Once Again, You Don't Compete With Innovative New Services By Being Lame

from the in-case-you-weren't-paying-attention dept

A couple years back we pointed out how the entertainment industry kept trying to "compete" with new (legal and not-so-legal) online services, but always seemed to do so by being incredibly lame. And, you don't compete by being lame. It appears that this message still hasn't quite gotten through to some yet. With the movie industry facing new challenges concerning online distribution and innovative services like Redbox, here are two stories of old school players trying to "compete" but missing out on the part where they make their offering compelling.

The first comes from Josh in CharlotteNC, who points out that Blockbuster is trying to compete with Redbox and its widely available kiosks (and Netflix with its larger library of downloadable movies) by setting up kiosks in its stores where you can download movies. But... you can only download them to proprietary SD cards, and then it can only play on special proprietary hardware that participants in this program need to have. How is that a better experience then, well, anything? If you want a movie that can be downloaded, why not just let people download it at home? Why have people go out to download it?

Then we have a story sent in by Loydster, about how Sony Pictures is offering owners of new Sony/Bravia HDTV's the chance to download and watch the movie Cloudy With a Chance of Meatballs before the DVD release. While that is actually a nice tie-in between Sony's content business and its consumer electronics business, Sony (of course) has to screw it up. That's because the company thinks it can charge $25 to download the movie. The company seems to admit that it's charging this much because it doesn't want to piss off its retail partners (like WalMart), but it's difficult to see why it's worth doing the project at all if the pricing is going to be so ridiculous.

Experimenting with ways to compete is good... but being so obviously lame is not.

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Eolas Is Baaaaaaaaack; And It's Suing Everyone Over Embeddable Web Widgets

from the because-otherwise... dept

Well, here we go again. As you may recall, Eolas is a company that claimed to hold a patent (5,838,906) on browser plugins. The company sued Microsoft, and a long drawn-out battle ensued. Even though web inventor Tim Berners-Lee presented prior art and asked the USPTO to invalidate Eolas' ridiculously broad and obvious patent, the USPTO eventually upheld the patent (after initially rejecting claims). Even as Microsoft began presenting evidence that it actually had made use of the technology in question before Eolas applied for its patent, losses in the courts and the Supreme Court's refusal to hear the case eventually resulted in Microsoft agreeing to settle rather than continue to fight.

Since then (two years ago), plenty of people have been waiting for the other shoe to drop, concerning Eolas' plans to sue others. Now we know why it waited. It's now received a new patent -- a continuation patent, which is often used to abuse the patent system by putting forth a broad patent, then filing for continuations to make changes that let an earlier "invention" cover technologies that later become popular. In this case, the new patent (7,599,985), which basically just extends the earlier patent on browser plugins, and extends it to javascript widgets. Yes, those embeddable widgets used all over the web? It appears that Eolas thinks that those are infringing and everyone should pay up.

The new lawsuit has been filed against Adobe, Amazon, Apple, Blockbuster, Citigroup, eBay, Frito-Lay, Go Daddy, Google, J.C. Penney, JPMorgan Chase, Office Depot, Perot Systems, Playboy Enterprises, Staples, Sun, Texas Instruments, Yahoo, and YouTube. Apparently, starting small isn't part of the plan. Not surprisingly, Eolas filed in Eastern Texas using McKool Smith -- one of the most popular law firms representing patent holding firms in East Texas.

I am honestly curious how patent system defenders, who are also programmers, can defend this. I'm sure non-programmers will claim that the patent is valid, but I can't imagine how anyone who has any knowledge of basic programming principles can claim that such a patent is valid. In the meantime, tons of companies doing an incredibly basic thing on the web will now have to waste millions of dollars fighting a ridiculous patent lawsuit. How is this promoting innovation in any way shape or form?

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Court Rejects Online Terms Of Service That Reserve The Right To Change At Any Time

from the wow dept

If you look at many online terms of service, they reserve the right to change the terms at any time. Some force you to re-agree to the terms -- but others don't. In the past, courts have ruled that if someone didn't agree to the changed terms, the new terms could be found to be unenforceable, but a recent decision has gone much further, effectively saying that the entire terms of service are void if they claim they can be changed at any time. Sent in by Blake, the ruling said that Blockbuster's online terms of service were "illusory" and unenforceable because it included a clause saying it could change the terms at any time. So, even though the term it was trying to enforce was in the terms that the person agreed to, the court found the entire terms unenforceable. This is quite a ruling that could have a pretty major impact on any online service that has terms that insist they can change at any time. While it's just a district court ruling and may be reversed on appeal, it's something anyone running an online service should pay attention to.

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Blockbuster Takes Its PPV Streaming Movies To TiVo

from the lessons-learned dept

Blockbuster announced back in November that it would begin offering pay-per-view movie downloads, but its plan had a couple of major pitfalls: it required consumers to buy a proprietary box to be able to buy the downloads, and it didn't offer a very wide selection. It's cracked one of those, sort of, by making its OnDemand service available to TiVo users, who will now be able to access it alongside rival services from Netflix and CinemaNow. It's heartening to see that Blockbuster has realized the standalone box strategy isn't viable, even if others haven't figured it out. The lesson is pretty clear: if you're going to come out with a streaming service, you're going to fail if you force users to buy a proprietary box, and your only chance to succeed is by making it available on as many platforms as possible. That's not a guarantee, mind you, as there are still plenty of ways to screw things up, or to have things screwed up for you by movie studios.

Carlo Longino is an expert at the Insight Community. To get insight and analysis from Carlo Longino and other experts on challenges your company faces, click here.

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Today's Ridiculous Lawsuit: Wal-Mart, Netflix Sued Over Conspiracy To Create A Monopoly

from the ugh dept

Way back in 2002, Wal-Mart decided to enter the online DVD rental business, launching an almost exact replica of Netflix. Of course, Wal-Mart quickly discovered what almost every other player in that marker discovered: just offering a competing service to Netflix isn't enough to get anyone to use it. Wal-Mart had a lot of difficulty signing up customers (and keeping them once they signed up). The whole project was going nowhere fast, and eventually, Wal-Mart decided that it was a waste of time to throw more money into a project that was pretty far removed from its main business, and decided to simply let Netflix take over its online DVD rental service. This was a reasonable business move.

However, nearly four years later, a lawsuit has been filed claiming that Netflix and Wal-Mart "conspired to create a monopoly" in the online video rental market, and as a result of that monopoly, Blockbuster raised its prices. Read that sentence again. Netflix and Wal-Mart are being accused of creating a monopoly -- and because of that monopoly another major player in the space raised its prices.

If there's another major player in the space, there is no monopoly.

Besides, the folks bringing the lawsuit are going to have to convince a judge that the relevant market is online DVD subscription services, rather than any kind of home movie viewing service (which includes store rentals, purchases, internet downloads, subscription services and more). This seems like a random bogus lawsuit targeted at a company with deep, deep pockets (Wal-Mart), rather than anything serious.

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Now Blockbuster Wants To Sell You A Proprietary Box So It Can Sell You Streamed Movies

from the broken-record dept

Stop us if you've heard this before: a company wants to sell people a box so they can pay to download movies. Sound familiar? That's because plenty of companies have tried it before -- all with little success. Consumers haven't shown much interest in buying service-specific hardware so they can buy movie downloads from a single provider for a number of reasons: poor selection of movies, the cost of downloads, the cost of the hardware, download times, and lack of portability to name a few. What's amazing is that so many companies keep lining up with their own efforts, without ever really fixing any of the problems, as if time will solve them. Now, it's Blockbuster's turn, as it's announced a $99 box that can access $2 movie downloads. Blockbuster says its service is different than all the failed ones before it because it has "more recent" movies. Netflix's streaming service has 12,000 films and TV shows -- less than 10 percent of its collection, thanks to Hollywood licensing schemes. Blockbuster has a whopping 2,000. But they're newer, they swear. So not only has Blockbuster failed to solve one of the problems of these services (narrow selection), they've exacerbated it and are calling it a feature. Now that sounds like the path to success.

Carlo Longino is an expert at the Insight Community. To get insight and analysis from Carlo Longino and other experts on challenges your company faces, click here.

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Blockbuster CEO Is Still Confused By The Long Tail

from the have-you-taken-a-look-at-your-competitors? dept

In 2004, Chris Anderson wrote his feature article for Wired Magazine in which he coined the term "the long tail" to describe the business possibilities made possible by digital distribution. Four years and one best-selling book later, the CEO of Blockbuster is still confused by the concept that has been utilized by Netflix to wreak havoc on his business model. Yet, in a recent interview, the head of Blockbuster, Jim Reyes, misses the entire point of the long tail.

In response to a question regarding the small catalog of Movielink, Blockbuster's digital download service, Reyes responded, "When was the last time you watched 10,000 movies, you know? I don't care how many movies are available to me. As my personal taste as a customer, I want to watch the new stuff so whether we have 10,000 movies or 200 movies it doesn't matter if I don't want to see any of the movies that we have." The point of the long tail is not to ignore the hits, but to make available more. While Reyes's quixotic opinion may appease viewers with very limited tastes, when distribution and content creation is exceedingly cheap, it makes no sense to limit content. In his original article on the concept, Anderson noted that one-fifth of Netflix rentals are outside the top 3,000 movies. Clearly, a sizable minority of movie-watchers want to see films outside Movielink's inventory that "is heavily weighted toward newer releases and mainstream staple titles."

Kevin Donovan is an expert at the Insight Community. To get insight and analysis from Kevin Donovan and other experts on challenges your company faces, click here.

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And You Thought The Next Generation Video Standards Battle Was Over?

from the we've-got-a-new-one-coming-on dept

If you thought the questions about what technology standard we'd be using to watch movies was settled when Blu-ray won the next generation DVD standards battle, then you're in for a bit of a surprise. In taking nearly half a decade to decide which standard would make it, the DVD camps left open plenty of opportunity for online competitors to start making their moves. The technology for delivering movies online has been rapidly improving. But, of course, what we didn't count on was that it would just create a huge new mess.

Earlier this week, there was all sorts of talk about Netflix streaming movies to the Xbox as part of Netflix's effort to get consumer electronics companies to build in support for Netflix streaming. As we warned when that announcement was made, it's a bad idea for Netflix to focus on a proprietary streaming solution, as it's only going to set up another standards battle. And, indeed, Blockbuster is working on its own such solution. Then, of course, everyone knows that Apple's in the market with the AppleTV. And don't forget Sony, which is selling a special (extra expensive) TV for downloading movies. And, of course, there are countless startups in the market as well.

Oh, and how could we forget Amazon? The company is now announcing its own proprietary online store for streaming movies and TV. This one piggybacks a bit on Sony's awful plan (meaning if you buy that super expensive internet-connected TV, you'll also be able to stream movies from Amazon).

But the end result is a total mess for the entire market, and that doesn't help anyone. All of the players should take a look at how badly the multi-year DVD standards battle hurt the industry. It makes people unwilling to buy certain hardware, as they don't want to be stuck with the "loser" a year from now. What's wrong with coming up with a single standard for streaming movies from any particular service to various TV-connected devices and computers? Then let the different providers compete on actual services provided? That would increase adoption, and let these companies do what they do best, rather than fighting a can't-win battle against too many other competitors.

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Blockbuster Looks At Circuit City's Books; Ditches Acquisition Offer

from the no-real-surprise dept

We were one of a very small number of people who actually saw some logic behind Blockbuster bidding for Circuit City -- though, it seemed unlikely that Blockbuster viewed the purchase in the same way we did. Most people assumed (probably correctly) that Blockbuster didn't really have much of a plan at all, other than to merge the two struggling companies and have an even bigger mess on their hands. Blockbuster has now withdrawn the offer to buy Circuit City, gamely claiming that it has to do with "market conditions" and a better understanding of just how awful Circuit City's books appear to be. That's press release talk. What's more likely is that Blockbuster realized that everyone was right: it would screw up the merger and make a bad situation worse.

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Blockbuster Thinks You'll Drive To A Store To Download A Movie?

from the our-dumb-ideas dept

While I do think Blockbuster is trying a few interesting ideas in its ongoing effort to adapt to a rapidly changing market, some of its ideas are just flat out bad. For example, new Chairman and CEO James Keyes actually spent time at the company's recent shareholder meeting to unveil and talk up the possibilities of a special movie download kiosk that can be placed in stores. It sounds like someone got "kiosk fever." For those who don't follow the e-retailing space, I guess you can be forgiven for actually thinking digital kiosks make sense (though, barely). But the concept of in-store kiosks for digital content has been around for over 20 years, and shows up like clockwork every two years or so -- and fails miserably every time. People just aren't interested -- especially when they have the best, most useful "kiosk" they could ever need at their home in the form of their computer. The idea that people will want to go to a Blockbuster store to download a movie seems preposterous.

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Can Blockbuster Turn Its Stores Into Destinations?

from the worth-a-shot dept

Blockbuster clearly knows it's facing mounting challenges to its business. The company has been mostly outplayed by Netflix in the online rental market (though, Blockbuster's competing offering has done much better than some others who have tried to play the Netflix game). The company's financials have been a bit of a mess, but it's still planning for the future -- and that includes recognizing that the market is changing drastically, and it needs to change with it. While no one knows if it will be able to survive these changes, it's still rather refreshing to at least see the company try to meet those challenges head on. Recently, it's talked about a strategy to create its own set top box as well as put out an unsolicited bid to buy Circuit City. While both ideas have some problems (the Circuit City acquisition would be particularly hard to pull off for example), it does show that the company is trying to branch out.

What may be even more interesting, though is that Blockbuster clearly recognizes that it has an asset in its brick-and-mortar stores that Netflix can't easily copy. While some may say that the stores are a liability, that may depend on what Blockbuster can do with them. Already, it tries to leverage the stores in its online rental service (allowing you to return movies to the stores and immediately pick up a new film as part of your subscription), but as Gizmodo points out, it's also experimenting with making the shops into real destinations, rather than just rental shops. It's playing with a few different "formulas" to see how people respond -- including setting up a bar where people can buy soda or coffee and another where there's free WiFi and people can play video games on a big screen. It's also testing out setting up a store where shoppers can buy consumer electronics. You can consider that last one a test run for what would happen if the Circuit City deal goes through.

Turning the stores into more of a destination, with a variety of options on ways to make money off of the customers is a necessary strategy -- though, it's hard to pull off well (so, at the very least, it's good to see the company experiment before rolling something out nationally). Sam Goody, the big record store chain, tried to do something similar a few years back, and it didn't work out all that well. A large part of the problem may be really convincing people that it's a worthwhile destination. This is one case where the company's reputation matters, and Blockbuster's reputation isn't great. Still, this is the right strategy -- though, success or failure is very much dependent on the execution, which isn't exactly Blockbuster's strong suit.

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Blockbuster Sued For Revealing Movie Rental Info To Facebook's Beacon

from the oops dept

There was plenty of people upset by Facebook's original "Beacon" advertising system, that automatically connected information on purchases to your "news feed" and broadcasted them to all your Facebook friends -- but now we'll find out if some of that activity was illegal. One of the initial participating companies was Blockbuster, who automatically fed information to Facebook about what movies you had rented. It turns out that there's a specific federal law against revealing info about movie rentals (who knew?). The Videotape Privacy Protection Act was apparently passed by Congress after Supreme Court Appointee Robert Bork's videotape rentals were revealed while he was being reviewed by Congress. While plenty of folks don't know about this law, you would think that it would be pretty near the top of the list of laws that a company like Blockbuster would be familiar with. Yet, it seems to not have occurred to anyone there that automatically feeding movie rental info to Facebook might violate that law. However, it appears someone else did recognize this and has now sued Blockbuster for violating the law. Not surprisingly, the plan is to turn this into a class action lawsuit. Thanks to the specifics of this particular law, it's unlikely that other Beacon participants violated this law, but it's only a matter of time until class action lawyers figure out some other law they probably violated.

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Blockbuster In Surprise Bid To Buy Circuit City

from the does-this-make-sense? dept

The news came out early this morning that Blockbuster was making an unsolicited bid to buy Circuit City, which has left many scratching their heads, saying that the synergy isn't all that obvious. Circuit City has been in trouble for a while, and Blockbuster (while a lot healthier than Circuit City) has been facing its own series of challenges. While it's unclear what Blockbuster's plans are, the deal actually could make sense if Blockbuster was really looking distantly into the future about where its market is heading. It knows as well as anybody that video delivery is moving to the internet eventually -- at which point its business model gets a lot trickier. Yet, by owning a retailer selling hardware -- and the rights to content to be distributed to that hardware, things could actually get interesting. Now, I'll say ahead of time that I doubt this is where Blockbuster is heading, but with both movie distribution rights and the ability to sell hardware, it could embrace the economics of infinite goods, by packaging content (infinite) with hardware (scarce), creating a much more compelling offering, than competitors to either firm alone.

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Bad Ideas: Blockbuster Planning Yet Another Set Top Box Offering

from the please-don't-do-it dept

It's like watching a train wreck in slow motion. Apparently Blockbuster is working on plans to offer up its very own set top box for downloading movies that can be watched on your television. This is a bad idea. There is a long and disastrous history of companies trying to create their own proprietary set top boxes for downloading movies. They pretty much all fail. It's another piece of expensive hardware that is extremely limited and tied to just a single company. This is probably something of a response to Netflix's plans to have consumer electronics companies build in the ability to download Netflix films directly to televisions and set top boxes. That plan was bad enough, but this is much worse. People don't want to spend a few hundred dollars just to get another set top box (which they don't have room for given the number they probably already have) that only does one thing and only works with one company who they may not be comfortable dealing with for very long.

If Netflix and Blockbuster were being smart about this, they'd actually agree to an open standard to allow consumer electronics makers to build into systems so that people could sign up for whichever movie download service they want. They won't do this because they think (short-sightedly) that this only helps their competitors while losing the "lock-in" that a proprietary solution would have. That's the wrong way of thinking about it, however. The proprietary, limited, solution will fail because it won't provide enough value. Therefore, the comparison isn't between helping a competitor or having the field to yourself. It's between a strategy that will cost a lot of money and ultimately fail, or one that will be cheaper and will most likely succeed, even if it means sharing some of that success with competitors. I don't know about you, but I'd prefer a success to a failure any time -- even if it means my competitors succeed as well.

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Is The Post Office About To Kill Netflix's Business Model?

from the ouch dept

While Netflix has done a great job building up its business and competing with players who were much bigger and more well established, could it be the US Postal Service that finally does the company in? It turns out that those patented funky red DVD mailer envelopes are a pain for the postal service. They "sustain damage, jam equipment and cause mis-sorts during automated processing," and the postal service has had enough. The Inspector General is asking to charge an extra $0.17 per DVD mailer if adjustments aren't made to make the envelopes more "machinable." While $0.17 may not sound like a lot, a research analyst at Citibank cranked the numbers and found that it would likely cut Netflix's monthly margin per customer from $1.05 to $0.35 -- basically killing 67% of its margin (ouch). Now here's where the situation gets fun. It turns out that Netflix's main competitor, Blockbuster, does not have this problem with its DVD mailers. Remember that Netflix sued Blockbuster over its patents last year. The two firms reached a settlement earlier this year, but could this be a chance for Blockbuster to strike back at Netflix? Anyone know if Blockbuster patented its "working" design for the DVD mailers? I'm sure it would be thrilled to license it to Netflix... at a reasonable fee.

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Netflix Patent Antitrust Case Thrown Out, Judge Orders Lawyers To Alert The Press

from the legal-oddities dept

Back in May we told you about a class action lawsuit that was being filed against Netflix, claiming that the company violated antitrust law by fraudulently obtaining the patents it was using to sue Blockbuster. This seemed like a really odd argument, and one unlikely to succeed. By definition, patents are monopoly rights which are granted by the government -- so it's difficult to see how they can violate antitrust law. Also, as we noted when the original suit was filed, these types of class action lawsuits rarely do much good (though, they do tend to make lawyers a lot wealthier). A little over a month after this lawsuit was filed, Netflix and Blockbuster decided to settle their patent dispute, at which point we wondered what would happen to the antitrust class action. Now we know. It's about to be dismissed. However, the judge apparently is worried that due to the original press coverage of the case (from folks like yours truly), potential members of the class may have held back filing other actions against Netflix -- and therefore has demanded that the lawyers get the same level of press coverage as the first time. Of course, the news that such an action has been dismissed isn't quite as newsworthy as the original filing (which was newsworthy for being an odd way to fight bad patents). Either way, the anonymous lawyer who tipped me off to the original case, has now emailed me again with the order demanding similar press coverage (to be clear: it's the order demanding similar press coverage, not the lawyer, who said rather little in the email). I'll post it here not because the dismissal of the case is interesting, but the idea that the judge believes the plaintiffs can "make sure that the end of these actions gets as much attention as their start." At this point it's unclear if the dismissal is because of the settlement (quite likely) or because it's just not a very good idea to claim patents violate antitrust law. As much as our patent law and patent system are screwed up these days, allowing people to challenge patents on the basis of antitrust class action lawsuits seems likely to only make things worse.

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NetFlix Hopes Good Customer Service Will Keep Mail Boxes Stuffed With Red Envelopes

from the nice-talking-with-you dept

Although Blockbuster sat on its heels for a long time while NetFlix gobbled up market share, the company has aggressively fought back this year, prompting a lot of pain at NetFlix. NetFlix stock has been pummeled lately as its been drawn into a price war in order to stem customer churn. The problem is that its business model is easily replicated, which partly explains the company's attempt to assert a patent on it. However, the company does appear willing to actually compete, which is refreshing. The New York Times reports on the company's unorthodox decision to offer customer support services from friendly sounding Oregonions (as the company puts it), rather than rely on offshoring or email support. Although this is an expensive move, the company feels it will prove to be a key differentiator as it battles back Blockbuster. Obviously, good customer support means happier customers, while bad customer support can turn customers away. But the lesson isn't that companies should immediately stop all offshoring of these services. Rather, it's important for companies to think of customer support strategically and weigh the various costs and benefits, rather than just going on the lowest-price option.

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Surprising Survey Results Reveal That Movie Download Sites Do, In Fact, Suck

from the how-much-clearer-can-we-be? dept

It's incredibly obvious -- to everybody but the Hollywood movie studios, apparently -- just how bad movie-download sites are. When the first studio-backed efforts launched several years ago, the problems were clear. In the following five years, they haven't been fixed, despite plenty of reviews pointing them out. The studios made "protecting" their content with ridiculously restrictive DRM their top priority; delivering a good user experience came in somewhere down towards the bottom. Now, a new study has yet again pointed out that consumers don't like these services, and yet again makes it clear why: poor selection, unreasonable prices, poor quality. Add in the general difficulty in getting video from the services to users' TVs, and you've got a recipe for failure. These are many of the same points that have been made over the download services' lifetime, but that the studios and companies running the services have largely failed to address. It's little wonder, then, to see a site like Movielink, the studios' own download site, get sold at a huge loss since it's going to take wholesale changes to give it any chance of success.

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Blockbuster Takes Movielink Off Studios' Hands For A Pittance

from the on-the-cheap dept

Movielink, the movie download site started by major movie studios, has been up for sale for quite some time. The studios have had a hard time finding a buyer, though, because it's blindingly obvious (to everybody but the studios, apparently) just how badly the site sucks. The studios' desire to lock down the content with restrictive DRM, along with other flaws make the site wholly unattractive for users. It now looks like the studios have finally talked Blockbuster into buying Movielink at a fire-sale price -- less than $20 million, according to the WSJ, compared to the $100 million-plus the studios pumped into the site. Blockbuster may have picked up some download infrastructure on the cheap, but if it hopes to wring any sort of success out of Movielink, it's going to have to completely change the way the site works. But the studios wouldn't let that happen before, since controlling the content was their top priority; since they'll still be licensing the content to Blockbuster, it's unlikely that they'll let it remove any of the barriers to uptake they've put in place.

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