By Relmor Demitrius
It might be hard for some people to imagine Netflix (NASDAQ:NFLX) as the big bad bully in the entertainment distribution market, especially when you consider the once retail superpower Blockbuster Inc. (NYSE:BBI) as the victim. In the new digital age, court rooms and laws have to evolve as fast as the industries they cover. There are more grey areas in technology based anti-trust laws than teenage fans of the new Twilight Movie release.
When you dominate an industry, and then are late to the party on the digital age, you really only have yourself to blame. With a new CEO and a very warranted sense of urgency Blockbuster is making this game of catch up very interesting. As Blockbuster seeks to move in this direction, and indeed they have made great strides in that area, they might find the path a little more difficult than Netflix had it. Should one company dominate the On Demand Video distribution business? Not if customers want quality and pricing to remain affordable. Blockbuster does have some leverage though with exclusive same day of release distribution capabilities for many new movies, they can offer the game system manufacturers something more;ie more bang for the buck.
Rarely, does one company dominating an industry provide better overall quality than two companies competing for that same market share. Would Intel (NASDAQ:INTL) chips be as fast and affordable today without AMD (NYSE:AMD) pushing them? Of course not. Would McDonalds only charge $1 for a McDouble if Wendy’s didn’t have a dollar menu too? I think the answers here are obvious, and lessons learned in other industries shouldn’t be ignored. Am I claiming Netflix is in violation of anti-trust laws? Not at all. That is actually the furthest thing from what I am saying here. But lessons learned can be applied here. I mean Netflix is just a company like any other. They have stockholders to satisfy too. If Blockbuster approached Sony, Nintendo or Microsoft for their XBOX 360 device, and proposed an agreement to be available on any of their devices as an alternative download method for digital entertainment, and Netflix said if you don’t do that, we will give you a percentage revenue share of all profits, there could be a line being crossed. This is just one very hypothetical future scenario Blockbuster could be in, or for all we know already is facing right now.
For instance, when a company was thinking about going with an AMD products versus Intel, Intel was accused of offering pricing AMD could not compete with, even at a loss to them, on top of kick back rebates for simply buying Intel products, and for not switching. There are other nuances to this dispute and settlement, but that is the basic concept Intel was accused of, and in fact settled with AMD for over 1 billion dollars. This was considered an anti-trust violation by the courts. Through legal avenues, options expanded for AMD where otherwise doors were closed. Is it the end all of AMD’s problems? Of course not, but the precedence by the court was set, and should help AMD’s penetration going forward.
The same could be possible for Blockbuster. As their penetration with On Demand devices now includes a slew of home entertainment system products from Samsung (now including even Blu-Ray capabilities) and availability in Tivo devices as well, Blockbuster in 2009 entered into an area in which previously Netflix only had reigned. Netflix famous inclusion in gaming platforms is considered a legendary example of marketing genius and distribution. Use it or not, on every XBOX 360 is the name Netflix with the ability to download movies directly to your TV through your device. Mobile apps are now coming up from both companies as well. The Iphone has a Netflix application and a Blockbuster application is available on the HTC H2 device from T Mobile. Blockbuster also has a Motorola app in the works for select phones, as well as an application which will work with ARCHOS portable media players giving the user literally hundreds of choices.
Is there room for two distributors? For consumers sake, I hope so. If not, then maybe some day a court of law will have to make sure this will be the case. For now there are avenues for Blockbuster to continue to expand their business model, without legal means being necessary. Who knows, maybe in 2 years Blockbuster and Netflix may be on every new TV and digital recording device that comes out. I think that would definitely be a huge win win situation for consumers. Well have to see what the future holds.
Long BBI
By Relmor Demitrius
