Letter to Blockbuster: Bye-bye Goliath

Blockbuster’s penchant for greed and arrogance is apparent once again — this time in the highly-competitive field of DVD rentals by mail. I switched from Netflix a couple of years ago because at the time BB offered free in-store rentals for each mailed DVD dropped off at the store.

Another advantage was that the store return immediately (at least in theory) triggered the mailing of the next titles in my online queue. Blockbuster’s inventory was dismal, but I noticed that you were increasing your inventory beyond the mainstream titles and offering films actually worth watching.

You failed on all those fronts and then some.

You cut the freebie limit to only five per month. You never caught up with Netflix’s inventory. BB DVD’s tend to be more scratched than Netflix’s. The latter’s website is faster and has better usability (even though BB pretty much copied pretty much the whole thing for its own website). It only took a couple of clicks to reopen my Netflix account two weeks ago and get back the queue I abandoned two years earlier!

To top it off, you raised your price right in middle of the fight with Netflix and I think NF dropped its price a bit. And I can’t figure out how you calculate taxes. The $19.95 rate shows up at $23.50 on my AMEX statement. That’s a tax rate over 15%. Are you based in Switzerland or Sweden?

Furthermore, NF offers totally free “Watch Now” streaming videos. You have your hand out for your downloads. I shouldn’t be surprised; this is the same outfit that rents out a single in-store new release for $4.50 and piles up ridiculous late fees when not returned within 2 days.

Finally, your mail service is much slower than Netflix’s. I ran a test this week. Instead of returning BB titles to the store, on Monday Dec 15, 2008, I mailed three BB and three Netflix DVD’s simultanously. NF’s three new titles were in my mailbox on Wednesday. On the other hand, two BB titles didn’t get here until Friday and the third didn’t get here until Sat. Meanwhile, NF took the trouble to email me asking about arrival dates to improve service.

Come on! Are you really fighting a war with Netflix or acting out Ronald Reagan’s arms-for-hostages playbook?

I just copied my BB queue and moved it to Netflix because BB is greedy, has worse service and really doesn’t care that much about serving the serious film enthusiast or you would’ve bothered to catchup with Netflix’s alleged 100k-plus inventory.

It’s just hard to believe that you had your chance to beat Netflix, create an entirely new revenue stream, and try to change your “family friendly” reputation to include people who want more than Hollywood’s dumbed-down mass-marketed claptrap. Network television and cable already cater to the dummies and do a fantastic job.

But despite your size, awesome capital advantage and thousands of retail outlets, you’re still managing to lose out to a start-up that doesn’t have a single retail location!

There was a time that everyone, including me, was predicting Netflix’s eventual demise. How could it possibly outspend BB? we asked. But we were wrong. Someday this sad yet amusing story will be studied in business schools as another case of the dumb, meandering giant - a la Microsoft - getting pounded by the smarter, more agile newcomer.

[If the biblical analogy holds, the newcomer also gets ambushed later on - by his own penis (arrogance). But that’s another story.]

I look forward to reading the Wall Street Journal story on Blockbuster selling out to Netflix - right next to the obituaries for three other irredeemable symbols of pomposity: GM, Ford and Chrysler.