Could Netflix's Patent Lawsuit Boost Blockbuster?

from the unintended-consequences dept

Thu, Apr 6th 2006 6:15pm — Mike Masnick

Earlier this week when Netflix decided to sue Blockbuster over its business model patents, the one thing that seemed odd to many was the timing. After all, Netflix had been able to continually wallop Blockbuster in the market, despite plenty of fears for many years. When Blockbuster first entered the online video rental space, many thought Netflix was doomed -- but they managed to keep growing at a much faster rate while Blockbuster seemed unsure of what it really wanted to do with the online offering. Early on Netflix's actions even made clear that they were more concerned about competitors like Amazon than they were by Blockbuster or WalMart (who eventually outsourced their effort to Netflix). In fact, there was even talk recently that Blockbuster would ditch its online component completely and focus on its core business of renting from stores. They apparently decided against that late last year and refocused their efforts, but it was still considered well behind Netflix. So, in suddenly sending out the patent lawyers, does Netflix risk legitimizing the competition from Blockbuster? It certainly seems like the way Blockbuster is spinning the lawsuit, noting that it's their sudden surge in the marketplace that has Netflix scared. With there already being plenty of doubt about Netflix's ability to prevail -- will this lawsuit completely backfire and simply serve to make people more aware that Blockbuster has a similar offering?

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46 Comments

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jdragon, 6 Apr 2006 @ 6:43pm

it could kill blockbuster
i'm a netflix user and i am aware of bbi's offering...personally, i think netflix has a better UI.
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D Slocum, 6 Apr 2006 @ 7:32pm

it should hurt Netflix
First Netflix throttled (and continues to throttle) its own customers. Now, in its fear of legitimate competition, Netflix management is tying to use the courts to put competitors out of business. It's not often that one finds a business with such sleazy management.
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Walking Dude, 6 Apr 2006 @ 7:46pm

Re: it should hurt Netflix
This free lunch mentality around the 'net is starting to get really annoying. Netflix isn't "throttling" its customers, it is preferring its customers who don't use its service as much as the heavy users. And I don't blame them. If I'm renting 1-2 movies a week, I'd expect to get the new releases first versus someone who is renting 10-20 and either has an inordinate amount of free time or is pirating (I'm sorry, "backing up") and planning on watching them later.

Fact is, Blockbuster retail stores throttle in their own way, too. Show up at noon on Tuesday and you are definitely going to get the new release that day. Show up at 8 pm and chances are you will not. Different market, different model but both have the same problem - finite number of discs. You are certainly free to switch services or go back to brick and mortar. No one is forcing you to be throttled by Netflix. You can go be throttled by Blockbuster On-line OR you can pay per rental at a brick and mortar.
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Anonymous Coward, 6 Apr 2006 @ 7:54pm

Re:It Should hurt Netflix
Im sorry i have been a customer of both, and to be honest i think blockbuster has more to offer. As for throttleing and who gets what, it should be just like a brick and mortar. First come first served.... just because some of us have a grave yard shift in a data center doesnt mean we should do without. If i set up my queue and list what i want and i have it set first then i should get the disc first then as long as i dont have anything out....
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Joseph Payne, 6 Apr 2006 @ 8:53pm

NetFlix Vs blockbuster
Ok, first I would like to say that I was a mameber of blockbuster since it started. I 'm glad Netflix became successful as we live in a country where a little competition is good for us the consumer. NetFlix has alot of movies you simply cannot find a Blockbuster and Blockbuster carries large amounts of Mainstream movies so more than likely you will get what you are looking for most of the time. As for the comments of who should get the first disc? Everybody has to wait in line at sometime or other everybody thnks they are more important than someone else and that they shouldn't have to wait well tough that's life someone is always going to wind up last no matter what. The main thing we should stay focused on is do we get our monies worth for the services we pay for?
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rguyah, 6 Apr 2006 @ 9:01pm

NetFlix the evil empire
Gameznflix.com --- forget the big boys and get games and DVDs
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dms, 6 Apr 2006 @ 9:51pm

Re: NetFlix the evil empire
Gamenflix.com is great! Games and dvds.
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howard, 6 Apr 2006 @ 10:02pm

brick & mortar membership better
After hearing about the throttling effect, I'm glad that I have a membership at Hollywood Video's brick and mortar. A small monthly fee (comparable to Netflix) and I can return exchange movies on my way home from work (or when going to the grocery store).

Can't imagine having to wait for it to go through the mail.
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Anonymous Coward, 6 Apr 2006 @ 10:21pm

Re: Re: it should hurt Netflix
I'm sorry Walking Dude, but calling first come first serve a form of throttling is ridiculous. Throttling in the Blockbuster B&M context would be like snagging the last copy of a new release, taking it up to the register and having the clerk ask over the PA whether anyone in the store rents less frequently than you and was also looking for that movie.

You're right about one thing, though. No one is forcing me to be subjected to this. That's why I quit netflix and am settling for OnDemand and the occasional trip to a B&M until someone gets it right online.
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Anonymous Coward, 6 Apr 2006 @ 10:44pm

Blockbuster throttles too
Blockbuster Online throttles heavy users too
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John, 6 Apr 2006 @ 10:47pm

Re: it should hurt Netflix
I for one was a Netflix user. in the long run renting of discs will go by the wayside in that everthing will be downloadable and watch on your TV. Soon Netflix will have to address this issue.
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Anonymous Coward, 6 Apr 2006 @ 10:47pm

Blockbuster throttles too
Blockbuster Online throttles heavy users too
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Flagg, 6 Apr 2006 @ 11:08pm

Of course they throttle!
To all of those people who think that they are hurting netflix when they cancel their memberships because they are getting 'throttled', I have news for you. They don't want you anyway!

In case you didn't know, it does cost actual money to mail DVDs both ways, and Netflix actually loses money on many of the members who receive more than the average customer. You can complain all you want to, but you are getting extremely good value for your money, even when your throttled.

Yes the pricing is for 'unlimited' rentals, but that unlimited amount simply comes with the stipulation that preferential treatment goes to those customers who rent less. They are still losing money on you, so get over yourself!

Flagg
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?, 6 Apr 2006 @ 11:23pm

Re: Re:It Should hurt Netflix
what does Blockbuster offer that netflix doesn't? Snacks?
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?, 6 Apr 2006 @ 11:34pm

Re: NetFlix the evil empire
Gameznflix is fine if you don't mind waiting a week for your movies....

Even if I get throttled by netflix, which does happen, I don't have to wait an entire week.
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Loki, 7 Apr 2006 @ 12:40am

What?!?!
Ok, now I know that NetFlix doesn't even want to start a monopoly (ahhemm....Mic®os©ft, Ma Bell, etc...) witch hunt. I think they should let everyone do it, Wally word, the bullseye, all the mainstream video stores...even Bob's Backyard Video should be able to copy the model. After all, this is america where having a clever idea and being the only ones to do it is illegal.
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Lonny Paul (profile), 7 Apr 2006 @ 2:05am

C'Mon y'all! Get the Facts Straight!
Okay, first of all, Blockbuster is only the largest competitor that Netflix has. There are so many knock offs it's not even funny. In fact, I've even found an 'adult' service ala Netflix, and they are still kickin'.

The entire concept of process patents is stupid. Look at IBM, they are deep in patents, however they are based on a physical mechanical interaction or module within another piece of hardware or software. Not "ideas." Amazon tried that, remember - didn't work long, now they have 90 people who do nothing more than attempt to figure out how to automate human processes and Microsoft has taken over a business park in India - hiring people with NO PATENT EXPERIENCE REQUIRED and are reviewing pretty much anything ever made and determining if there are any "open" patents to file... Nice business model!

Netflix continues to deliver faster than most, until throttled, then you don't even wait so long...

Blockbuster has the B&M Tied up. Hollywood is a pale second. They should try an unlimited, recurring membership fee for rentals as well, level the market and see what happens. Hell, it can't hurt - there is a great need for prime locations wtihin the best stripmalls.

When someone said OnDemand, I said, Right On! First, Pay Per View (aka OnDemand) was great, remember when the cable box used to be connected to the phone line? Well, after that they went without the phone connection, utilizing two-way communication - already within the communications capability of the box. Now, with really, On Demand (Channel 1) Videos, television shows you miss, everything you can want is ready 24 hours a day for your viewing pleasure, when you press start.

Feel free to FF and REW while you PLAY your movie. Being able to do that with live TV still freaks me out. But TIVO - HAH! Gave away the only one I ever had without even opening the box - I had already fallen in love with Windows Media Center and Cinema Now. But today, Comcast - just rules. Satellite - Get it OUTTA here!

Okay, so back to the rental topic.

No throttling;
No more than 3 @ any time
No monthly limits (1 transaction daily)
Games and DVDs.
B & M could rule the world.

Or, Netflix could buy up Hollywood Video and do their own thing! C'mON guys!
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Beckey76, 7 Apr 2006 @ 3:04am

Blockbuster vs. Netflix
I think that both are excellent services. I have subscribed to both at one time or another (currently on Blockbuster) and I have found Blockbuster to be better with the shipping, but Netflix does have a wider selection. As far as who gets them first, I really don't care!! As long as I get it at sometime, I'm happy. Plus, with blockbuster, I get 4 free in-store rentals, so if I want a new release and I can't get it that quickly online, I go into a store.
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Scott, 7 Apr 2006 @ 5:23am

Re: Re: Re:It Should hurt Netflix
Free in store rentals on both games and movies. If I have a friend show up from out of town and we decide we want to game or see something that came out that we missed.

I can't same day a movie back and forth, but I can drive to blockbuster, pick it up for free which Netflix can't do.
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Tim, 7 Apr 2006 @ 6:07am

NetFilx or Block Buster
I will leave Netflix when Block buster returns all the late fees they charged me.
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Notresponding, 7 Apr 2006 @ 6:47am

Re: Re: it should hurt Netflix
What you fail to relize is that I have had Netflix for about 2 years and my movies where coming so slow that i was lucky to get 2 a mouth. I spoke to Netflix and they said it was because i was being throttled back. I switched to Blockbuster and now I get them the day after I send them out. I fill that if I pay that much a mouth I better get more that 8 movies a mouth.
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Dave Rapp, 7 Apr 2006 @ 7:45am

Re: NetFlix Vs blockbuster
Ah, a breath of calm reason. How refreshing.
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acousticiris, 7 Apr 2006 @ 7:52am

I hated Blockbuster stores
...and so when I finally took the pill and joined Netflix, I was happy because I didn't have to deal with $4.00 rental fees plus late fees (which I seemed to get hit with every single rental).
As of hearing of this patent lawsuit, I immediately cancelled my NetFlix account and sent them a note regarding my personal moral choice. I'm tired of shoddy patents being used by companies to boost their bottom line. I refuse to support a company that tries to make money through nothing patents and teams of lawyers.
Much to my dismay, Blockbuster now has my business. (I only ever had a problem with their unbelievably high prices).
I don't know if I will get the same service, but the selection *seems* comparable, the service fees are acceptable and I just received my first two rentals the day after I requested them, so it's comparable performance to NetFlix (who never throttled me, because I was a very profitable customer... on the three rental program I probably wathed six movies a month).
So my hope is that NetFlix gets hurt by their patent lawsuit. I don't care if it props up Blockbuster, but it'd be nice if people who believe that these types of patents should be handled differently would vote with their feet when they can.
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Anonymous Coward, 7 Apr 2006 @ 8:05am

If Netflix business model involves losing money on heavy renters then their model is flawed. Either way, I think the previous post claiming this is incorrect.

Nextflix's customer acquisition cost is over $40 - it costs them more than $40 per customer to get that customer. The only reason a company would spend this kind of money is if they stood to make a nice profit from each customer and expected they could hold onto them forever. Throttling customers is something that people complain about - to their friends, family, online etc. Netflix is only driving those customer acquisition costs higher.

Suing Blockbuster only legitimizes Blockbuster as a competitor. Stupido!
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Matt, 7 Apr 2006 @ 8:29am

Re: Re: it should hurt Netflix
That is complete bullshit... Netflix PURPOSELY holds discs away from frequent users, Blockbuster simply applies a "first-come first-serve" method...

YES, both companies have a finite amount of discs, but the methodology is different.
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Matt, 7 Apr 2006 @ 8:52am

Re: Blockbuster throttles too
I tend to disagree with that... do you have any proof of this? any news article reference or anything?
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Anonymous Coward, 7 Apr 2006 @ 9:22am

Here is my issue with throttling... Yes, I am a heavy user, but I pay for the service and I live in a remote area where it does take a week+ to get turnaround on discs.
When it starts taking 2-3 weeks to get a disc, because I'm being throttled, is unacceptable.

The nearest depot is in Deluth, GA and I live in Albany, GA... Now I understand that because I live in the middle of ghetto central, that the mail is slow because, well, it is the 'souf'. But this is insane. The best part is when they send the surveys out and I mark on there that the movie go there after the latest date, because it really did get there that late, the service seems to slow down significantly more.

I have attempted to contact customer support and they do not seem to care... I have been hung up on repededly by the agents taking my call, because I ask for a supervisor or manager to fix the issues. Apparetly they didn't learn any thing from the lawsuits. I'm so glad I opted not to get in on the settlement. Now I can sue.
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JM, 7 Apr 2006 @ 9:22am

I've used both services...
I started using Netflix and, as a heavy renter, about 3 months into my subscription my movie arrivals fell from 48 hours to 120+. When I attempted to contact Netflix's support I found that they were more interested in giving me flack and blaming my mailbox than they were in admitting they were releasing movies slower.

Frankly, I don't have a problem with them holding out on heavy renters - if that was what was advertised. Unlimited means UNLIMITED, not, "unlimited as long as you stay below a certain limit." False advertisement if you ask me and I have no sympathy as a result.

After a few words with Netflix's tech support I canceled my subscription and signed up with Blockbuster. After 6 months with Blockbuster I have yet to have movies withheld in a similar manner. Sometimes a movie takes an extra day to reach their facility after I've shipped it back (funny considering I often ship 3 at once) but I have never seen my movie rentals take 5 days to reach my home and then have support claim that the US postal service is to blame - that's a flat out lie when it happen to every movie shipped over a 3-week period (other mail arrived just fine, thanks Netflix!)

On top of superior service (so far), Blockbuster gives me two free in-store rentals a month and usually an offer for a free DVD or a buy-one-get-one-free deal.

My opinion? Obvious. I hope Netflix loses and the competition gets tight because that can only mean better customer service from all if they want to keep my business.
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Anonymous Coward, 7 Apr 2006 @ 10:10am

Re:
I totally agree! I used Netflix a few years ago and loved their selection of Anime, UFC and stuff that Blockbuster just doesn't carry enough of. My problem was the throttling. Regardless of why they think I want so many movies a month, the fact is that is what their service offers. They made the business decision to offer something that sounds great to the public. They MUST have known that some people would want to rent lots of movies. If they didn't then they didn't do their due dilligence and aren't very smart. They make money because the odds are that most people WON'T rent crazy amounts of movies. Kinda like the insurance companies - they'd be screwed if everybody filed a claim (ala Lousiana and the gulf coast) They make money because MOST people aren't going to file a claim ever and few make more than 1 claim. Netflix' throttling is comparable to the insurance carriers resusing legit claims from some of theose affected by huricane katrina - it is changing the rules of the game midstream. This is BS no matter how you look at it. I now rent from BB for which I have a distaste. I use there moviepass which costs a set amount each month and I change my 2 movies out as often as I want. I actually spend less money than I did before because I don't pay the late fees I'd always pay before and the moviepass is cheaper than netflix. Theyv'e asked me several times if I want to use their online program, but I refuse because I'll not give them a way to control my rentals by throttling me as Netflix did...

Having said all that, Netflix is clearly listening to bad advice. This business process patent sounds stupid to everyone I've mentioned it to. They are goning to hurt thmselves by losing customers and giving BB a ton of free publicity. They are actually making the hated BB look like the innocent!!!!
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Dam, 7 Apr 2006 @ 10:24am

Re: NetFlix Vs blockbuster
You're absolutely right. And, if someone REALLY wants to see the movie first, go to the damn theater when it's in general release.
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Azalea, 7 Apr 2006 @ 10:31am

Ohhhh Blockbuster is going down
Blockbuster is number one worst company with Nextel following right behind them. Their customer service is like I am dealing with Dell's customer service in India, even when they are right over the counter. I can't even tell you how much money they make on fees, and much of that is due to them lying. My last straw was when they said I was a week over due on some porn flick. Although I am one to watch it, I am not one to rent it. So I stick with Netflix. I cannot say more about their excellent customer service and that every single film I have ever wanted to see I have been able too. From documentaries to foreign films to Sundance films, they have it. I don't mind if a video takes an extra day or two in the mail, because I get a year or more to watch it. Why are people complaining about waiting an extra day, as if they stand by the mailbox waiting for it’s arrival. Come on American’s don’t have the time to go the speed limit, let alone have the time to watch a movie once it appears on their door step. Sticking to the topic…Blockbuster should be sued for taking the brilliant concept of that Netflix created. Plain and simple that is what patent law is for.
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Dam, 7 Apr 2006 @ 10:32am

How Do You Patent A Biz Model?
I guess the real question here is the lawsuit, not whether customers are being 'throttled'. WIthout having much knowledge of the Netflix' patent, how does one patent being in the same business as someone else? If I run a bakery, and some other guy started his before me, can he patent how his business operates?

Personally, it sounds like a load of manure to me - lawyers with too much time on their hands and looking to enhance their income.
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Jonathan, 7 Apr 2006 @ 10:41am

BLOCKBUSTER HANDS DOWN...
NETFLIX IS A JOKE. I HAD NETFLIX FOR ABOUT 4 MONTHS AND WAS COMPLETELY DISSATISFIED WITH THEIR SERVICE. THE CUSTOMER SERVICE AT NETFLIX IS VIRTUALLY NON-EXISTENT. NETFLIX IS KNOWN FOR THE CLASSIC BAIT AND SWITCH METHOD OF MARKETING. THEY WILL START OUT WITH GREAT SERVICE AND SUDDENLY SLOW DOWN THEIR SERVICE BY NEARLY A WEEK SLOWER. BLOCKBUSTER IS WAY WAY WAY WAY WAY WAY WAY BETTER PEOPLE. TRUST ME.
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Anonymous Coward, 7 Apr 2006 @ 12:00pm

Re: Ohhhh Blockbuster is going down
Complaining about waiting an extra day? Dude read the damn posts! My experience left me waiting a minimum of 5 days - FOR EACH MOVIE. That occured after 3 months of a maximum of 48 hours for each movie. That's bull and anyone who says different has something to gain from Nutflux's scamming.

Distribute what you advertise corporate monkeys!
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Anonymous Coward, 7 Apr 2006 @ 12:02pm

Re: Ohhhh Blockbuster is going down
You clearly don't understand the entire intention of patents. Get an education.
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Anonymous Coward, 7 Apr 2006 @ 12:52pm

There's not going to be a large enough segment of the general population aware of the lawsuit to make a difference in the number of people that sign up with or switch to Blockbuster.
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J K, 2 May 2006 @ 11:40am

Lesser of 2 Evils...?
I have been using Netflix for about 8 months, 1 disc at a time. Everything works great, 1 day to receive, 1 day to deliver back. I have had no problems whatsoever. Blockbuster on the other hand was a scam and a half. First they screw you over with excessive late fees, then they come out and advertise No Late Fees which SOUNDS great... until you realize what they do is charge you the full price of the movie if you keep it longer than they think you should. Wow, thats better...NOT. Its cheaper to me to buy a movie outright than rent it from Blockbuster.
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Anonymous Coward, 3 May 2006 @ 6:30pm

Re: brick & mortar membership better
Hollywood's movie pass is a joke. Blockbuster's movie pass doesn't limit you to only certain titles. Their movie pass allows you to get any movie any time.
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Anonymous Coward, 3 May 2006 @ 6:31pm

Re: Blockbuster throttles too
No they don't.
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CarlT, 4 May 2006 @ 7:07am

Re: Re:It Should hurt Netflix
I couldn't agree more. I've just changed from Netflix to Blockbuster after having been a customer of the former since it's online inception. But throttling has gotten increasingly worse and exceedingly noticeable since Netflix recently changed its terms of service. They will eventually end up being the end horse in this race. Everyone's buck is worth the same and unfair business practices should not and will not be tolerated by insightful consumers.
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rad4crst, 5 May 2006 @ 8:47am

BBI throttling is ridiculus...free coupons
Yes BBI may throttle its online contingent but they make up for this with the free instore coupns you get every month So that you do not have to wait on that new release. Also you cannot call it throttleing if you do not return your movies regularly if your quota is out then they are not going to hold a new release movie until you return one. So before you call yourself throttled think about how long you hold onto your movies. I have almost always received the movie that was within the top 5 or so of my queue. I have never had to wait a longer period of time for newer than older releases with the exception of sets. In the case of sets at times I have had to wait. But over all the service is good so I have had no reason to think about trying out netflix afterall I like the in-store coupn idea and last time I checked netflix did not offer such a thing.
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MoeJoe, 12 May 2006 @ 12:11pm

Same Issue with Netflix
I had same problem with Netflix I now use Blockbuster (no problems yet), which has a $9.99 offer if you go through this Xbox website:

http://xbox360s.freepay.com/?r=29899665
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Joe Momma, 30 Jun 2006 @ 4:42am

Re: Re: it should hurt Netflix
If you pay more for a larger amount of rentals on Netflix hence making them more money, should'nt that also buy you more privelages?? Last I checked the word "unlimited" meant:

adj.
1. Having no restrictions or controls
2. Having or seeming to have no boundaries; infinite
3. Without qualification or exception; absolute

Amidst your arrogant explanation, you still mentioned your higher expectations of preference with new releases considering you rent very little as opposed to someone who rents, and correct me if I'm wrong, 20 movies a week?? (slight exaggeration?) What was the last time you talked to someone who pays for any kind of service that has low expectations? Fact of the matter is, we ALL expect a better service from anyone we spend our money with.

One thing you are right, we all have the choice, like anything else in life. I made the choice to reply to your arrogance and ignorance.

Happy trails.
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Jack Mehoff, 30 Jun 2006 @ 4:45am

Re: brick & mortar membership better
As opposed to dropping of your movies on the way to pick up your mail, or walking out to your driveway.... tough one there....
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Jennifer Litchford, 23 Dec 2006 @ 11:09am

Netflix membership
I am currently a customer of the Netflix online rentals. I've always been happy with the offers that Netflix has & I have always received my movies in a timely manner. I'm sure Blockbuster has good offers as well, however; as long as my membership continues to go as well as it has, with Netflix, I won't be changing anything.
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MikeD, 21 Dec 2008 @ 3:43pm

Walking Dude Dumbest poster around?
My vote is yes.
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