Mario Sundar

LinkedIn's 2nd PR hire. These are my thoughts on products, public relations, and startups.

Only Community can save Netflix!

There are no two ways about it — ONLY community can save Netflix. Three signs, that all’s not well, in Netflix land:

1. Already, customers are switching. Take for example, Michael Arrington, who was a Netflix user and who recently switched to Blockbuster, citing the following reason:

But recently Blockbuster changed the service in a way that can really hurt Netflix. Movies received by mail can be returned directly at any Blockbuster store. You get a free rental on the spot, and Blockbuster still sends out the next movie in your queue. And yesterday they announced that the monthly coupon for a free rental can be used for movies OR video games.

2. Or the recent campaign for users to flip over your Netflix flaps for a FREE blockbuster rental.

3. Over the New Year weekend 07, I happened to see Blockbuster ads, which were compelling. The ads, basically stressed on the same rationale that Michael cited for his switch. To me, that’s compelling, esp. since sometimes I don’t find movies at my doorstep when I need one.

I have actually quit once — to Blockbuster and back again, for 1 reason:

I’ve got my friends on Netflix

Any suggestions on how Netflix can foster community even further? Could this be the answer to Netflix’s million dollar question? Is Netflix doing enough to connect with their current customers?

(to be continued…)

Filed under: Miscellaneous

20 Responses

  1. Mario Vellandi says:

    Community is a great key, but not all users are the happy-go-socializing -spend more time online-make friends kind of people…hence existing Netflix customers are susceptible to switching when prompted by enticing offers as you mentioned. Disclosure: I am a happy BB online subscriber.

    So as a marketing guy, my suggestions for Netflix are as follows:
    1) Maintain your commitment to community as before. BB has major catchup to do here, especially in their ratings system.
    2) Continue the great advertising to build and maintain brand awareness.
    3) Start making/expanding some targeted ad campaigns on the following users: hispanics and women

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  2. Hi Mario,

    Hmmm…I think Netflix might have a hard time catching BB with some of their offers (return to store is something Netflix doesn’t offer, coupons, etc.). I don’t think community will be the primary factor here, as pricing/convenience are probably more at play than socialization (as Mario V. mentioned).

    If Hollywood gets “smart* & starts to offer viable, quality downloads…then both of these companies better watch out;-) I wonder how much more the studios would make by going “direct to download” for many of their titles…

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  3. Paul McEnany says:

    I couldn’t agree more, Mario. I also was a blockbuster online customer, but switched because it took them forever to actually mail me dvds, whereas Netflix has been pretty reliable. But I love the friends functionality, and the little quiz, and the overall usability of the website.

    But, now I’m thinking of switching back. It seems pretty nice to be able to just walk in the store and get whatever I want.

    But, as Blockbuster never has anything in stock (which is why I went online in the first place), I wouldn’t doubt it if I just settle back in with Netflix.

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  4. Mario Sundar says:

    Mario!

    What I was driving at — is the killer differentiator that Netflix badly needs and I think we can both agree that the community’s online user experience is a brand differentiator that helps (ratings et al).

    Brand awareness is a given, esp. since BB is spending the big $$ trying to woo Netflix’s current crop of customers.

    I think targeted ad campaigns will also fall under community! So, the verdict is out — community IS the killer differentiator that can save Netflix?

    What say you?

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  5. Mario Sundar says:

    D, I couldn’t agree more with you that online movie downloads (HD quality perhaps) will signal the death knell for Netflix and my guess is that they’ll jump onto the bandwagon sooner vs. later.

    However, in the interim, they’re playing a deadly game of competition with BB. In my opinion, assuming, pricing is equal, here are the standings:

    BB: Convenience
    Netflix: Community AND Speed of return of DVD’s

    What do you think, D? Does it sound right?

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  6. Mario Sundar says:

    Paul,

    I switched to BB before turning back to Netflix for the community aspect of it. I still believe there’s so much more Netflix can offer by fostering community (will talk more about it soon:)

    Also, let’s also not forget, that mail-in-DVD’s WAS the convenience factor that drove us to Netflix and it’s amazing how that very killer differentiator is being used against it?!

    Do you think, you’d want to drive over to the DVD store to get your new DVDs every time? Think about it?

    Stick w/ the Netflix community. Feel free to add me to your Netflix queue 🙂

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  7. Mario Vellandi says:

    Mario,

    Since you put it that way, I see then Community as the centralized force. Everything else is tactics to bring in and keep users within the community.

    So let’s think about a couple tactics:
    1) Partnerships: there have to be some big ones down the road…there’s a LOT of equity within the Netflix community.
    2) Targeted advertising: Showcase individual user profiles and how they fit/interact within the community, in an Apple-esque way.

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  8. Hi Mario,

    “However, in the interim, they’re playing a deadly game of competition with BB. In my opinion, assuming, pricing is equal, here are the standings:

    BB: Convenience
    Netflix: Community AND Speed of return of DVD’s

    What do you think, D? Does it sound right?”

    Sounds about right;-) I also think that you’re probably more likely to get a newer title at a Blockbuster store than via Netflix (based on stuff I’ve read online ). Netflix definitely has the advantage with having more available titles – but most folks probably want to see newer releases first (many older titles, after all, can be purchased on Amazon or eBay for probably not much more than the cost of a rental would equate to). If one has cable, you also have “free” access to a lot of titles as well (premium channels offer movies, Comcast has Ondemand movies, etc.)

    Let’s not also forget that there are thousands of Blockbuster stores that can act as distribution/return centers now;-) What’s more exciting to you…

    a) Picking up a dvd and looking at it , looking at potentially hundreds in a visit to the store?
    b) Reading about the dvd online.

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  9. Hi Mario,

    Check this out on Blockbuster:

    http://news.yahoo.com/s/usatoday/20070104/tc_usatoday/surpriseblockbusteronlinehits2millionsubscribers

    “That resulted in 500,000 sign-ups in the fourth quarter, matching the growth from all three previous quarters.”

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  10. Mario Sundar says:

    Mario, (I just get the feeling I’m talking to myself:)

    I don’t quite see what kind of partnerships you envision. But, I definitely, love the targeted advertising idea. More so, I see how you could actually cultivate community further on Netflix, MORE like Yelp than like Apple.

    Don’t get me wrong — I LOVE APPLE! and admire Steve Jobs (next to Jack Welch), but I definitely don’t think they’ve cultivated community YET! Maybe they don’t find the need for it?! But, I digress…

    So, what kind of partnerships do you see?

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  11. Mario Sundar says:

    Damon,

    OK, I concede the newer titles point. I dunno how it works at BB, but Netflix definitely takes a while to ship out new titles. Moreover, I’ve felt how I’ve to SEEK OUT newer titles actively, which the interface should actually highlight, for your convenience.

    To answer your question: I’d go w/ choice c, which is reading about the movie online and ability to view a movie I’m interested in ASAP. Instant gratification!

    As much as going to a store seems enticing, isn’t avoiding going to the store, one of the main reasons for choosing Netflix?

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  12. Hi Mario,

    Ah…as a marketer you should also understand the “impulse buy”. If I walk into Blockbuster, I might just pick up a movie on a whim because I touched it (I also might buy some candy, popcorn, a used dvd, etc.). As a counterpoint, Netflix’s recommendations *may* not have recommended the same movie to me & the only thing I can get from Netflix is a movie, which may not be the new release I want now.

    Note on the above: I also think that this is largely why shopping for apparel (clothing), at least in certain cases, isn’t done largely online. I know women shoppers (I have a girlfriend) & they like to pick up everything, feel it, & then try it on.

    Avoiding going to the store is much easier for some things. But I don’t think that it can be the only factor in this particular “war”.

    New titles: If Blockbuster has 2600+ stores nationwide, how many movies do you think that would come to in total? They often buy hundreds of major new releases for each store & I think that they could effectively turn retail stores into distribution centers (sending out movies) as well (how many distribution centers does Netflix have?). And while I am sure Netflix has good rates for shipping, I think BB could also drastically reduce shipping expenses by sending movies from the closest store one day (if they aren’t already).

    P.S. I didn’t give a choice “C”. Very tricky;-)

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  13. Hi Mario,

    Oh..just so I am not being contentious…

    Netflix did force Blockbuster to change their business model (late fees, which were actually a huge source of income for Blockbuster). I am just not entirely sure if Netflix can contend with Blockbuster’s integrated approach (retail store & online) very easily right now. I think it would kill Netflix if they had to lower prices…

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  14. Mario Sundar says:

    To be honest, the “Candy & Popcorn” up-sell annoys me, in spite of the fact that it reminds me of going to the movies (a positive psychological effect:)

    However, I think buying movies is vastly different from buying apparel. With movies, most of the times, I watch based on my criteria and sometimes, my friends. Trying it on for size doesn’t matter here.

    And, IT WOULD KILL Netflix, if they lowered their price. I think they’d have to show MORE VALUE w/ the COMMUNITY aspect of it. How? I’m not sure, but I think that’s the key here, Damon.

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  15. Hi Mario,

    Hmmm…I just don’t think Netflix has a product that has something that has too much community value (IMHO). I think there’s a big difference between a physical product (movies) & online services/communities (MySpace). If I had friends on Netflix & they though that going to the store AND using BB’s online service was better for them, what value does having my friends on Netflix have then? Not much;-) If you tell me a movie is good, I might make it a point to rent it…but I can decide whether I want to go to the store OR an online service to get it.

    The trying analogy:
    I was basically just trying to state that touching something physically, be it a movie or a book, probably has a more profound impact on the person than something done “virtually”. I also think that there’s more of an opportunity for Blockbuster to use their retail stores for the impulse buy (candy, popcorn, used DVDs, etc.) I can’t think of one way that Netflix could counter this…

    Believe it or not, I worked for Blockbuster many years ago. I quit when they “wrote me up” for taking a day off, something I hadn’t requested once the entire time I’d been there (it was an emergency & I tried to cover my managerial shift through a variety of methods).

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  16. […] believe, collaboration is key to a social or professional networking site (see my thoughts on Netflix). Yahoo!’s got Answers, YouTube’s got Community, Netflix’s got Friends, and the […]

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  17. Mario Sundar says:

    Damon,

    I hear you, buddy. I guess it’s all a matter of being subjective to one’s individual tastes/preferences. I don’t believe the download of movies, will impact the new generation, that is fed on downloading movies and music (in my opinion). But I agree, technology definitely has to permit the impulse buy over the web.

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  18. […] going to evoke the “I told you so” sentiment, on this topic. A few weeks ago, we had a lengthy discussion on the survival of Netflix. Friends pitched in with their ideas and I stuck to my conclusion that […]

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  19. […] technology. trackback This post is probably a great add-on to my earlier post on how “Only Community can save Netflix” given Blockbuster’s increasingly aggressive poaching […]

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    Even thought I’ve only attended the first half of the opening day of Web 2.0 Expo 2007, I feel like it’s a precursor of similar great, learning experiences over the next three days. If I were to pick just th…

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