Blockbuster And Netflix Settle Patent Dispute

from the and-they're-keeping-the-results-secret dept

Thu, Jun 28th 2007 3:13am — Mike Masnick

Last year, we were surprised to see Netflix announce that it owned a patent on its business model and was suing Blockbuster. This was surprising for a company like Netflix that had shown its ability to compete with the big players in the marketplace -- in effect showing how you could succeed against much bigger players without resorting to government-backed monopoly protections. However, Netflix decided that, even as it was killing Blockbuster in the market, it was going to sue for copying its business model. After a year of fighting, however, the two companies have settled the lawsuit, with neither side admitting to what that settlement means. If you read between the lines, however, it certainly sounds like Blockbuster paid up to get the suit out of the way. If true, that would be unfortunate. It's also unclear how (or if) this will impact that separate class action lawsuit against Netflix that claims these patents were used to violate antitrust law by not declaring known prior art.

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20 Comments

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Chris Garrett, 28 Jun 2007 @ 5:25am

Just business I guess ..
Does seem like Netflix were showing they are less than 100% confident they could compete purely in the market, but at the same time I guess it must be annoying and worrying to shareholders to see a big competitor copy your strategy
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- Ajax 4Hire, 28 Jun 2007 @ 6:01am
  
  Re: Just business I guess ..
  100% confident? that is just ignorant; lacking education.
  
  I doubt that if one of your co-workers was copying your work
  you would be less than 100% confident you could complete.
  
  No that is stupid.
  If someone is seen stealing your work/IP/business, you do something about it.
  
  I am not talking about the merits of the patent itself but if another company is seen using your patented ideas, you ask for compenstation. That is the whole reason behind the patent system, duh!
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Mike4, 28 Jun 2007 @ 5:57am

Netflix is winning?
However, Netflix decided that, even as it was killing Blockbuster in the market I have know knowledge of who is "winning" between the two, but I find it very hard to believe that Netflix is doing better, considering that they have no way of offering the same features as Blockbuster. Blockbuster allows you to bring your movies back to the store instead of dropping them in the mail and when they are scanned in, they are considered returned, so your next set of movies can be sent to you. In addition, you can go grab some movies in the actual store (equal to how many you brought in) and they don't count against the movies being sent. For a 3-at-a-time plan, you could technically have 6 discs at once. I do belong to Blockbuster (although I don't take advantage of it enough) because of these features. I have no interest in who is doing better financially, so I hope I'm not giving the impression that I'm touting Blockbuster as the better company. If Netflix magically sprouted up a few stores in my area and provided better features, I would probably switch to them. I just have a hard time believing that more people would be using Netflix then Blockbuster when they are getting less... unless it's just name recognition and people don't really know about Blockbuster providing the same service.
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- I Love This!, 28 Jun 2007 @ 12:28pm
  
  Re: Netflix is winning?
  Top notch Blockbuster sales and marketing Mike4! Your comments made me like I was watching the ad's on TV!
  
  Blockbuster has been losing millions trying to match the Netflix model. They do offer a more complete service, but in now way are they close to Netflix in profit.
  
  With Gameznflix, Blockbuster and Netflix fighting in this market, it keeps prices low for the customer!
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- Eric the Grey, 28 Jun 2007 @ 7:49pm
  
  Re: Netflix is winning?
  While the idea of returning the disks to the stores and being able to grab more, AND having the returned disks be registered as returned, for the process of getting the next in your queue is wonderful on paper, in practice it's not worth all that much.
  
  The reason? It's because Blockbuster's selection is nowhere near that of Netfilx.
  
  That was the reason for my decision to stay with Netflix after giving BB a try.
  
  I currently have just under 300 titles in my queue. Most of them are series disks, and most of them are Anime, which Blockbuster carries very little of.
  
  If Blockbuster really wants to compete, they have to increase their inventory by multitudes, and expand on their selection of titles.
  
  EtG
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Overcast, 28 Jun 2007 @ 6:16am

With DVR and Media On Demand - they would be better to invest time in coming up with more value to add to both of their services.

Renting movies almost seems 'old school', really.
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Witty Nickname, 28 Jun 2007 @ 6:19am

Net flix is doing better in the market - Blockbuster is bleeding money from this program - they just know they are loosing customers to Netflix.

Don't get me wrong - as a Netflix subscriber I LOVE Blockbuster being in the market. Blockbuster lowered their prices a couple weeks ago - I got an e-mail this morning and Netflix matched it (thanks!)

Netflix also offers a limited selection of movies you can watch online, and their rating system is great - I have seen movies I never would have otherwise picked that are now some of my favoriates.

But make no mistake - Netflix is currently the only profitable online movie rental store.
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Sensei Loco, 28 Jun 2007 @ 6:28am

NF!!
I moved to Netflix precisely because I was tired of video shops having pretty sad sections devoted to independent & international cinema. I love NF's interface and rating system. As far as my tastes, online is the only real solution for me.
...but that's just my opinion...
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dazcon5, 28 Jun 2007 @ 7:05am

renting
I go with Netflix BECAUSE I don't have to mess with going to the store and dealing with a reduced selection, plus the knob behind the counter. Renting through the mail trumps trekking to the store (at least for me). Yes, the rating system has gotten me to try movies I would have never looked otherwise.
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- Cpt. Obvious, 28 Jun 2007 @ 7:27am
  
  Re: renting
  You don't have to mess with going to the store with Blockbuster, 'tard. Didn't you even watch the commercial? It's exactly the same as Netflix with the added bonus of the OPTION to exchange in-store for other movies.
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flagpole sitter, 28 Jun 2007 @ 7:24am

Both have advantages
Presently I use Blockbuster, but Netflix has a slightly better selection and seems to be a tad more prompt than Blockbuster. That being said, the return at the store for more movies thing is awesome. I watch a lot of movies (~6-10/week) and that would cost a fortune if I were to get the larger plans from Netflix. Since I can snag the obscure movies online and return them for the presently popular, it's a winning situation for me. I guess once I've mown through the entirety of the movies I want to see from Blockbuster, I'll move back, but for the time being I like Blockbuster.

Also, to those whining that they don't like dealing with the stores, you don't have to with Blockbuster, you can always just stick the movies in the mail, just like with Netflix.
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Don Wood, 28 Jun 2007 @ 7:40am

Netflix
I quit Netflix because of their policy of favoring the newest customer when shipping. Until they change that, my business goes elsewhere.
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Blockbuster SUCKS!, 28 Jun 2007 @ 8:08am

I lived in a small town that had 3 small Mom & Pop video stores. They had a pretty good selection with good prices. Blockbuster moved in and priced movies from $1-$2. With in 6 months the Mom & Pop shops were out of business. Then Blockbuster jacked their prices in excess of $4. Screw Blockbuster. I'm all Netflix and glad to see Blockbuster going the way of the Turd!
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Ajax 4Hire, 28 Jun 2007 @ 9:13am

There is no way I will ever go back to Blockbuster
not even if they offered the service for free.
I got so tired of the late fees, having to battle store managers on when I returned the tape.

I eventually stopped going.
Like a bad restaurant, I have so many other options to choose from; It is time to give all the others a chance the dissapoint me before I go back to Blockbuster.
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- J.B., 28 Jun 2007 @ 11:17am
  
  Re: There is no way I will ever go back to Blockbu
  As a Blockbuster manager, I can tell you are the kind of customer that is a pain in the ass, just by your statement. There are no late fees, they give you a week past the due date before they charge you anything, and as long as you return it within 37 days the most you'll pay is 1.35 ( might be slightly less or more depending on location ) for a restocking fee. If you can't get the movie back by a week past the due date, you deserve to pay that small flat amount. If you hold onto it for more than a month, then you should own it, because we haven't been able to make any money off of it. There's no 12:00 deadline anymore, and its been that way for years. I will say that we do get rented out of the new movies too quickly.
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Anonymous Coward, 28 Jun 2007 @ 9:32am

Blockbuster vs Netflix
I've been a member of both, and in my opinion, Blockbuster is significantly better. Their movie exchange option, where you can trade in a rental you got in the mail at the local blockbuster for another free movie, means that you get twice the movies per month that netflix offers. Plus a free videogame rental once a month.

Granted, Netflix has a wider assortment. I still think whoever blinks and start offering adult movies will win.
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Anonymous Coward, 28 Jun 2007 @ 11:19am

Once again Techdirt shows it is clueless and just assumes that anyone with a patent or that tries to protect IP is a scumbag.
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The infamous Joe, 28 Jun 2007 @ 12:00pm

My_mWORDSouth
I dunno, Coward #15, I don't see the word or implication that anyone is a 'scumbag' anywhere above. Though, after taking a closer look at their patent I find that the library has been doing this for ages-- so once again we have people who think that because it's on a computer, it's new and innovative.

The patent system has been terribly perverted from it's original purpose-- in such a way that I'm not sure if we wouldn't be better off without it. In any event, no one in their right mind would say that it's a good, working system.. but for now it's all we've got.
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Jon, 7 Jul 2007 @ 6:17pm

I stopped dealing with Blockbuster long before joining Netflix simply due to their shady business practices. Blockbuster screwed their customers so many times that by the time Netflix came around we were itching for a way out-- with nowhere to go because they did everything in their power to put all other rental stores out of business! Even if Blockbuster's mailbox service was without a doubt better then Netflix I still wouldn't go back... not until they refund me all the late fees I haven't gotten back!

Side note- In Blockbuster's defense they have refunded some of the money, but not until after they were brought to court and forced to give everyone at my store credit for all the cash they were stealing from us!

Bockbuster Employee: "Hey boss, should I grab those DVD's and videogames out of the dropbox?"

Blockbuster Manager: "No, wait until 12:01 so that we can charge everyone late fees."
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Video Mailbox, 21 Aug 2009 @ 8:30pm

Video Mailbox Came Before Netflix
It is interesting that Netflix has a patent "on its business model." Another company, Video Mailbox, used a very similar business model way back in the 1980's. Check out this fan site: http://sites.google.com/site/videomailbox/home
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