When Netflix announced a 60% price hike for streaming and by-mail subscriptions, you’d have thought the sky was falling. More than 12,000 people left comments on Netflix’s blog post that explained the changes; thousands more took to social media to complain; and every major media outlet covered the negative reaction to the news. (When has a $6 price change ever sparked such outrage?)
Many have threatened to leave. But is their Netflix aversion strong enough to transform the brand into a recruiting tool for its competitors? Even when these supposed alternatives to Netflix offer very different services that are, in some cases, more expensive than the prices that led them to ditch Netflix in the first place?
At the height of Netflix’s price hike hoopla, for example, Blockbuster swooped in to give disappointed Netflix customers a free 30-day trial and a discounted subscription plan. Now, Blockbuster.com has been dramatically redesigned as a Netflix attack-hub. “Looking to make the switch to Blockbuster? Tell Netflix why,” the site’s front page reads, with an option to post your thoughts publicly under the hashtag “#HelloBlockbuster.” A bold banner on the right begs “Netflix customers” who are “seeing red” to make the switch to Blockbuster.
But Blockbuster offers different services than Netflix. The company does not offer streaming movies by subscription; rather it charges customers to stream content on a pay-as-you-go basis, meaning customers can rent a title (for roughly $3.99 and up) or purchase a title (for roughly $14.99 and up). If you’d like a subscription with Blockbuster, you can purchase a DVD-by-mail plan, beginning at $11.99. That’s much more expensive than a comparative Netflix plan, which starts at just $7.99. (After the price hike, Netflix’s subscription and DVD-by-mail plan, which originally started at $9.99 per month, went up to $15.98 per month. The company also began offering a $7.99 DVD-by-mail-only plan, in addition to a $7.99 streaming-only plan already available, which are both less expensive than anything subscription Blockbuster offers.)
Of course, there are benefits to Blockbuster’s subscription service: access to in-store exchanges, video games, and many new releases that Netflix subscribers would have to wait 28 days for. But, fundamentally, the two companies have different business models. As Blockbuster CEO Jim Keyes has said, Blockbuster is more focused on new releases and physical DVDs, while Netflix is more focused on longer-tail content and subscription-based streaming.
Walmart, too, has gone after Netflix customers, without a Netflix-style service. If you’d read any number of media reports, you’d believe Vudu, Walmart’s streaming service that launched on the iPad last week, is yet another Netflix killer. But Vudu is a VOD or video-on-demand service. Similar to Blockbuster’s streaming offering, movies are available online to rent or to purchase. “It’s an à la carte service,” as Vudu GM Edward Lichty says. It offers an entirely different service than Netflix and has an entirely different business model. Like iTunes, Vudu does not offer unlimited online streaming for a monthly subscription rate, and it does not offer DVDs by mail.
But on Vudu, every film clicked has a large advertisement attacking Netflix.
Under a section entitled “Why Is Vudu Better,” the company spends much of the page comparing itself to Netflix: It has no monthly fees; it has higher-definition video; and it boasts the ability to “stream hundreds of new releases years before they’re on Netflix*.” (That’s a complicated asterisk to explain.)
Yet Vudu doesn’t see Netflix as a competitor–it’s a complement to Vudu. “We’ve found that what we do, at least today, is very compatible and complementary to subscription offerings that are out there,” Lichty says. “By way of example, most of our customers are also Netflix customers.”
Lichty adds that he doesn’t suspect the 28-day delay to have had much of an impact on Netflix. “I certainly know they’ve been growing like crazy since that was put in place, so it doesn’t appear to have hurt them,” he says.
The media is just as guilty for drawing such comparisons. Plenty of alleged “Netflix competitors” are often branded potential “Netflix killers.” Hulu Plus? A Netflix killer, despite the fact that it mainly offers streaming television shows. Amazon Instant? Another potential Netflix killer, despite the fact that it’s a VOD service that also offers subscription streaming, with a fraction of the titles that Netflix has, and unrelated benefits such as free two-day shipping. Redbox? A kiosk-based DVD provider that rents on a per-day basis. HBO Go or Comcast Xfinity? Only provides HBO or Comcast-provided content, respectively, and only with a TV subscription with HBO or Comcast, which is more expensive than any comparative plan from Netflix.
Traditional wisdom says that in order to do well in the space, you must kill the top player–you must be a “Netflix killer,” in other words. Not true. While Netflix is growing exponentially, Redbox is growing sharply too, with revenue up 34% in its last quarter. Hulu Plus has shot up to 875,000 paid subscribers in just seven months, and expects to hit its first million in the near future. HBO Go has rocketed to 4 million users since launching in April. Apple’s iTunes is a phenomenal success. And Vudu, as Lichty tells Fast Company, has tripled its revenue and customer-base since January. (Blockbuster, as usual, is the exception to success here, but it’s a complicated example due to its bankruptcy and recent acquisition.)
So why attack Netflix? Branding. Marketing. It’s no different than when Apple went after Microsoft when Microsoft was Microsoft; it’s no different than how most every team in the MLB hates the New York Yankees. You need a Darth Vader-like figure ruling an empire in order to seed a rebellion.
Could there be a “Netflix killer” in the future? Sure, if any competitors actually launch the subscription streaming services they’ve long been rumored to be building.
But for now, the only Netflix killers out there are in the movies and TV shows that Netflix offers.
[Image: Flickr user Texas Hillsurfer – On The Road]