The success of Netflix (NFLX) has always puzzled me. Perhaps that is because I am not much of a movie watcher. Not sure. Blockbuster (BBI), in the day, I understood. However, with broadband adoption widespread and download speeds moving higher and higher, I don’t understand the attraction of the DVD that has to be shipped in the mail. How the DVD in the mail beats out the digital delivery via a set top box or a TIVO unit puzzles me.
Perhaps I am the dinosaur, but my feeling is that Netflix could go the way of the Dodo. When I am in search of content, it can typically be on a whim. If there is a new release, I would rather play it “on demand” with my local cable company or via our TIVO unit through Amazon.
To add to my confusion over the success of the DVD (or Blueray Disc) there are kiosks and boxes popping up in supermarkets around the country. The impulsive rental, I understand. The prices in the kiosks via Redbox (a division of Coinstar – CSTR) are much less ($1.00/day) than what you would pay for a digital delivery via a set top box or TIVO.
What is the long term picture for NFLX? Is their brand strong enough to be a leader in digital delivery? If you have ever seen the mechanisms they have in place for pick and pack and inventory management, you might question why they don’t chop off a supply chain/warehousing / order fulfillment company from the core.
In any event, I can’t see myself as a buyer of NFLX. But… they continue to perform quarter after quarter. They may have another couple of years to run, but I can’t see the company having a bright picture for the long term.