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Paul Gillin's Blog - Social Media and the Open Enterprise

Sunday, June 25, 2006

Christina Kerley has an interview with Mike Kaltschnee, the blogger who writes HackingNetflix that's well worth reading if you're a marketer. It will give you some great insight into how clueless some marketers can be and I am referring to the marketers at Blockbuster.

HackingNetflix is a great example of an enthusiast site. Kaltschnee started it because he's a movie buff and he was really excited by the DVD-by-mail business and Netflix's in particular. In the process of writing about his passion, he's become one of the leading influencers in that market. He now writes about all the DVD-by-mail firms, not just Netflix. And he's got 3,000 - 7,000 readers a day.

HackingNetflix covers everything from bugs on the Netflix site to rumors about competitors and new products to new promotional materials to information about Netflix' stock price. He told Kerley that that about half the stories he posts come from readers and comments.

So here's what floored me about the interview. Mike Kaltschnee has probably got his ear closer to the ground than anyone in the planet on the DVD-by-mail industry. And Blockbuster won't work with him!

Can you believe that? Here's Blockbuster, whose stock is trading at an all-time low and who has filed antitrust claims against Netflix, refusing to interact with an independent source who can most help them understand their biggest competitor, not to mention the rest of the market. And they won't even acknowledge his existence.

It's hard to chalk this up to arrogance on Blockbuster's part because the company doesn't have much be arrogant about. It has to be cluelessness. Someone in Blockbuster's PR organization needs a dope slap. Or a pink slip.

Netflix, by the way, loves the site and has been all over it, Kaltschnee said.

Blockbuster is missing a huge opportunity by not working with HackingNetflix. If you're a marketer, there's probably a Mike Kaltschnee in your market. That person is a resource to you, not an annoyance or an eneny.

----------------------------------------------
Update 6/26/06

Here's an update to this commentary.

I e-mailed Blockbuster's PR department about Mike Kaltschnee's comments and received a prompt reply. Blockbuster's responses are in bold. Specific addresses have been changed for confidentiality purposes.

1. Is Blockbuster media relations aware of the site HackingNetflix? Yes

2. Are you planning to engage with the author of this site or are youchoosing not to pay attention to it for now? To our knowledge, we have never been contacted by this site. We respond to reporters on a regular basis and are available 24/7 at 21X-85X-X190, or online at xxxx@blockbuster.com

3. Does Blockbuster's media relations have a policy on communicating withbloggers as part of your media plan? If so, may I know what the policy is,please? We are communicating to the media on a regular basis. There is no policy one way or the other re: bloggers.

4. Do you have any comment on Mr. Kaltshnee's statement that "I triedseveral times to reach Blockbuster, and finally had one exchange with the PRpeople, but subsequent e-mails went unanswered." We encourage Mr.Kaltshnee to contact us at 21X-85X-X190 or at xxxx@blockbuster.com.

¶ 7:09 AM

Comments:

You go, Paul! What is beyond me is that Mike is the HERO here, yet only a handful of us recognize it. Even though his site is called "Hacking Netflix", he's more than happy to give fair and balanced coverage to all the players...so he should be viewed as Blockbuster's Hero, too.

He shouldn't have to call Blockbuster once, less several times. They should be calling and courting him. Duh. No, double duh. And they can't serve us the "Mike's audience is not our target market" line as his readers are avid movie renters.

Having worked at many of these ivory towers, I know just how expensive it is to retain PR folks...and yet they get Mike, with a loyal following, for the price of a call.

Are many of today's marketers really this removed form their markets? Yep, that was rhetorical.

A BIG thanks to you for following up with Blockbuster and fighting the good fight.
- ck

# posted by

Anonymous : 11:31 AM

I've worked for Blockbuster as a supplier in the past and been a customer of both Netflix and Blockbuster and what I think is the real issue here is that somehow Blockbuster has allowed itself to be vilified and Netflix actually has a rabid, but small group believing that they have noble intentions -- the company may even believe this load of crap themselves. They both just want to make money and both prey upon customers best intentions and tendancy to ignore minor economic penalties.
Blockbuster I assume is "the bad" guy because the video store model they depended on for many years is based on punative fees. The Netflix model however depends not on their corporate good will but rather the tendancy of renters to bite off more than they can chew and in essence not get the full value of the monthly fee. Both models are poor, although there is certainly more upside online, particularly as the first real competition to Netflix from Blockbuster brought prices down (if only slightly). Reality check, Blockbuster owns tons of real estate, has capital to burn and is ultimately better positioned to make the leap as a brand to the next big thing (which I assume is downloading movies as millions already do illegally). The TINY Netflix brand (only a few million subscribers, compared to blockbusters tens of millions of customers) with its much lower awareness is just not going to be worth much unless they figure a way to beat iTunes, Blockbuster, Microsoft, the Telecoms and cable companies to the download/rent/buy punch on a mass scale. In dvd by mail got the early adopters, who are arguably "better customers" and "bigger movie fans" -- but a brand is more than it's customers and in this case, it's just an undifferentiated series of warehouses and a servicable web interface -- not the stuff of long term success. Blockbuster is not a smart company or a well run company -- but they aren't evil anymore than Netflix is benevolent.

# posted by

Gorilla : 2:18 PM

Blockbuster does tend to get vilified because its financial performance has been terrible the last two years and it's in a business that's all but dead. You have to admire the company, though, for being innovative enough to hang on and come up with ideas like "the end of late fees" which, I understand, is a terrible program for them financially but has generated a lot of goodwill and buzz.

I agree with Gorilla that Netflix' model is easily reproduced, which leaves it little competitive advantage. However, Blockbuster's brick & mortar presence is hardly a virtue. You've got an industry that is rapidly going virtual between VOD and downloads and Blockbuster has all this real estate that has no competitive value. In fact, it's an albatross.

In any case, the point of the blog post was not to critique Blockbuster's business model but to point out the absurdity of its not dealing with someone who may be the single most influential independent voice in the DVD-by-mail industry, simply because he's a blogger. My point was that this kind of marketer myopia is pervasive and HackingNetflix is an example of where it's potentially damaging to Blockbuster's business. How much trouble is it to return a phone call?

Last point: in a service industry, the only true differentiator is service itself. Netflix' business model may be easy to copy, but its brand, reputation and customer relationships aren't. A lot of people love Netflix. I don't hear a lot of people saying they love Blockbuster and there's no guarantee that Microsoft, Apple or anyone else will be able to duplicate that kind of customer loyalty. Netflix courts Mike Kaltschnee. Blockbuster ignores him. Who do you think is more interested in cultivating a positive customer image?

# posted by

Paul Gillin : 5:23 PM

a) Blockbuster doesn't own their real estate, they lease it.
b) I would characterize Netflix's relationship with HackingNetflix as occasional and tentative rather than 'active courting'.
c) HackingNetflix is an excellent aggregator of news items, going beyond Google News in that department, but not a particularly wealthy source of original analysis.
d) The idea that BB or Netflix could 'embrace the community' of HackingNetflix isn't flushed out here. In what manner? It's not a straightforward proposition on how to do that precisely.
e) Community participation on the site is of mixed regard for Netflix.

Another interesting example is the forum IHateBlockbuster.com whose primary participants are, humorously, active BB employees.

# posted by

Aron : 5:27 PM

Thanks for your perspective. A couple of responses:

Leases are liabilities, though not as much as mortgages, that's true.

I'm out at Gnomedex and just had lunch with Mike Kaltschnee. From the stories he tells, Netflix is very active about courting him. Netflix executives routinely respond to his inquiries from their Blackberries on weekends.

One way to engage with the community would be to offer senior BB executives to speak to the HackingNetflix community through Q&A interviews. Another idea would be to sponsor contests. Or BB could float ideas and ask the community for feedback.

Thanks for the link to iHateBlockbuster!

# posted by

Paul Gillin : 5:55 PM

With Blockbuster Total Access, it is really going to give Blockbuster one up on Netflix. With the convenience of exchanging the DVD at the store, something Netflix can not offer. It is going to put pressure on Netflix to step it a notch. I think this going to put Blockbuster ahead in the poll.

See for yourself: http://todayspolls.googlepages.com/blockbuster_vs_netflix_poll

# posted by

TodaysPolls.GooglePages.Com : 1:05 AM

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