Reed Hastings Interview

`Consumers are very social and they want to talk about movies'

Q. How did the Hollywood studios react to you in 1999? How did you present Netflix?

A.We tried a number of things, none of which worked until we hired (industry veteran) Ted Sarandos. He knew all the right people. They trusted him. They knew each other. They all had a network of friends that went back 20 years. Ted was able to put those (revenue-sharing) deals together within a year with all the studios. It was very much a hire-the-right-person strategy as opposed to camp-out-on the-doorstep.

Q. How do the studios treat you now?

A. In the first two or three years, the studios were tolerant. And to the degree that they supported us, it was because they wanted more competition in the rental market. Which makes sense for them. And so they were supportive perhaps more than our economics at that time justified.

Now they love us because we do such a great business for them on the hard-to-market films. So, ``Spider-Man 2'' we carry. We have it. Everyone has it. We're not adding any particular value to it. But then, you go into Sony Classics, we do a huge business.

Q. As you examine your innovator's dilemma -- creating a new way of doing business that others attempt to copy -- which companies do you look to for inspiration?

A. The studios know, Wal-Mart is always going to sell more of your DVDs and make you more money. So treat 'em well. But we're going to be the passion brand that helps grow the whole category.

Q. Blockbuster and Amazon are the near-term threats to Netflix. What about long-term threats of video on-demand services?

A. ...the profit on a DVD sale is about $14 to the studio. Whereas VOD or Internet downloads, it's $1 or $2 to the studio. That's why it makes economic sense for the studios to protect DVD sales.

Q. Many analysts predict Netflix will be forced to sell its online service to a larger media company to survive? Is that the case?

A. In the near term, over the next couple of years, we're a strong independent company leading the DVD rental business. As the development of Internet delivery comes, it may be that we need to be part of a Viacom, a Disney, a Yahoo, to compete effectively. We'll see at that juncture. But in terms of the DVD rental business, we're strong, profitable, have $175 million in cash, no debt, we have no need to be part of someone.''

excerpted from MercuryNews.com | 02/27/2005 | San Jose Mercury News.

A Blockbuster Campaign Can Be as Good as Gold

Los Angeles Times is talking about how studios spend millions of dollars campaigning for Oscars, advertising their movies to Academy Awards voters. Why?

"Winning an Oscar still means a spike in theater ticket sales. And with DVD sales and rentals now representing more than 60% of a studio's revenue, spending even as much as $15 million on an Academy Award campaign can be a good investment. In this 15-minute culture, Oscar is one brand that lasts.

"That money comes back in spades in terms of more rentals, more sell-through [video purchases], more television fees…. The bottom line is those awards have a life probably as long as that statue," said Russell Schwartz, president of marketing for New Line, which took home a bushel of Oscars last year for the third part of its "Lord of the Rings" trilogy.

This means all the nominees and winners will have "long wait" status on Netflix and other online DVD rental services, unless they're smart and buy more copies. Read more about Oscar campaigning (registration required)

Hacking Netflix has links to where the Oscar winners and nominees appear on Netflix, so you can add them to your queue. You might also want to check out the Independent Spirit Awards, which are better, in my humble opinion.

Blogging Distribution Center

The Netflix distribution center in Lansing, Michigan has its own (unofficial) blog!

Oscar-nominated shorts viewable online--TODAY ONLY

VIA GreenCineDaily you can view five of the Oscar-nominated live-action and animated shorts at Salon.

Hacking Netflix pulls out all the stops

Please peruse Hacking Netflix, which has a plethora of posts for this penultimate day. Then get back to work.

Paramount speeding up DVD releases

Netflix's New Plan: Be Like Dell, from Business 2.0

Netflix has new price plans

Netflix ad on Yahoo for $11.99 plan.

Cool Google Movie Hacks.

Netflix Lifetime Membership for those who need it least

Celebs Get Tons of Goodies at IFP Independent Spirit Awards
via KGET 17

This makes me crazy: Part of the goody-bags that presenters get at the Independent Spirit Awards is a Netflix Lifetime Membership. See the rest of the list.

The 2005 IFP Independent Spirit Awards premieres live on The Independent Film Channel (IFC) at 5pm EST and is edited for rebroadcast on Bravo the same evening at 10pm EST/PST, following an exclusive one-hour red carpet show at 9pm EST/PST.

Netflix Throttle Banner

I don't believe in "throttling". Netflix has stated that they prioritize sending discs out, when there aren't enough of one title on one particular day to go to everyone who wants one, to users who have not received their first choice a lot lately. However, this is a hoot. I found the link on Manuel's blog.

Attention, Netflix! Listen Up!

This is for you, Netflix:

"Internet experts say some blogs are adept at synthesising public opinion and can be a powerful force that companies ignore at their peril."

"easy-to-use blogging software and powerful search engines are now creating vast and efficient "word of mouth networks" on which tens of millions can compare information."

"'If companies don't understand that and don't learn how to track what people are saying, they are going to be hit violently with PR problems that they don't understand or know where they are coming from,'says Robert Scoble, a Microsoft employee who writes a popular tech blog."

"Some executives have started their own blogs to proselytise about their companies, while others are responding by hiring one of an increasing number of intelligence firms that monitor online traffic.

But Mike Masnick, chief executive of Techdirt, one such firm, says most companies are oblivious to blogs and those that are aware do not know how to respond.

He believes the best strategy is to engage bloggers openly and honestly in their realm. Any whiff of insincerity will be picked up and turned against a company."

"'It's the new world and you want to be part of the conversation,' says Mr Scoble. Mr Masnick is quick to agree. 'Companies that don't recognise this are going to get bitten,' he says. " Read the rest at Financial Times (registration required)

A memorable, but not rememberable, movie

via roanoke.com: "A friend who subscribes to Netflix
is always looking for titles to add to her list. So, when I saw this movie, I thought, 'I need to tell her about this one!'
Next time I saw her, I positively gushed. 'I saw the greatest movie the other day! You have to add it to your list!' 'Great,' she said. 'What's its name?' "

It's right on the tip of her tongue. Read more.

Netflix Freak 2.0 adds profile support, more

via MacCentral:: "The Little App Factory has released Netflix Freak 2.0, a major upgrade to the Mac OS X application to help Netflix subscribers manage their queues. Netflix is a mail-order DVD rental service. New features in the 2.0 release include support for Netflix Profiles, a relatively new feature of the service that lets subscribers set up separate queues for each member of their household." Read more

Reed Hastings regrets going public

via The New York Times
ON GOING PUBLIC

IN retrospect, Mr. Hastings wishes he had waited longer to go public. By the time the investment bankers were willing to sell shares in Netflix, the company was no longer desperate for the $94 million it ended up raising in its initial public offering.

"In hindsight, what triggered Amazon and Blockbuster to compete with us is they could see how profitable we were and how fast we were growing," Mr. Hastings said. It has also meant that Mr. Hastings is constantly fending off analysts and commentators who are convinced that long-term survival requires that he sell the company to a large suitor to ward off the competition.

Netflix has $175 million in cash and is carrying no debt, Mr. Hastings noted, and it has "no desire or need to be acquired."

ON VIDEO ON DEMAND

Mr. Hastings anticipates that it will be 2010, if not 2015, before a lot of the movie-watching public is downloading films over the Internet. Mr. Hastings is convinced that the same features that draw people to his DVD rental service will induce them to use his service to download digitally delivered movies. Netflix has devoted millions of dollars to building an easily navigated Web site while it refines a complex software system that recommends movies based on customer ratings.

"If we differentiate the Web site well enough, with rating histories and other features consumers want, that's our strategic leverage" once people start receiving movies via the Internet, Mr. Hastings said.

Online Movie Rental Battle Review

HardwareGeeks.com has updated their "Online Movie Rental Battle Review", in which they compare the major DVD rental services. They used to prefer Blockbuster over Netflix, but now, they're calling it even.

New Netflix subscriber experiences lost disc during trial period

Matt writes to me

“Hi Becky,

I've read through your blog, good one BTW, and Hacking Netflix.
It looks like the going rate for "buying" a disc from Netflix is $20. This is my situation: I signed up for the free trial, about half way through one of my disc doesn't show up on the return trip. If I cancel and the disc doesn't show up for 7 days after cancellation they charge me for it. I assume $20. If I stay on and give it another month to show up it only costs $18 and I get more movies as well. This is what I wrote to Customer Service:

Subject: Help with Your Account

I returned a DVD on Tue, the 15th. My 14 day free trial expires Sun. the 20th. I have to wait 6 days to declare a disc "lost" which would be the 21st. I would like to cancel my account, but if the DVD doesn't show up in 7 days after cancellation, will I be charged for the DVD? If so how much? I feel like I'm being forced into continuing my subscription. I am not at all pleased with this situation.

Thank you for your quick reply,

Matthew

and here is their response 9 minutes later!!

Hello Matthew,

Thanks for your message.

If you mailed back your movie more than 6 days ago and you have not received an email confirmation that your movie was returned, please click on "Report Problem" on the Rental Activity section. After you have clicked "Report Problem", simply follow the instructions on the next page(s) to report the title as "Returned but Netflix has not received it". This action will place a notation beneath the title stating "DVD reported as missing" under the "Movies You've Rented" section of the Rental Activity Page. Once it is received by our warehouse this notation will be removed. We apologize for any confusion this may have caused.

Per the terms of cancellation, outstanding rentals must be received by Netflix within 7 days of cancellation, or we'll automatically charge a replacement fee for the unreturned DVDs.

As a courtesy I have extended your return date by an additional 7 days.

If you have any further questions or concerns, please feel free to contact us.

Thanks,

Scott,
Netflix Customer Service

As you can see they plan to charge me if the movie doesn't show up and "have extended your return date by an additional 7 days". I have reported the movie as lost and canceled my subscription as of today, Sun, 20th. If after about 10 days if the disc has not shown up I plan to restart my membership and let them charge me $18 for another months movies and wait for the lost one to return. Any advice is welcome. I'll let you know how it goes.”

My reply

“Dear Matthew,

Thanks for writing. I'm glad you are enjoying my blog.
I'm sorry I don't have any advice regarding your situation, but my experience with Netflix has been very good regarding lost discs. In one year and over 200 discs, I've never had a lost disc that stayed lost. They always turned up eventually. However, I have had to pay for a broken disc.

May I have your permission to post this entire email on my blog?

Thanks,
Becky”

Matt replies to me

“I really hope this disc shows up. I feel like I'm playing by the rules, but I would rather spend the money on another months membership than pay for a disc. Which begs the question. If I
was a member for 3 years and "lost" 4 discs during that time, when I cancel all my discs have to be returned in 7 days or pay for the discs. What is the statute of limitations?? Do I now
have to pay for all the lost discs??

Matt”


Netflix writes to Matt

Lost Disc Report

Dear Matthew,

We're sorry to hear that Hellboy was lost in the mail. Unfortunately discs do go missing during shipment from time to time, so it is our policy to accomodate for the occasional disc lost during shipment. According to our records, you have reported the following disc(s) as lost in the mail: Date Reported Title 02/20/05 Hellboy If we receive any of these movie(s) from the post office, we'll let you know as soon as they arrive. If you've requested a replacement copy, it will be shipped to you as soon as possible, otherwise, your next movie should be on its way soon. We apologize for the inconvenience.

-Your Friends at Netflix

Netflix Membership Cancelled

Dear Matthew,

Per your request, your Netflix membership has been cancelled, effective 20-FEB-2005.

Please return the following titles by their specified due dates: Due Date Title
Feb/27/2005 The Mask (1994)
Feb/27/2005 Category 6: Day of Destruction (2004)

We hope you enjoyed the service and will consider returning some day.

Movie Received

Your Queue is empty

We've received Hellboy, but since your Queue is empty, we can't send you your next DVD. Please come choose some movies so we know what to send you next. Hellboy Our records indicate that you previously reported this disc lost. We wanted to notify you that we have since received it.

My conclusions

Based on Matt's experience, we may conclude that you should report lost discs as lost right away, if you are planning to cancel before six days elapse. Netflix apparently removes that lost disc from its calculations, so they do not expect you to return it after canceling, nor will they bill you for it.

Lots of new Netflix jobs

A Netflix keyword search on Monster.com reveals lots of opportunities.

Netflix is hiring Operations Managers in Gaithersburg, MD, Santa Ana, CA, Cleveland, OH and elsewhere.

They are also using temp agency, Volt Services, to hire operations associates for Phoenixville, PA and Santa Ana, CA, and a customer service representative for the Netflix call center in Sunnyvale, CA.

Reminder: today is a Postal Holiday

According to the USPS Postal Holiday Calendar, today is Washington's Birthday, also known as President's Day, and all Federal Offices are closed. This means no Netflix today.

Vote for Netflix on UrbanDictionary.com

UrbanDictionary.com allows you to submit new slang words with your definition. You get to vote on the ones you like the most. I've submitted a couple of definitions for Netflix. Please vote on your favorite. It'll make me feel good.

My Netflix Queue Stats

In honor of the first anniversary of my Netflix membership, here are my Netflix queue statistics:

208--Number of movies I've rented from Netflix since I joined.
380--Number of movies in main queue
5--Number of movies I have out
21--Number of movies in "DVDs Awaiting Release" queue
65--Number of movies I've rented in the last 3 months
0--Number of movies labeled "Very Long Wait and Out of Print”
2--Number of movies labeled "Very Long Wait"
0--Number of movies labeled "Long Wait"
3--Number of movies labeled "Short Wait"
0--Number of movies in the queue that are actually television shows on DVD
6--Number of movies in the queue that I've already seen
0--Number of movies I feel are categorized wrongly
21--Average number of times I check the queue per week

Respect Copyrights

Netflix Fan does not endorse copyright violation. I do not encourage people to use their Netflix account to obtain DVDs for the purpose of copying copyrighted materials. I believe people and corporations have a right to own their own property, a fundamental belief which distinguishes American democracy from communism. Thank you for remembering the rights and freedoms for which our friends, family and forefathers fought and died.

For more information, visit RespectCopyrights.org

When I was in school, I was the one who wouldn't let you copy my homework.

Free alternative to Netflix

Your public library. This link happens to go to the New York Public Library, but I'm sure you have one nearby.

Q: How are free things not really free?

A: Opportunity costs, mainly inconvenience: parking, locations, hours, and selection.

SBC to offer video on demand

Per MSNBC , telecom giant SBC plans to offer broadband subscribers the ability to download up to three mvoies at a time to their digital video recorder and replace them when they are finished viewing them for a flat fee of about $18 per month, later this year.

The Netflix reaction: "A Netflix spokeswoman said the company does not believe SBC and others will represent a significant threat to its basic business for at least five years. That's not because of technological barriers, but economic ones.

'The studios have an exclusive window on DVD rentals and DVD sales. The money they make on rentals is far more than they make on Internet delivery of movies or content,' said Shernaz Daver, spokeswoman for Netflix. 'If you look at Comcast or anyone, what they are offering to date to be downloadable is their old content -- their collection -- not their newest releases.'

Daver said the company believes that while Internet deliver will eventually emerge as an important method of getting films to customers, DVD's will remain the primary form for the remainder of the decade because that's where studios can make the most money.

'DVDs will remain the predominant mechanism for delivery for the next five years,' she said noting Netflix has nearly 3 million customers and an offering of 30,000 titles. 'That's not something that any of these companies can offer today. Can they do it in the next five to 10 years? Probably, and that's the reason we are going to be offering some kind of digital media this year.' "