September 22, 2011
Hey, watch this!
Netflix beat Blockbuster the same way Amazon and Walmart beat their competition: supply chain mastery. Distributing physical things is that difficult. Inventory control is what ultimately did in Borders. Now Netflix is trying to compete in the same market as Apple and Amazon using the same Internet as everybody else.
But Netflix convinced itself that its physical supply chain was an albatross around its corporate neck. Even if it was spinning off the DVD division to sell it at a later date, the mystery is why it would destroy the brand now ("Qwikster"?) before any deal is done. PC Magazine has already added Netflix to its pantheon of tech debacles.
An obvious comparison is the Kindle. Amazon sees a big future in ebooks. It's built an entire publishing platform based on ebooks. But it isn't about to spin off its physical supply chain (call it "Bookster"). When launching the Kindle, Amazon could augment the still-slender Kindle catalog with its deeper catalog of physical books.
What does Amazon do with excess capacity in its supply chain? Amazon sublets it, even if that means competing against itself. It doesn't care as long as it gets a cut of the action.
As I mentioned before, Netflix no longer has the deepest anime catalog on the Internet, the only reason I signed up with them in the first place. But Netflix has what niche competitors like Greencine lack--a nationwide supply chain. Why not sublet that excess capacity to any other renter of "First-sale doctrine" IP materials?
In any case, had Netflix just nailed down a bunch of long-term licensing agreements with the major IP owners and the owners of the pipes all that data has to travel through, that'd be one thing. But with Starz still holding out, Netflix is negotiating from a position of weakness while kicking the business that brought it this far to the curb.
Like a hormone-addled teenager, it's as if Netflix CEO Reed Hastings thinks he can impress all those disenchanted subscribers and cute content providers who keep blowing him off by doing something as arrogantly grandiose as it is self-destructive. Hey, watch this! Or in the immortal words of Otter from Animal House:
No, I think we have to go all out. I think that this situation absolutely requires a really futile and stupid gesture be done on somebody's part!
And they were just the ones to do it. Of course, such demonstrations of desperate determination often end with a trip to the hospital. Or bankruptcy court.
Blockbuster goes bankrupt