"Online DVD rental is a large and attractive opportunity and we remain committed to investing in our long-term growth. With yesterday's price cuts in two of our most popular subscription plans, together with the reductions in February and June, we are choosing to lower price and reduce marketing as the most efficient means of sub growth and retention in the current competitive environment, and we are lowering our full-year guidance for revenue, subscribers, and earnings accordingly," said to Reed Hastings, Netflix co-founder and chief executive officer.
The gist is that Netflix has lowered their low-end priced customer rental plans. All commentary sees this as another move against Blockbuster. The war is raging they say, and Netflix is fighting on the price front.
In my opinion, they've taken the first step to losing the war. (Insert warning that I'm a Netflix customer here.) Sure Blockbuster had the lower prices, but what else did they have? Were they the largest customer base? Did they offer more options? Is there speed of service better?
From all appearances Blockbuster had no clear advantage other than price. Netflix also had them beat on sheer visibility. From my personal experience, most everyone I've run into at least knows about Netflix, but I've yet to meet anyone in my circles that even knew Blockbuster rented online. Of course that could be the point here.
Perhaps Netflix is cutting back their direct marketing and really passing on the savings. And of course it's just happens to help in the price war?! Maybe Netflix also realizes that their biggest marketing strength are their customers. Folks like me that having nothing but good things to say about their service.
I'd heard of it and seen the commercials but had little interest until a couple of my friends really talked it up. From there, I worked actively to market, um, mention, it to my friends. So maybe the Netflix user base isn't growing as fast as before, but is a price drop going to work on their prime means of recruiting?
What Netflix needs here isn't to start a conversation about price. A dollar is a dollar but a dollar a month escapes a lot of folks' radar. It would have been a nice surprise on the bill but only for about 5 minutes. The question is what story do they need to tell now.
I'd like to recommend to Netflix that their next move be to ignore what Blockbuster is doing about price and tell a different story. Tell the story of the satisfied customer. What about the story about think of a movie and bam, add it to the queue. Or maybe the story of finding a rental at Netflix at anywhere on the Internet.
Want a good one Netflix? How about jumping in on a Facebook app! I already share movies I like there, how about letting me share my queue and my rented lists.
Another idea? How about tiny Firefox plugin so I can highlight a movie title and click the button and be taken to the matching Netflix page.
My final idea? Work the blogger angle. Give us bloggers a widget for our favorite movie(s) on Netflix. I'd really like being able to review a rental and get a referral credit of some sort for getting folks to rent it from my blog.
So Netflix, please reconsider your story. Do I mind the dollar discount? Not at all, but I'd like you to consider that a month later that conversation will be over and that story too boring to tell.
As for you Blockbuster, you can skip the price wars too. Give me a story interesting enough to come over and visit you.
Todd, an avid movie buff.