Thursday, October 06, 2005

Old News

So, I was up late tonight working on a presentation, and I happened across this headline on Yahoo:

Blockbuster to miss online DVD rental target

Very exciting to read. Gave me a little lift. We up our short term guidance and tell people we'll be at 20 MILLION members not far past the end of the decade, and BBI is having trouble getting to 10% of that figure in the next year or two.

I have to admit to a guilty... well... not pleasure, and not even an indulgence. It's best described as a bad habit. I occasionally read the NFLX board on Yahoo Finance. Look through to see what's being said. I see a lot of nonsense on both the long and the short sides, but what really doesn't make sense to me is the rabidity of some of the short-siders.

They harp on the same things over and over again. They say there are no barriers to entry. Well, Walmart and Blockbuster might beg to differ on that point, because they've certainly both had their share of problems getting traction in this market. They talk about how video on demand will eat our lunch. Well, VOD has been around for a while, and our lunch is still sitting on the plate in front of us. We deliver, on demand, millions of individually selected movies to millions of individuals, week in and week out. For the next several years, you would be hard pressed to build a network that can move millions of movies worth of bits a day; until then, the USPS carrying DVDs is the king-kong of bandwidth (admittedly a very fat pipe with hellishly long latency between packets -- I wouldn't want to browse the web that way).

They talk about how we can't sustain growth, that we churn off a bazillion customers a month. I can't fathom why they don't understand that even when we lose 5% of the customer base, we still have convinced 95% of our customers to keep giving us money. We've also convinced a bunch of new people to start giving us money, and 95% of them will give us money the next month, and the next and the next. Are we expected to keep every customer around forever? We can't. It's kind of a 'frictional churn,' much like there's a 'frictional unemployment.' You can't ever get to full employment. Economists say it would cause the economy to explode.

People take breaks from Netflix. People come back. A great many of the people who leave tell us that they wish they didn't have to leave, and they tell us that even though they're leaving, they still recommend us, because they loved their experience so much. I'm insanely proud of the fact that I work for a company where people love us. It's gratifying to know that I'm on a team that's making a difference in people's lives. Admittedly, it's not curing cancer or eliminating poverty or global warming, but it's making people's lives richer, or at the very least, bringing some entertainment to them.

As gratified as I am by the warm wishes and happy customers, I'm equally puzzled by those people out there who for some reason wish us to fail. So, I guess in the end, maybe I shouldn't have been so cheerful about Blockbuster floundering. They're just folks with jobs, trying to do them the best they can. However, in any confict, there are winners and losers. If it takes a little viciousness to help insure my team comes out the winners, I suppose I'll pay that price. I just have to keep remembering that it's only business -- nothing personal BBI.

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