Scott Hardie | May 20, 2005
From today's StudioBriefing:

The brutal war over online DVD rentals accelerated Thursday as Netflix and Wal-Mart announced an agreement, which was followed by an announcement by Blockbuster offering incentives to anyone switching from Netflix and Wal-Mart. Under the Netflix-Wal-Mart deal, Netflix will take over Wal-Mart's online DVD rental business beginning June 16 while at the same time promoting Wal-Mart's sell-through business. Wal-Mart is believed to have about 300,000 subscribers. Shares in Netflix rocketed up 24 percent following the announcement. Later in the day, Blockbuster offered to give Netflix and Wal-Mart online rental subscribers two months of online rentals free, a free DVD of their choice to keep, and two coupons for free in-store rentals. In a statement, Blockbuster chairman and CEO John Antioco said, "We remain committed to growing our online rental business and plan to continue to compete very aggressively in" online DVD rentals.
Fucking goddamn cocksucking Blockbuster motherfuckers!

Ahem. Sorry. I just had to get that off my chest.

Kris Weberg | May 21, 2005
Wow. You must feel strongly about this -- you not only used a graphic, but made sure all of US would curse along with you!

Amy Austin | May 21, 2005
Well, Scott... I say that you (along with anyone you can enlist to do the same) should take advantage of Cockbuster's (or is that "Cockblocker's"?) magnanimous offer -- in other words, take the DVD and run... back to Netflix!!! (Or have they figured in some sort of membership clause that locks you in for a specified time frame???) Along with you, I really don't care for the tactics currently being employed to steal back business that was rightfully lost in the first place, and I'm certainly more than willing to take advantage of free goods with no intention of staying on... *if* it doesn't mean being locked into a contract! Of course, it probably won't really do as much damage as I'd like to fancy... but what if *every* faithful Netflix patron did the same??? ;-D

Steve Dunn | May 21, 2005
Um, Scott? Is there something inherently evil about Blockbuster? Or virtuous about Netflix?

I am a happy Netflix subscriber, but if competition from Blockbuster motivates Netflix to provide better service and better prices, I'm all for it.

Are you opposed to competition in the DVD rental sector of the economy? If so, why?

Scott Hardie | May 21, 2005
I should really save this for morning when I have better clarity of mind, but what the hell. Please forgive any rambling or offense, Steve; you know you my man.

I have been reading with interest your corporate-themed discussions on BTD for a while, Steve, particularly the "evil shareholders" debate of late. (link) It's one thing to point out how asinine that kind of public statement is. But you seem to relish pointing it out, and making a fool of anybody who sees a smidgeon of sense in it. (Me, I took Chris Martin to mean that the business of returning to shareholders on their investment is stifling to many musicians' creative freedom in general – three years I've been waiting for Fiona Apple's unpublished album, all because Andy Lack needs his fucking R&B hit machine – and it seemed like Martin simply chose a stupid way to phrase his side of the age-old business-vs-art debate.) Even though you've wisely warned us all about the dangerous and subtle effect that emotion has on what we tell ourselves is our rational decision-making process, please forgive me, I can't help but wonder if you take this side because you enjoy being on the easy one. After all, there's no shortage of loudmouths in the world complaining about how corporations are the great evil of our modern age – shit, Netflix will even rent their movies to you (link) (link) (link) (link) – and if you take the broad view, those people look like idiots to complain about the driving engine behind an economic revolution that has made our lives so much more convenient, comfortable, safe, and informed. To pull the plug on corporations would be to go back two hundred years in progress. How fun it must be to point out those peoples' foolishness to them from your unassailable position behind Adam Smith. They're genuinely upset about corporate malfeasance, while you get to wag your finger about the inherent fairness of market competition and how big corporations have the right (nay, the obligation) to do everything in their power to earn profit, as if your audience didn't already get it. Do you so assertively argue the obvious side of the debate because you like being incontestable?

The side you have chosen doesn't bother me one bit; you're on the side of common sense. It's that you seem to argue that side so often, and with such zeal, and with such a condescending tone to those of us who seem to need a clue, that I wonder if you take the position only because you enjoy being in that position. It's like your political alignment. How easy to be a moderate independent: You can point out liberals' foibles to liberals, and you can point out conservatives' foibles to conservatives, and nobody can accuse your side of being wrong because you don't have a side; you always get to be right and you never have to be wrong. Your fortress is the invulnerable ivory tower of the obvious, and what fun it must be to snipe at those of us with real opinions from all the way up there.

Now it's time for me to explain what should be obvious: Our problem, however poorly Chris Martin might enunciate it, is not the corporation in general. We get the corporation. We like the corporation. We thank the corporation. Our problem is with one specific corporate issue, the matter of malfeasance, in which a few corporations engage in a big way. Some of us get pissed off about their massive layoffs with unnecessary mergers, others gripe about lost pensions and worthless stock and cooked books, still others complain about their failures to the arts they support. My Blockbuster gripe is and always has been that Blockbuster doesn't just seek "fair competition" with Netflix, but that they're leveraging their massive size in order to unethically undersell the weaker Netflix for the singular purpose of extermination, at which time they will conveniently return their prices to a profitable level. Netflix can't provide better prices than they do currently, because after they pay postage and minimal overhead, they're only earning just enough with each subscription to stay in business; Blockbuster offers their own service at a significant financial loss for the explicit short-term goal of bankrupting Netflix. In other words, it's a monopolistic business practice without the monopoly. You can call it fair in a business sense, but I say it stinks in an ethical sense, and I say that with every ounce of bias I have as a Netflix devotee. It stinks! Fuck Blockbuster! I've been following this little war in the news for some time, and this latest announcement today, that Blockbuster is making it even more personal, kicked up my anger to a new level.

For the record yet again: I do not oppose corporations, or fair competition, or the economy, or better service, or better prices, and I do not wish to rewrite the centuries-old rules of capitalism to suit my Pollyanna worldview. If all Blockbuster was doing was making Netflix into a better company, I'd kiss the sidewalk in front of their nearest location. But Blockbuster isn't playing fair, and they don't just want to "compete" as you conveniently put it; they want to obliterate Netflix with what I personally consider to be an unfair business practice, and they stand a good chance of succeeding in the next two years. It strikes me as wrong, and because I love Netflix so much, it also makes me very angry. Just because my opinion is complex, and perhaps only makes sense to me, does not make it wrong or ill-considered or ill-informed.

I do also, for the record, concede the role that emotion probably plays in my thought process on the matter. I can only try to think away from it.

Anyway, this has probably turned out to be way more personal a response than you expected or deserved. I do apologize if I have misrepresented you or unfairly maligned you. Personal arguments are the antithesis of what we both believe about TC (I even banned them in those fucking rules), but in this case, it seemed to me that your thought process and mine were both suspect, so I sought to address them at length.

Scott Hardie | May 21, 2005
P.S.: What if Blockbuster actually had a monopoly, and their opponent was a new upstart, but the situation was otherwise identical? Wouldn't this plan of Blockbuster's then be decried as an unfair monopolistic business practice? How come they get away with an unethical practice in open competition that they wouldn't in closed competition? Is the practice not always unethical no matter the circumstances?

Maybe that's our problem. Maybe you're considering what's fair in a business-rules sense (this is), while I'm considering what's fair in a philosophical-ethical sense (this isn't). It would hardly be the first time for us. :-)

Michael Paul Cote | May 21, 2005
Scott,

While I can see both sides of this argument, I can only point out that in today's world, business ethics is as big an oxymoron as military intelligence. It just doesn't exist, and if it does, the poor schmucks practicing it will not be practicing for long.
It seems to me that I remember not too long ago, the same type of thing happening between an upstart ice cream company called Ben & Jerry's and the mega corp Haagen Daz (which for the uninitiated is owned by Pillsbury). HD was basically blackmailing retailers by saying that if they wished to continue carrying HD ice cream, they could not put B&J in their freezers. Three cheers for the little guy and their "What's the Dough Boy afraid of?" marketing battle. It was a bitter fight, but in the end, justice prevailed.
I think that if Netflix has other devoted fans such as yourself, they will survive this onslaught, if for no other reasons than the ones Amy mentioned. The American consumer is basically devious and will attempt to get something for nothing and then go back to where they are happiest. As for me, I don't subscribe to either, I have inDemand and icontrol on my cable. Not as big a choice and I may have to wait a bit longer for the new releases, but it works for me. Price is the same as BB rentals as well. Will I change to an online service, maybe. Which will it be if I do? Don't know. But chances are Netflix will at least get a try as I am a member of BB already and could take or leave their services.
Give the underdog and chance and I bet it survives and flourishes if for no other reason than this country loves an underdog...

Steve Dunn | May 21, 2005
Wow.

Both in the BTD thread and this one, I reacted to statements I considered so extreme as to preclude further inquiry. "Shareholders are the great evil of this modern world" is not a critique of corporate malfeasance. "Fucking goddamn cocksucking Blockbuster motherfuckers" is not a critique of predatory pricing. That said, I realized you were in engaging in intentional hyperbole and I should have left it alone. I did not meant to snipe or condescend, only to spur more substantive analysis. But I realize there is more to life than substantive analysis, and I realize you have explained yourself on these issues already. Sorry to rain on the parade.

Kris Weberg | May 21, 2005
I guess my question is this -- what, in business terms, is unethical about predatory pricing? Isn't it simply a competitive mechanism that offsets a "pure" price war, one which could result in unprofitability on all sides? Businesses in a competitive system have zero incentive to make sure their competition is healthy; quite the opposite, actually.

I understand (and share) Scott's more general ethical objection, but I fail to see where this objection connects with business ethics: it's not a breach of contract, it's not false advertising, and it's not industrial espionage, so what's wrong with it in business terms?

In theory, what should happen in any sustainable industry is the proliferation of enough different competitors so as to make predatory pricing too costly for any one competitor to undertake; even if one business fails, the notion that there's profit to be had will induce investors to provide startup funds, thereby generating new competitors in the field.

Ideally, what happens is that, say, NetFlix realizes Blockbuster can undersell them and competes ata different level by providing services BB doesn't, or simply providing better service, perhaps negotiating exclusive distribution rights so that they have an induplicable offer for consumers, and so on.

Of course, like so much in economics, this very simplified analysis of mine tends to assume that decisions by purchasers and by producers will be rational at some level, something I simply don't believe is true.

Steve Dunn | May 21, 2005
As is often but not always the case, Wikipedia seems to have a decent section on predatory pricing here: (link) It touches on the arguments about the ethics and rationality of the practice.

The antitrust argument is essentially that certain ruthlessly competitive practices can actually have the effect of being anti-competitive. Antitrust law is supposed to protect the consumer, not the competitor. The Microsoft case was widely perceived as Sun/Netscape v. Microsoft, and if this one goes to court it will be perceived as Netflix v. Blockbuster. The law, however, is premised on maximizing utility to the consumer. Competition that results in better and cheaper services for the consumer is generally considered to be a good thing. That's why the courts take a dim view of the theory of predatory pricing - if Blockbuster wants to give away DVDs, the consumer benefits. If Blockbuster drives Netflix out of business and then jacks up prices beyond what the market would otherwise bear, then another competitor will come along to fill the gap. Antitrust law exists to make sure we get access to cheap DVDs, not to make sure Netflix stays afloat.

I used to be much more of an ideological libertarian than I am today, and I use to argue that the sky should be the limit as far as competition is concerned. I now favor appropriiate regulation of business at all levels, but in the same way I favor certain limitations on the freedom of speech: reluctantly, and with caution.

I'm not as worried about Netflix as Scott is. I did not consider switching from Netflix to Blockbuster for one second as a result of their new offer. Admittedly, this is because I hate Blockbuster, but I think there are a lot of people who do. If Netflix wants to survive, it'll have to find its niche and serve it well. Just like any business. If Netflix doesn't make it, that doesn't necessarily mean Blockbuster did anything wrong. Between TiVo, Replay TV and the other DVR manufacturers, I don't know which ones will still be around in 10 years. Just because you've got a great product doesn't mean you've got a great company. Netflix has a great product. If it's a great company, it'll survive.

Kris Weberg | May 21, 2005
Ah. So long as you're noting that the introduction of an ethics that isn't restricted to laissez-faire visions of capital is what makes predatory pricing unethical, I think we agree.

Pure competition is like any other "pure" value: good on paper, scary in reality, where no pure category really comes into existence.

I also note that the game theory elements discussed in the wiki entry seem to support my contention that predatory pricing is only a failing strategy where a classical economic notion of rational economic choice still holds.

Now, if someone can give me an untroubled economics-based argument for untaxed inheritance, whose incentive effects seem to me predicated on simultaneously undercutting the greed incentive for the heirs to produce wealth, let me know. I've seen the property-rights argument for it -- people can dispose of property however they like, including leaving it to their kids -- but I've never seen a genuinely good account of just how inheritance can be said to function in capitalist systems without disrupting them in certain ways.

(In case you can't tell, my objection to much of economic theory is that it requires some version of rational choice to function, and I don't believe that most choices people make ARE rational, in the end.)

Jackie Mason | May 21, 2005
[hidden by author request]

Scott Hardie | May 22, 2005
There's something that I should have said when I woke up on Saturday morning, that I knew before I even looked at this: I shouldn't have written what I did. On Friday night, while still outraged at Blockbuster, I blindsided Steve with a personal attack that was not at all called for. The moment pulled out of me some hostile comments that I wouldn't have made if I had waited for morning, when I was calm and clear-headed. Steve, I apologize.

I guess we'll have to accept our differing views on this. I don't mean the economic view that this ultimately benefits the consumer (very well put), on which we agree, but the view on Netflix's fate. In the industry's general opinion, they are expected not to survive this war with Blockbuster, and when they pass I will not blame their loss on their inferiority as a company or their inability to adapt, I will blame it on their being crushed by a massive competitor devoted to crushing them. I am encouraged by the pro-Netflix comments that I read here, and I have seen enough Netflix-themed blogs to know how devoted their fans are, so I hold out hope that they'll survive the onslaught. I know that Blockbuster CEO John Antioco is the one behind the push to undersell Netflix and he was recently ousted for this move, which was unpopular with the top investors in the company, and the new management is already testing the $17.99 price in some markets to see if it's viable, so it's possible that "fair competition" can still happen after all.

Jackie: I agree completely, that was another underhanded move on their part. They gave it up after 47 states attorneys threatened to sue. You can read more here under the "Lawsuit" heading: (link) (I'd link to an actual news article but I had trouble finding one.)

Steve Dunn | May 23, 2005
No sweat, Scott. That was actually a pretty good critique of my online persona. I see my writing as proceeding from a nihilistic/relativistic world view, and I do think I have "real opinions." But I also realize I can be supremely annoying. People often find me condescending. People often hear me say, "you're an idiot for saying that" when what I'm trying to say is, "you're smart, so really think it through." Either approach is condescending in a sense, I suppose. I've gained some humility over the years, but I have a long way to go. Anyway, I don't mind being called out when the occasion demands, by people I respect.

But that said, dude, your brand loyalty is out of control. Netflix is cool, but it's just a corporation. Given half a chance, it'll twist the knife in its competitors, too.

Scott Hardie | May 23, 2005
All fair. I didn't realize the obvious until yesterday, that it wasn't anger at Blockbuster that prompted me to get so personal. It was my mistaking your attempt to get more serious discussion going for a personal critique of my position, as if suggesting that I had no more depth to it than swearing at the competition. It seemed like I was being backed into a corner and I responded vigorously. One reason I often fall silent in TC discussions is that I try to avoid repeating points that I've already made, and that's what I should have done here, say nothing and let my Netflix/Blockbuster comments of a few weeks ago stand.

As for brand loyalty: I know, I know. :-) They are a great company and offer a great product, yes, but I love them so much because they have turbo-charged my movie-viewing. I have loved movies for years, but in college I was lucky if I saw two in a week; going downtown to the video store just wasn't cuting it for my lazy/broke ass. Then I got Netflix, cranked it up to the eight-discs-at-a-time subscription, and now I literally watch a movie every day, sometimes two. I'm in heaven. They're going to have to go out of business for me to stop. My love for Netflix is all gratitude.

Anna Gregoline | May 23, 2005
Me too. Netflix forever.

Dave Mitzman | May 23, 2005
I love Netflix. Given my current movie viewing habits (I get through maybe half a movie on dvd every week or so), I don't find it cost effective to subscribe. When I was living in Florida though, I was on Netflix and it was great. I tried out the Blockbuster unlimited viewing first (which I was unemployed, right after the "dark times") and I was watching 3-5 movies a day sometimes. I changed to netflix due to price and reputation and loved it. My favorite feature was the RSS feed they would provide on your rental queue. No need to login to the website to see what's coming up in your mailbox next.

Scott Horowitz | May 23, 2005
My favorite rental place is torrentmatrix.net

Kris Weberg | May 23, 2005
Cinema is what keeps the proletariat down.

But I'm thinking of joining NetFlix so I can finally see Kill Bill v.2. It's always out around here.

Steve Dunn | May 24, 2005
Cinema is what keeps the proletariat down.

Roger that. Netflix put the circuses in "bread and circuses."

Kris Weberg | May 24, 2005
Yeah, but these days I think it's more like "Pop-tarts and reality TV."

Steve Dunn | May 25, 2005
Slurpees and goo game.

Scott Hardie | May 25, 2005
Did you not get my email, Steve, or are you ignoring it? It's ok if you're ignoring it; I'm just wondering. Of course, if you're ignoring it, I don't suppose I'm going to get an answer here either. :-)

Kris Weberg | May 25, 2005
A few years back, it was ganja and Jackass.

Steve Dunn | May 26, 2005
I did not get an email from you, Scott. I know you have my email address. I'll check my spam file...

Denise Sawicki | May 26, 2005
The e-mail update on TMR:Scream 2 arrived pretty late. Maybe Scott has a mysterious e-mail problem.

Steve Dunn | May 26, 2005
I found it in my spam folder and have now responded. I'm glad you mentioned this. The spam file is indispensible, but I've had this same problem several times (message that I want sometimes get filtered out).

Scott, the way you feel about Blockbuster... that's pretty much how I feel about spammers.

If this happens again (you expect a response from me and don't get it) be sure to post here. I added your email address to my "allowed" list, but I assume that's not the address you use all the time.

Anyway, I found it. Thanks!

Scott Hardie | May 27, 2005
Glad I mentioned it. I hate spammers too. I am so glad to have the arrangement of this site, which allows strangers to reach me (via forms) even while spammers can't, thanks to a system of forwarding addresses. I couldn't imagine going back to Hotmail or some kind of free account after this luxury.

Steve Dunn | September 23, 2010
Somewhere in Florida, Scott Hardie chuckles softly...

Blockbuster declares bankruptcy.

Lori Lancaster | September 23, 2010
[hidden by author request]

Tony Peters | September 24, 2010
the one in town here closed about a year ago and is now an Advanced Autoparts....I have lived here for 4 years now and I can honestly say I had never been inside the store

Scott Hardie | September 24, 2010
I wouldn't say that age has mellowed me so much as it has robbed me of time to care about stuff like this. Sometimes the only thing keeping me from canceling Netflix to save a few bucks is the fear of losing thousands of ratings that I've recorded. Blockbuster has been in decline for a while now, and brought it on themselves for failing to adopt not just Netflix's business model but its apparently groundbreaking idea of trying to keep customers happy. The only emotion I still feel on the subject is remorse for giving Steve an undeserved hard time over it. Sorry, friend.

Denise Sawicki | September 24, 2010
Well, you probably know this, but you can put Netflix on hold indefinitely and it will save all that, at least it seems to do so for me.. we put it on hold all the time and then extend the hold date beyond the initial 90 day limit.

Scott Hardie | September 24, 2010
Oh, sweet! I heard you could put it on hold for up to 30 days, after which they would close the account and delete your data. I didn't realize you could extend it indefinitely. I'll check it out. Thanks!


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