DVD players, smartphones, APPLE TV and even tablets. Any consumer can access the Netflix library, often with one click, from many platforms.

Once again the message is clear: The Consumer is gaining power. You can’t win trying to change the direction Consumer Behavior is going…You have to go with it.

The Gutenberg Moment: The Rise of a New Form of Storytelling

The word this week that The RIM folks, who brought you the Blackberry, were readying their first tablet product gives us a chance to look at where this genre is in the development scheme. It’s my belief that the Tablet format will be the one that finally puts the new digital platforms into their place as a new medium and accelerates development of new digital storytelling tools and products that change our lives.

You will begin to see that while the early success of the tablet revolves around bringing traditional forms of media, like books, tv shows, magazines and newspapers, to us in a more convenient and economical way, the later success of this technology will be that it was the way we bring a new form of storytelling to the mass market. All forms of media – words, pictures, video, graphics, interactivity – will be combined to tell stories and communicate better, for all forms of communication. This isn’t just about news or email, which will benefit, it’s also about advertising, marketing and education.

Birth of a New Medium: The Growing World of Tablets

This new format will be the best platform for teaching or imparting information and wisdom. It will allow every story to be told in the best way, whatever that way is. If you are trying to explain how a building fits into its environment, you can show it with a photo or a 360-degree panoramic view; if you want to show the dangers of a street corner you can show video of cars missing signals; if you want to explain the impact of having a strong, or weak, dollar, you can include an interactive graphic that traces the impact on prices; if you want to describe how powerful a speaker John F. Kennedy was you can show his speech at the Berlin Wall. Or, sometimes, words alone can make a point best. No Matter.

What we are still waiting for are the next generation of storytellers who will recognize the power of this medium and create uniquely for it. And we are waiting on the next generation of entrepreneurs who will build businesses that can exist on this platform. Some will come from the usual places, Venture Capital or Angel funded startups, but others may come from some of our existing media companies that are starting to understand the power of this new media and are working on figuring out how to build for it while understanding where it leaves their existing business of print, television, radio, movies…etc.

But bet on…they are coming. They will likely emerge around certain markets that are the most obvious places where a business model can emerge. Textbooks are a great example. This new medium is a tremendous teaching tool, bringing an entire classroom experience to the user on a screen, including — soon — the ability to interact visually with a teacher. That it makes learning more efficient and more interesting is obvious. Also, the fact that students don’t want to carry 40 pounds of outdated books in their backpack doesn’t hurt either. The educational publishing business might be a good example of one that will turn sooner.

The race is on between traditional and new media players. No matter who gets to the finish line (if there is one) soonest, the consumer will win.

Bringing Newspaper Subscriptions to IPads: Interviewed On Bloomberg TV

Should Apple sell Newspaper subscriptions on IPads? Of course they should and the Newspaper industry should be testing price points and negotiating terms as quickly as they can. News companies simply must go where the readers are. It’s no longer about newspapers, it’s about news. Apple is offering them a fantastic platform. Sure Apple wants to control their users. No kidding. Newspapers want to own their subscribers. Of course they do. So share already? Since Apple is predominantly selling hardware and newspaper companies are primarily selling news, They should share whatever data they can.

But newspapers should also be embracing new platforms as quickly as possible to bring their content to readers, particularly younger readers. The kind who have IPads. The newspaper companies have to embrace new forms of storytelling, not just the printed word. Video, Audio interactive graphics, photos…will all be part of the story they have to tell. So learning how to do that is important and the IPad is your first sandbox. The IPad is the first, but not the last, of many different tablet products that will emerge over the coming year from powerful companies like Google and Dell. This is only the beginning of a major shift in storytelling to the new digital platforms, and for newspaper companies to survive, they will need to learn how to tell stories on ALL platforms, or they will lose their readers entirely.

Unclear on the Concept

Nothing has driven me crazier than losing my main link to the world of entertainment, my 50-inch-Panasonic TV. A terrific TV for 5 years, it just stopped working. The events of the next couple of days taught me that the consumer electronics industry still has a way to go when it comes to serving customers in the C-scape, the new world where consumers have much more power and demand more and better service.

First, my experience dealing with Panasonic was painful. My TV was dead when I arrived home late Monday night. I immediately went on the web to find out what was wrong. Because Panasonic customer support was down, I wound up trying to use a generic service that cost about $39 but offered service on weekends and evening.

That was a disaster as all I was allowed to do was type in the question and wait, in some case hours, for a response that told me very little. So I was dead until Tuesday when I called Panasonic. Panasonic listened to me describe the problem and quickly told me they would have to send a technician out to me but instructed me to call a technical service that handles their product. I should have expected this to be a jobbed out service, what with the fact that I was calling from a place without a large population: New York City.

So I called Advisory TV, and I was told that the visit from the tech would cost me $235 before I even got an answer to what the problem was. Desperate, I agreed. He came Wednesday morning. That was good. But the news wasn’t. After doing some tests he determined that the board inside the TV that was now faulty was an expensive board and total repair and replacement was going to cost more than a new TV.

When I asked him about new TV’s, he recommended LG and Sony. So much for farming out tech support, Panasonic!

So I went to Best Buy at lunch on Friday and found a Sony 55″ led 3D TV that was awesome. And, it was on sale. But they couldn’t deliver until Saturday and I was going away for the weekend.

Best Buy has generally done a great job serving its customers. But what happened next taught me that there still is a disconnect between their store and online efforts. They made my life difficult and it almost cost them a loyal customer who had a preference to buy from them.

I was going to be out of town until Sunday, so I arranged to have the concierge desk in our building accept delivery of the TV and escort the delivery people to my apartment and stay while they removed the old TV and set up the new one. Meanwhile I went on the web so I could get measurements for the new TV and I discovered that Best Buy offered a package with that TV that gave you a 3D Blue Ray player, some 3D glasses, The USB receiver that allowed the TV to get web content and a special transmitter that synched the special 3D glasses to the TV. The package only cost $200, which was a discount of more than $1,000, if you bought it with the TV.

I was upset. The sales person at the store never told me about about the package, nor did he mention that the TV didn’t come with the 3D glasses. On the other hand, the web site said the TV couldn’t be delivered for 7-10 days.

So I called the store to see if they could add the package. I got put on hold for 15 minutes by someone in the TV section. When I hung up and called again, the TV department didn’t even answer. Another call an hour later got similar results. I couldn’t even ask!

Now I had to leave for the weekend.

The TV was delivered and installed. One point for Best Buy. So when I got back on Sunday I went to the Best Buy store to plead my case. At first I was told that the store and the website have different specials so I was out of luck unless I wanted to return the TV I bought and buy the package from the website. Then, a supervisor finally came over and offered to discount the additional pieces, but nowhere near the amount cut by the package. And, by the way, the glasses were sold out. Frustrated, I bought the Blue Ray DVD player and the USB link to the wireless internet. Tomorrow, I get to go back and see if they got any glasses in.

For the future: How about syncing sales on all platforms, and delivery options? How about offering a long standing customer the ability to take the package that was advertised? How about training the sales people to explain what comes with a TV and what doesn’t!

Convergence Continues: Canada’s Phone Company Buys Content

The Media Industry Convergence Strategy continues with word that BCE, Canada’s largest telecommunications company, is buying the country’s largest broadcaster, CTV.

Besides getting the largest broadcast network, for it’s $1.3 billion (Canadian) investment, BCE will also be picking up several cable channels. (Sound familiar, Comcast and NBC?). The deal follows an announcement that Canada’s Cable Giant Shaw Communications recently agreed to buy the television operations of CanWest Global.

BCE CEO George Cope told a press conference that the company wanted to lower the price of the content it was going to be putting on multiple platforms, particularly their mobile services.
Cope said he was motivated by something that happened during the Olympic games.

“We truly were kids in a candy store at the Olympics,” BCE Chief Executive George Cope said at a conference call, according to the New York Times. “I remember coming back from Whistler to Vancouver watching the women’s hockey game all the way on a handset,”

All over the world, the story is the same. Driven by the pace of media convergence, all kinds of media companies are getting into each other’s traditional businesses. In every case the motivation is similar: If they want to grow revenues around the creation of content, they simply must be prepared to build new revenue streams on emerging platforms. And if they merely own distribution platforms, they are vulnerable to two serious problems: 1) The price they will have to pay for content could get out of hand while at the same time 2) New distribution competitors are popping up everywhere.

And, as the consumption of media content is spread out over multiple networks and devices, the content creators have to figure out the business models that work best for every consumer.