Tag Archives: entertainment

Killing Netflix “Profiles” – A Stupid Business Decision

19 Jun

Netflix LogoNetflix is ending its longstanding policy of allowing customers to hold multiple profiles under a single account.  The announcement was sent to users today:

We wanted to let you know we will be eliminating Profiles, the feature that allowed you to set up separate DVD Queues under one account, effective September 1, 2008.

Each additional Profile Queue will be unavailable after September 1, 2008. Before then, we recommend you consolidate any of your Profile Queues to your main account Queue or print them out.

The profiles feature was an excellent way for multiple people living in a single household (husband/wife, roommates, etc) to maintain separate queues and profiles of the movies they have liked, disliked, etc., while keeping a joint account of discs sent to the same address for billing purposes and convenience.

The rationale for the move is not substantially explained in the Netflix communication.

While it may be disappointing to see Profiles go away, this change will help us continue to improve the Netflix website for all our customers.

The most likely explanation is that Netflix has determined that joint accounts are causing them to lose revenue due to their pricing structure.  In effect, multiple users in a single household gain scale efficiencies because it is cheaper to have a single account sending 4 discs at a time ($23.99) than it would be sending 2 different accounts 2 discs at a time ($13.99 x 2, or $27.98, a $4.00 difference).  If multiplied across millions of accounts on a monthly basis, that could mean a lot of additional revenue for Netflix.

… IF it doesn’t turn a large number of their customers away.

The real shocker can be found on the FAQ linked from the email sent out today:

You will not be able to transfer your Profiles data to a separate new account

Consider moving all DVD titles in your Profiles Queues to your main account Queue

How does that make any sense?  Does Netflix seriously expect the wives and roommates and brothers and sisters who have been sharing accounts to merge their accounts into a single account and lose all of the individuality and “social profile” data that they used to enjoy from the site?  This mass of data, and the power of the Netflix recommendation engine was one of the major differentiators that kept its users on the site.

To quickly come to my point, this is a plain stupid business decision.  Here’s why:

  • Users will now have to pay two bills where they used to pay one
  • Users will lose all of the data they have built up over time while using Netflix, eliminating the barrier that once kept them from switching to a competitor, such as Blockbuster
  • Users who decide to stay with Netflix will be forced to spend hours re-entering their movie ratings and rental queues
  • Users who have been too lazy to close or downgrade their accounts won’t renew their accounts, killing the “momentem” that once kept them paying every month
  • Users who do decide to turn their single account into two different accounts will feel like Netflix is nickle-and-diming them, forcing them to pay more for a less convenient, equivalent service that they used to pay less for
  • New customers that might have been attracted to the idea of a single Netflix account per household (it’s easy to convince a new roomie to pay $3.00 a month to move from a 2 to 3 disc account, when they might not have been willing to pay $9.00 a month to get an account of their own)

Who wins from this decision?

  • Traditional competitors who can take advantage of the mass of new potential customers shopping for a DVD rental service (e.g. Blockbuster)
  • New competitors (e.g. iTunes movie downloads) who will open their arms to an influx of users who no longer have any reason to stay with Netflix and its old DVD-by-mail technology

Am I missing something here, or did Netflix just make a huge blunder?

Greystripe – Developing a Complete Mobile Phone Advertising System from Scratch

7 May

Greystripe LogoAfter attending a presentation yesterday by CEO and Founder, Michael Chang, and VP of Operations, Kurt Hawks, about their startup, Greystripe, I have a newfound appreciation for the challenges that face entrepreneurs innovating in a part of the market where there is so much uncertainty. Greystripe’s primary revenue stream is from the sale of visual ads placed on mobile phones, but the story of how they got there, and the challenges they had to overcome, was both inspiring and daunting. I want to share a condensed version of that story, although I apologize in advance if any of it has been mangled in the retelling.

Where they are today:

Greystripe is an advertising network, content publishing partner, and distribution network for mobile phones that is VC backed by Steamboat Ventures, Incubic, Monitor Ventures. Its most recent capital round, a series B, raised $9 million. Their free, ad-supported games are being downloaded at a rate of 250,000 per day, by users all over the world.

How they got here:

Chang’s presentation focused on how the company has evolved since getting off the ground in 2005, and the multiple iterations the company has gone through in creating its current business model. The company started with a focus on mobile advertising in a single vertical: location based services. Inherent from day one in this business were challenges of developing content for different screen sizes, across different phone manufacturers (e.g. Nokia, Samsung, Motorola) with different operating system software (e.g. Palm, RIM, Microsoft), operating on different telephone networks (e.g. AT&T, T-mobile, Verizon), with different wireless technologies (e.g. GSM, CDMA). The complexity would not stop there.

As it became clear that location based services were evolving much slower than they had hoped, Greystripe’s focus shifted to a different vertical, gaming and applications. Games were sourced from publishers (e.g. Digital Chocolate, Hands-on Mobile), modified with the company’s AdWRAP technology, which inserts additional blank screen pages for advertisements before and after gameplay, and offered for free to users to download on their mobile phones. The next challenge, then, was to find advertisers who would pay for the full-screen advertising real estate within these games. Their search for an advertising network which could effectively source those ads on their behalf turned up empty, and again the fledgling company was back to the drawing boards.

Developing an advertising network, which places ads on behalf of companies and advertising agencies, would require a larger sales force, and a different business model than Greystripe had originally envisioned. A sales team was hired, relationships developed, and the first ads were placed. As the network took shape, and advertisers began to take notice, two new challenges would emerge. First, visual modifications would have to be made to the ads to serve the multiple screen sizes and formats, and second, the games would have to be distributed to users for download. The second would prove to be particularly daunting: it became clear that there were no effective distribution avenues available to ensure that games could actually reach users.

The next iteration of the company therefore took on this challenge: developing a diverse set of distribution channels for publishers. These have evolved to include mobile providers’ own catalogs of games and applications available for download, the sites of the game publishers, and GameJump, a portal developed by Greystripe.

Greystripe today is fully functional end-to-end, and is revenue generating (though not yet profitable). The company is now in its fifth iteration of its business model, and both Chang and Hawks sounded optimistic that even if not the company’s last, that it offered their greatest chance for success to date. Chang acknowledged that future developments could include gathering more detailed profile information about the users of its ad supported games, layering on location sensing technologies, and using it to more precisely target ads to specific users, allowing them to demand a higher premium per screen view from advertisers.

For the potential entrepreneur’s in the audience, Chang offered several tidbits of advice – including the importance of this kind of iteration and evolution in the formation of a business: “Push things far enough to really test the business model, but without pushing them so far that you run the company into the ground.”

Why Wal-Mart’s DRM-Free Tunes Will Change the Way You Buy Music

21 Aug

DRM-Free Music from Wal-Mart Great news was announced today for music fans, and from an unusual source: Wal-Mart. A time when we can purchase our music online and do what we like with it (share it, copy it, play it on whatever device we like) is finally about to become a reality. From Reuters:

Wal-Mart, the world’s largest retailer, said its new MP3 music catalog included thousands of albums and songs from major record labels like Vivendi’s Universal Music Group and EMI Group without copy-protection software, known as digital rights management.

Wal-Mart said it would sell the “DRM-free” MP3 downloads of music by artists like the Rolling Stones, Amy Winehouse and Maroon 5 for 94 cents per track or $9.22 per album. It said the new format let customers play music on almost any device, including iPods, iPhones and Microsoft Corp’s Zune portable media player.

The news from Wal-Mart is going to mean a big change for the industry, and for two important reasons:

  • Wal-Mart is such a powerful competitor, it virtually guarantees that other music retailers (e.g. iTunes) will have to follow suit and reduce their prices on DRM-free music in order to keep customers
  • Wal-Mart drives such sales volume, Sony BMG and Warner Music will soon realize that they are missing out on a large number of potential sales by not offering their music in DRM-free format as well, putting pressure on them and their artists to come to an agreement to join Universal and EMI

Until recently, the buyer of digital music was given fewer rights for the use of his or her music than the buyer of a traditional CD. Recording companies required that digital music be protected in Digital Rights Management (DRM) software, in an effort to combat the online piracy of music. This created the frustrating situation wherein music bought on Apple’s iTunes store [by far the largest with 80% market share in the US] could only be played on one type of MP3 player: the iPod. Apple justified this by saying that its DRM software would be compromised if it was shared with other hardware manufacturers.

The first major progress toward giving music buyers back their rights came several months ago when Steve Jobs and Apple advocated that music should be available to consumers in a DRM-free format, resulting a few weeks later in the advent of “premium” iTunes downloads without DRM for an extra $.20 per song. It was a move in the right direction, but many songs remain unavailable without DRM, and paying more for the identical song just to get the same rights you had if you had bought the CD seemed unfair.

Soon we will quickly see both a drop in the price of DRM-free music and the unlocking of music from more recording labels. Thanks Wal-Mart.

Read More:

[And thanks Engadget for the graphic!]