2010
07.15
Recent News: Blockbuster to be delisted from the NYSE
Jared’s thoughts on competition in the movie rental industry:
Now that Blockbuster is essentially out of the picture, there are just two major competitors in the rental movie industry: Netflix and Redbox. They each have very unique, but related business models. They both want to keep customers coming back to use their movie rental service because repeat customers are cheaper than obtaining new customers. Netflix prides itself in its recommendation system in keeping customers happy; it recommends movies based off of algorithms and user ratings. Last year Netflix awarded $1 million for improved the recommendation algorithms and even posted the research online: http://www.netflixprize.com//community/viewtopic.php?id=1537
What I really want to see Redbox do is better compete with Netflix. I want to see Redbox use the Netflix algorithms and recommend movies to consumers when they go to a kiosk. Redbox doesn’t even need to have consumers create user accounts to receive recommendations, they can use consumer’s credit card as a unique key for each user and note what movies a user rented. When a user returns a movie, have them rate it (1-5 stars seems to work for Netflix) before they insert the movie into they kiosk and then add that rating to their account. Each movie has a unique bar code on it so it can be easily be identified what user rented what movie and what their rating was. It would be less burdensome than Netflix because you do not have to wait for DVDs to come in the mail and you don’t have to maintain your own user account its all automated.
Other suggestions for Redbox:
1. Create monthly subscriptions. Redbox has significantly less costs than Netflix because most of their system is automated in the kiosk and there is no shipping costs. I think its safe to assume that overhead is less for Redbox so it would be very profitable to have unlimited movie subscriptions, but only allow them to rent one movie at a time.
2. Build a streaming service. Redbox can charge either per movie or include streaming with their monthly subscription. This gets slightly out of Redbox’s comfort zone because their core competency is not in streaming , but one of Redbox’s core competency is dealing with movie rights owners to get distribution deals. In my opinion, once you clear that hurdle, everything else is smooth sailing.
2010
07.14
I was thinking lately about Google products and consumers and I thought maybe Google is getting ahead of consumers too quickly. If you think about it, Apple is very forward-thinking in design, but with interfaces, they believe that simplicity is key and with consumers it is. Apple pushes the consumer to accept new technology by simplifying it. I am a pretty firm believer in that, if you are going to produce something it has to be simple and easy to use. That’s not so much the case with some of Google’s latest technologies.
Google Wave and Google Voice seem like they are getting ahead of the average consumer. They are both very innovative, but they are not simple enough for the average consumer. The average consumer wants to simplify their life, which is what Wave and Voice set out to do, but they also add another layer of unwanted complexity. For Google Wave, you have to check yet another website and learn how to use another service to communicate people when you already use email, facebook, im etc. Google wave adds another level of complexity in that you have to save a second set of numbers to your phone and there is still not MMS functionality so you have to give out your cell number in addition to your Google Voice number if you want to use the service. Both are forward thinking services but they are significantly ahead of consumers and thats why Google is probably having a tough time getting the average consumer to continue using these products. To me they seem like they might be better suited for the forward thinking technologists and maybe one day either they will be simplified or consumers will catch up to speed.
2010
07.10
Haven’t wrote about economic observations lately so here are some:
China has been in the news lately because of two related topics. They are slowly allowing their currency to appreciate and their workers are beginning to demand higher wages. With these two events gradually occurring, China is becoming less and less of a developing country; it is projected to be one of the world’s largest consumption country. Of course this all makes sense because major American companies are already trying to get a foot in with the Chinese (e.g. Apple).
That being said, in the next 20 years, China’s economic comparative advantage is no longer going to be cheap labor. With an appreciating currency and rising labor prices, the developed world is going to have to look for other sources of cheaper labor. My prediction for where everybody is going to find cheap labor is Africa. Most of Africa is considered the third world so labor prices are even cheaper prices there, than in China. Both parties would benefit; Africa is in desperate need of 21st century infrastructure (their bandwidth capacity was just doubled) and Global companies would be able to reduce their costs.
I do acknowledge that there are unforeseen costs in doing business in Africa, such as the added cost of the instability, but I do believe that the benefits will outweigh the costs. Investment in Africa should only theoretically increase stability and allow the continent to be developed if done the right way.
@JaredKastriner