Blockbuster, Netflix, and Apple

I still remember a conversation I had about a year ago when I told an business acquaintance that Blockbuster was toast, and that it was only going to be a year or two before the company would be gone. My acquaintance argued politely that that was not going to happen, we agreed to disagree, and we finished up our meeting. But for some reason, that particular conversation stuck with me, even though I have talked about this to hundreds of people.

What amazes me is how stuck some people get in a belief that business models never change, and that companies and markets can grow forever. Blockbuster was in the right place and the right time to enjoy dramatic growth, crush its business enemies, and become one of the most hated brands in America. The company's insistence on ridiculously punitive late fees was the first clue that the company's leaders were out of touch with customers and the market. How anyone thought that enhancing profits by punishing customers was a good idea still perplexes me, but a lot of people at Blockbuster thought so.

Netflix was really a response to that. The Netflix folks had two key ideas: one was that people tend to take a few days to get around to returning movies. The second was that some day, DVDs would be history and everyone would watch on demand via a broadband connection. Even though the company started out mailing DVDs back and forth, you will notice they did not call the company "PostalFlix."

I saw something the other day that made me think I might finally want an iPad--someone near me on an airplane was watching a movie on their iPad. The big screen was easy to see, and the iPad has enough battery life to watch a long movie without running out of power, which is a problem with many laptops. Air travel has become so unpleasant that being able to watch a movie of my own choice has some appeal. The seats are now so close together that on most flights, even on bigger planes, it is nearly impossible to work comfortably on a laptop. I was on a 757 the other day, and there was only 12 inches of space between the front edge of my seat and the back of the seat in front of me. When you dropped down the tray table, the edge was jutting into my chest--impossible to comfortably use a laptop keyboard or to get the screen at a comfortable angle. But my iPad seatmate was able to prop the iPad up easily and enjoy a movie.

As video has moved from the Blockbuster store to the Netflix postal model (which is also toast, but Netflix knows this) and is now rapidly moving to the on demand model, the iPad and similar tablets are going to take it the final step--true portability--watch whatever you want, whenever you want, pretty much wherever you are.

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