Despite billions of dollars, tons of hype, and even a number of very happy customers, Internet grocery shopping has suffered notable business failures like Webvan and Kozmo.com (see the "Groceries in Our Midst" series of articles). However, this does not mean that old ways of doing errands cannot be replaced by more convenient services using technology and the Web. My favorite example is Netflix.
Netflix is a cross between the Internet Movie Database, Amazon, and Blockbuster, enabling you to rent and return DVD-based movies without leaving your home. It truly has replaced a brick-and-mortar store with a fully functional Web site for me and 300,000 other users.
Video rental stores, exemplified by Blockbuster and all of its competitors, suffer from the same problems. By the time I get to the store, the movies I want to see are already rented, especially on weekends. If I do find a movie to rent, I’m allowed to keep the movie only for a few days, meaning that I have to watch it almost immediately. I also need to return the movie promptly or suffer a significant penalty that can double the cost of the rental. These limitations would be more tolerable if only the video stores weren’t so limited in the movies that they carry. Sure, the big chains stock the latest hits, and the local shops often carry specialties, but none of them offer the universal selection to which buying movies from Amazon has made me accustomed.
Netflix addresses all of these problems, and introduces only a couple of small hiccups in the process.
Receiving and Returning Movies — The basic idea behind Netflix is that you select movies on the Web and Netflix mails you the DVDs via first class mail in an envelope slightly larger than the disc (sans packaging). (This approach wouldn’t work with videotapes, because DVD discs can be mailed at letter rates rather than package rates.) After you watch the movie, simply drop it in the mail using the same envelope, which already includes postage. Each time you return a movie, Netflix sends you another. There is no need to go to the store to pick up or return the movies, and best of all, you can keep a DVD for as long as you want – there are no late fees.
This stream of DVDs is made possible by setting up a queue of movies you want to watch at the Netflix Web site. You can add and remove movies from your queue, and you can change the order of movies to determine the order in which the DVDs are sent. When Netflix receives the last movie you returned, it sends out the next available movie on your list, and notifies you by email. My queue currently lists 61 movies, some which are still in theaters.
Netflix does not charge for each rental, relying instead on a monthly membership fee that corresponds to the number of movies you can have at a time. The Standard fee of $20 per month gives you three movies at once, though this does not mean you are limited to three rentals a month. At this level, you could easily watch eight or nine movies per month by watching and returning movies promptly.
Other membership levels include Bonus (four movies for $25 per month), Plus (five for $30) and Ultimate (eight for $40). Economy service ($14 for two movies) is available as well, making it easy to watch a movie every weekend. With Ultimate, a committed videophile could see watch between 16 and 24 movies a month.
Rows of Shelves of… Pixels — Netflix’s delivery method is wonderfully centered around the customer: I need only a mailbox to return movies, and I get around to it when I feel like it. But a great delivery mechanism is only part of the Netflix appeal. For starters, Netflix offers a huge selection, claiming to carry every DVD in print – 10,000 in all. That alone goes a long way toward eliminating the problems inherent to the brick-and-mortar stores.
When you visit a physical video store, you’re in permanent browse mode – the store employees are the closest you’ll get to a search engine. At the Netflix Web site you can search for movies by name, director, and actor, in addition to a number of other options.
As you would expect from an online storefront, the main page includes various listings to pique your interest. Today, for example, I see a Family Fun collection (The Wizard of Oz, The Iron Giant, Thomas and the Magic Railroad, Animal Crackers), and mysteries (Twilight, The Lady from Shanghai, The Astronaut’s Wife, Cutter’s Way and The Big Lebowski). There are numerous other groupings listed as well. There are also some permanent genre listings, such as Action & Adventure, Children & Family, Classics, Comedy, Drama, Foreign, Gay and Lesbian, Horror, Indie, Mature, Music & Concert, Romance, Sci-Fi & Fantasy, Special Interest, and Thrillers.
Often more helpful are the special category and Expert listings. These include Academy Award-winning films, the American Film Institute’s AFI 100 lists, and recommendations by movie critic Leonard Maltin and "Mr. DVD," who answers questions and points to relevant movies. Perhaps most interesting, however, is the Best Bet listing. By allowing customers to rate movies, Netflix recommends titles customized for your tastes. Presumably, Netflix is using aggregate ratings, much like Amazon’s rating system. My Best Bets are pretty close to the mark, and the more I rate movies, the more accurate its recommendations appear to be.
The end result of the Netflix selection process is that I get movies that I truly want to see. In video stores I would often end up picking up something I was only marginally interested in seeing, because everything that I really wanted to see was already rented. Netflix’s queue works well because you don’t have to remember what you wanted to rent – it’s all saved online. Whenever you think of a movie you’ve wanted to watch (I’ve been meaning to see Seven Samurai, for example), you can add it. I’ve found myself watching older movies through Netflix more than I ever did through Blockbuster. This has often resulted in better choices than those offered by more recent releases.
Why I’ll Never Go Back to Blockbuster — Because I don’t have to return movies immediately, I always have a few on hand. I try to set up my queue with a variety of different types of movies, so that I can watch films that suit my mood. For example, I wasn’t in the mood to view Sophie’s Choice for months after I received it, but I watched Planet of the Apes immediately after it arrived. There’s no need to return movies in order they arrived. This sort of scheduling just isn’t possible with conventional rentals.
And DVDs are just cooler than videotapes. It’s not just the quality – DVDs now regularly include special features such as scenes that didn’t make it into the theatrical release, directors’ and actors’ commentaries, and "making of" documentaries. Because I can keep the movie as long as I want, there’s time to watch those special additions. Netflix is also great for watching DVDs containing several episodes of television shows that aren’t available to everyone, such as HBO’s The Sopranos. And, anyone who has small children (who often want to watch the same movie every day for a week) will find the "no due date" policy a godsend.
Quibbles & Customer Service — Netflix really is as good as it sounds, though there are a couple of minor weaknesses. You’re never completely guaranteed to receive the first choice of movies in your queue. If it’s out of stock for a month (Netflix may have a huge selection and 2.5 million discs in stock, but they still have only a finite number of copies of each movie), then you wait a month. Of course, movies that I must see, I see in theaters. If I can’t wait to see it again, I generally want to own it anyway. However, to be fair, local rental shops can’t guarantee you’ll get your first choice either.
And there are certain problems which cannot be avoided in this model. Netflix simply can’t provide instant gratification (so you may still find yourself in a local store for the spur of the moment movie rental). Using Netflix doesn’t support local businesses. You can’t engage a clerk in a conversation about your movie choices. You can’t get a soda and bag of microwave popcorn delivered with your movie. Compared to the convenience offered by Netflix, however, these issues don’t bother me at all.
The real challenge Netflix faces is that even loyal customers sometimes find their use of the service waning after a few years. There are only so many movies that most people want to see, and after catching up on all those old movies, the crop of worthwhile new ones may not be sufficient to keep customers interested permanently. But for anyone starting now, that isn’t likely to be an issue for several years, and there’s no telling how Netflix will have evolved to address the problem by then.
I’ve had very few problems with Netflix. If you have not heard from them within four days after mailing a movie back, you can notify them from the Web site that you already shipped it back, and they will send you your next movie. The same goes if a movie never arrives. Also, with so much use, it’s inevitable that some discs may arrive scratched. The one time I received a damaged disc, it was easily reported on their Web site. In all these cases, Netflix sends you a replacement at no additional charge.
In fact, the service is so straightforward, and solutions for the few potential problems already in place, that I have never felt that I needed (or even wanted) to call to speak to someone. Their Web site takes care of it all, something I’ve never said of any other service or store.
All Tomorrow’s Movies — These days, every dot-com business has to show people that they can continue to make money in this economy. Netflix, however, has not made the mistakes of so many other Internet businesses. They offer a service for which people were already willing to pay (movie rentals); they have real revenues (an annual rate of about $70 million); and the service is extraordinarily easy to use. Although the privately held Netflix doesn’t report earnings, Netflix CEO Reed Hastings has predicted the company will break even in the first quarter of 2002.
What makes Netflix interesting is the way they’ve fabricated an essentially low tech service (mailing envelopes through the U.S. Postal Service) from the high-tech cloth of cutting edge DVD movie distribution media and a well-designed Web site. The quality of DVDs can be better than you’ll see in a movie theater after a few hundred screenings, and the bonus material is often well worth investigating. But as long as DVDs were firmly ensconced in the Blockbusters of the world, they were essentially just souped-up videotapes held back by the distribution techniques of the 1980s. Netflix gives DVDs their due by taking movie distribution to a new level, where a movie you want to see is pretty much always available. Perhaps we’ll have high-quality video-on-demand in a few years, and I wouldn’t be surprised to see Netflix in that business as well, but until then, I’ll be checking my mailbox for all the latest releases.
[Alexander Hoffman refuses to spend his own money on the very machines he makes a living supporting. Recently, he and his soon-to-be wife have been watching his TiVo and Netflix fight it out for their affections. ("Kids, you stop that right now!")]