Monday, 11 November 2013

Why not here?

You may have seen, last week, that Blockbuster, the American chain of video rental shops, decided to close the last 300 still open: it's been widely covered (for example here on Bloomberg), with quite a few commentators saying it was about time (as in 'Blockbuster is closing all of its video rental stores. Good riddance', on Yahoo! News).

Blockbuster, which at one point had 9,000 stores, wasn't much loved. Various people have commented on its limited range (other than multiple copies of the latest big hits), dreary stores, poor service, and overpriced extras (like popcorn), and the few times I used them in the States, I felt the same way.

Quite a few people also blamed Blockbuster for decimating the specialist, independent video stores, much like Amazon and the other e-booksellers have got it in the neck for dealing to that interesting little bookshop you used to go to.

But it wasn't its general unloveliness that did Blockbuster in. It was, first of all, Netflix's video-by-mail service (like our Fatso), and, more recently, the digital streaming of videos. And you can see why: online video on demand is cheaper (no bricks and mortar for the supplier, no getting the car out to go to the video shop for the buyer), faster, and offers an easily searchable and larger catalogue. Those of us out in the 'long tail' (I like French films) can find and view what we like.

Or at least we can if we live in the US. Here in New Zealand, we're well behind the curve. Yes, there's some online stuff available from the free-to-air channels and (in a rather limited selection) from Sky. And yes, Quickflix has entered the market, but judging by its current offering it's either early days or (if this is all the range they're going to offer) not a compelling proposition.

I try not to see market failures all over the place: for the most part, markets work pretty well to give us what we want. But I'm at the least bemused by the current state of play of video on demand in New Zealand. When what is completely routine in overseas markets is still the rarity here, you begin to wonder if we haven't got some kind of roadblock preventing or delaying the local deployment of a proven and popular technology overseas.

4 comments:

  1. Donal, I wonder how big a role NZ's small scale has in this? In conjunction with the rather archaic regional rules on media content, it make very little sense for large operators like netflix or amazon to even bother with our market. There is a regulatory failure IMO that exacerbates NZ's lack of scale.

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  2. Hi - thanks for the comment. Scale could be part of it, certainly, in a variety of ways: there may be markets bigger than us worth concentrating on first, for example, if you're a VOD provider in expansion mode. On the other hand the marginal cost of acquiring a new online subscriber anywhere must be very low, and you'd wonder why there are those archaic regional rules (like the ones on DVDs): you'd think it would make more business sense for Netflix to accept all comers on its US infrastructure (even those with NZ-issued credit cards?).

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  3. eaqubs, what exactly is the regulatory failure that exacerbates NZ's lack of scale? In what way do you think regulation should be different in order not to exacerbate NZ's lack of scale?

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  4. I expect that it's easier for Netflix to take grey-market Kiwi subscribers than it would be to navigate the mess of licensing issues. It's dead simple to sign up for Netflix using Hola or any of several other geoblocking sites. Netflix seems to welcome it, or they'd check the country of the credit card, or start asking questions when I'd switch from being Netflix UK to being Netflix US in 15 seconds to get access to different content.

    http://offsettingbehaviour.blogspot.co.nz/2013/09/netflix-and-fixed-costs.html
    http://offsettingbehaviour.blogspot.co.nz/2013/10/in-praise-of-netflix.html

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