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Strategies for a discontinuous future.












Wednesday, August 11, 2004
 


Blockbuster (finally) launches online rentals. It's about time - they've been getting hammered lately. How will the dynamics of this industry play out?

Well, Netflix has a significant first-mover advantage that's backed up largely by learning and mild network effects. The problem for Netflix is really gonna be increasing entry from all sorts of players, and the ensuing massive price and quantity competition.

But the problem for everyone is going to be that this industry is essentially disintegrating - it's going to be a victim of convergence into online services, substitution from independent film makers and distributors, and consumer needs shifting further and further away from Hollywood.

The writing's on the wall; if Netflix was smart (I'm assuming none of the other players are going to be) it would expand downstream and attempt to capture rents by financing innovative new kinds of content creation and licensing, or expand upstream and attempt to capture rents from movie consumption complements and infrastructure (aka hardware/software/platform).

-- umair // 11:46 PM //


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