The Netflix Attack on Blockbuster: Blockbuster Online is Useless

Netflix is a great brand. Strategically, the founders got into the action and pre-empted a move into the web video rental space by Blockbuster or emerging efforts by Amazon and Wal-mart. Intelliflix and Peerflix are also on the rise, but none of these competitors will hold a candle to Netflix.

Netflix was first. Blockbuster was second, and as some argue, better. Amazon and Wal-mart have little hope of competing strongly in this niche and can only hope to gain the share-of-customer with those already loyal. I don't expect many non-Amazon and non-Wal-mart customers will all of a sudden subscribe and become first time Amazon or Walmart buyers because of a DVD service.

By getting out of the gates early, Netflix grabbed the most critical share of all - the enthusiasts. These were the people who were visiting Blockbuster and the movie theatre on a regular basis and now found themselves a huge time saver. Existing Blockbuster customers had something new that was a little more refined than the ill-fated "no late fees ever" campaign launched by Blockbuster, which was lame because everyone got the point that they would be paying the same fee just in a different fashion. These early adopters cemented the Netflix hold on the market as the leading brand and unless they implode with an Enron-like scandal, Netflix will always rule this space.

Where does Netflix go from here? Netflix the brand should stay just that: digital entertainment and getting the next experience to you as fast as possible. Blockbuster will keepcoming hard because it doesn't have a choice, either they succeed at the service model or they die. Blockbuster was once a hot brand. And it will do things like the current campaign allowing service customers to return DVD's to their stores and get free in store rentals. It will not be easy for Netflix, but it's theirs to lose.

Blockbuster = Great brand for video rental STORES
Netflix = Great brand for video rental SERVICE

Dynamite idea? More mainstream brands should established newly branded services (not line extensions like Blockbuster Online) in order to capture the imagination and not dilute the brand. People might tell you Blockbuster stands for entertainment, but for the mainstream is stands for movie rental. If Blockbuster had moved into the newly developing niche concept of video rentals over the web, and branded that new service a different name, the stock would be hot and no one would be in their league. Too bad for them. New brands are born in the niche. Need more proof? Think Kodak in digital cameras. They should have seen the revolution, created a newly branded product and annialated everyone. But that would be too easy. What's too easy is the brand extension.