How a challenger start-up reacts when the incumbent finally wakes up
Netflix's founder & CEO, Reed Hastings, is interviewed in BusinessWeek this week. A number of things have happened to him, including a huge drop in his share price, a class action law suit for weird churn calculation practices, missed earnings, having their business-model copied over and over, marketing costs going north, etc.
But, as reported here, Blockbuster, the company Red decided to overtake when he started Netflix, is finally deciding to enter the online DVD rental market.
In this article, Reed Hastings , reflects on how a challenger should react when the incumbant finally wakes up. Interesting thoughts for entrepreneurs out there.
"Netflix is worth the extra $2 because the service has consistent overnight service to 90% of our subscribers, we have great recommendations, we've got a well-developed and mature site, and the service works extremely well. "
" What we're spending it on is more and better content. And Blockbuster is going to find the economics very challenging, because we have the economies of scale. We ship nearly a million movies a day, and Blockbuster is going to start from a very small base."
He also recognizes that his business is about electronic content distribution and reflects on consumer wireless electronics.
"We look at it as a great way for us to have electronic delivery, in addition to DVD delivery. Let consumers choose what they want, mix and match, on a single subscription. We're very much looking forward to that era. Hopefully by 2007 we'll be a major player in that era. "
There's a wide range now of companies bringing the Internet to the TV. There are Wi-Fi DVD players emerging. Most consumer electronics over the next several years will have integrated Wi-Fi. That's really what we see as bringing the Internet to the television. "
PS: picture to the left is Carvaggio's David slaying Goliath, taken from here.
