NetFlix has found a great niche; allow people to rent DVDs at a set monthly fee; no late fees, no hassle, just movies in the mail. They have been wildly successful, and for good reason. It's a good product at a decent price. I used NetFlix myself last year when I was laid off. Unlimited movies in the mail at a low monthly rate seemed like a good way to pass the time in between job interviews.
The concept behind NetFlix has spun off into a number of similar industries (video games, porn, most anything that could be rented at Blockbuster). The interesting thing about NetFlix is that they acquired a patent on their model:
In June 2003, Netflix obtained a patent on a "method and apparatus for renting items." The patent covers "a computer-implemented approach for renting items to customers (in which) customers specify what items to rent using item selection criteria separate from deciding when to receive the specified items." In addition, it covers what it calls a "Max Out" approach, which allows a certain number of items to be rented simultaneously.
If enforced, the patent could conceivably turn all of Netflix's competitors, no matter what they rent, into paying licensees — or run them out of business entirely.
.jpg?t=20120527181101)
Article comments
1 - TDavid
We did a similar deal through Blockbuster. Ran out their inventory of movies we were interested in within six months. We're in the Netflix affiliate program and haven't had a huge number of takers, though. Hopefully others have.
The patent thing is lame, IMO, they shouldn't allow patents for this type of thing. So are they going to say the unlimited rent by mail model is theirs for anybody who wants to do this, regardless of the genre?
2 - Pappy
As an IP attorney and someone who has commented on this thing in the past, Netflix is not likely to assert this patent offensively against other DVD rental-by-mail services. Remember the "one-click" patent? The Federal Circuit said there were issues about it's validity, and before it could go to trial again they settled.
That incident has taught people with these "flimsy" patents not use to them offensively, but rather defensively. If anyone tries to challenge Netflix, or the Netflix patent, then Netflix will assert the patent. Besides it's all a moot point anyways as the competition to Netflix is not that strong.
Speaking of Netflix, I would like to reiterate my thoughts from another blog post regarding video stores: Netflix makes money off the people who are casual renters, but pay for their service (the person who spends $240/year for the service, but only rents say $150-200 worth of DVD's)
If these two things happened (they won't), Netflix would go out of business:
1.) Every Netflix subscriber rented 10-15 movies a month
and
2.) Netflix actually had to buy each copy of the DVD it rents out. Keep in mind Blockbuster became huge because they got studios to throw free copies at them, in exchange for a percentage of profits (Ingenious idea by the way). I have not heard if Netflix has the same kind of "free movie for a kickback" deal with movie studios.
Movie studios could still be a big wary of Netflix and might be reluctant to give them copies just yet.
3 - Jim Carruthers
This is a good example why business and software patents are an inherently bad idea which stifles innovation.
That said, there are a couple of Canadian outfits which have taken the Netflix idea and run with it. I use moviesforme.ca (which has a dumb looking url). While their software needs a lot of work, getting DVDs in the mail is great, now if I could only get them to partner with Suspect Video. Yes, I am that lazy I can't walk over to Honest Ed's and rent "Blood Sucking Freaks - Like Yo' Momma".
4 - Tom
I love Netflix. I never rent movies any other way!!
5 - Scott Butki
Good piece.
I just wrote a news piece on Netflix, which is here.