DailyTech - Blockbuster, Netflix Settle Patent Suit

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Internet Blockbuster, Netflix Settle Patent Suit
Brandon Hill (Blog) - June 28, 2007 3:39 PM

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18 comment(s) - last by Spivonious.. on Jun 29 at 3:04 PM

Blockbuster and Netflix kiss and make up

The online battle between Blockbuster and Netflix has come to an end. The patent litigation the two companies have been involved in since April 2006 ended yesterday -- details of the settlement are considered confidential.

The dispute sparked when Netflix accused Blockbuster of copying its "method for subscription-based online rental that allows subscribers to keep the DVDs they rent for as long as they wish without incurring any late fees, to obtain new DVDs without incurring additional charges and to prioritize and reprioritize their own personal dynamic queue--of DVDs to be rented."

Blockbuster in turn filed a motion to dismiss the injunction brought forth by Netflix and filed an anti-trust case of its own against Netflix.

"As a result of NetFlix's purported monopolistic conduct, Blockbuster may be forced out of the market, which would cede to Netflix virtually complete control of the online-DVD market," said US District Judge William Alsup in August.

Blockbuster added more fuel to the fire during the 2006 holiday season when it gave Netflix subscribers free rentals in exchange for their tear-off address flaps.

"We want these movie fans to experience getting the movies they want without the wait so they never have to be without a movie, just like Blockbuster Total Access subscribers," said Blockbuster Chairman and CEO John Antioco during the promotion.

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No wait?

By phattyboombatty on 6/28/2007 3:57:03 PM , Rating: 2

"We want these movie fans to experience getting the movies they want without the wait so they never have to be without a movie, just like Blockbuster Total Access subscribers,"

I went to Blockbuster earlier this week to rent Reno 911: Miami. Well, it was completely rented out so now I have to wait to see it. I hate this feeling of being without a movie. Should have gone with Netflix.

RE: No wait?

By RjBass on 6/28/2007 4:47:59 PM , Rating: 3

I use the watch it now option with Netflix and we see the movies we want with our HTPC when we want. Blockbuster isn't doing that.

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RE: No wait?

By Kuroyama on 6/28/2007 5:22:04 PM , Rating: 2

I switched from Netflix to Blockbuster when the Total Access plan started, but now I'm back with Netflix since I discovered the new Watch It Now feature. Gives me the chance to be spontaneous if I feel like watching something different than what came in the mail, without having to go to the video store (could use more variety though).

Back on topic, I am generally cynical of the "business model IP" idea, but I think Blockbuster and Walmart unfairly jumped on the bandwagon after Netflix put in the hard work of showing that the online movie rental business could work. It was not at all obvious at the time that the unlimited rental idea would work at such a low cost.

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RE: No wait?

By smilingcrow on 6/28/2007 6:53:26 PM , Rating: 3

"I think Blockbuster and Walmart unfairly jumped on the bandwagon after Netflix put in the hard work of showing that the online movie rental business could work."

If only other people had just stood back and marvelled at the Ford Model T and not tried to emulate them the world would be a much better place; at least for Ford shareholders.
Emulation leads to competition which leads to lower prices for consumers. Long may it live. One example being Compaq emulating the IBM BIOS which kick started the cheap PC.

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RE: No wait?

By Alexstarfire on 6/28/2007 7:02:08 PM , Rating: 2

But it sounds like they aren't emulating, but rather directly copying it. While I don't believe that should be illegal, I also don't think it should be ethical. It's not like they freaking stole Bell's phonograph and said they invented it, but it's also not like they put in the time and effort into making something unique. Something as simple as a priority list is sure to be copied, as well as the no late fees. Now if they copied even the subscription styles and prices then......

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RE: No wait?

By Oregonian2 on 6/28/2007 9:05:36 PM , Rating: 2

Actually the "no late fees" is kind of funny. It SAVES netflix money for people not to return discs. They'd LOVE it if people would just get their disc "count" and keep them forever. Because netflix is paid for by the month, they get the same revenue no matter what from a customer. The more times they have to send a DVD the higher their costs (handling and postage both ways). So the fewer times the better. Very unlike rental stores where the revenue is tied to number of rentals -- to blockbuster, making rentals short and often is a monetary advantage.

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RE: No wait?

By omnicronx on 6/29/2007 9:48:20 AM , Rating: 2

i really hate the u.s courts and their leaning to any big corporation, because all this is going to lead to is blockbuster having the entire market as they have just a wiii bit more money up their sleeves.

we all know this is going to lead to blockbuster pushing everyone out of the market and not allowing anyone else in.
if thats not an antitrust concern i dont know what is.

netflix should have had the ruling gone their way as if the roles were reversed it most probably would have. seems like patents these days are only effective for the big companies and otherwise can just be bypassed in a single leap.

blockbuster get your own damn ideas!

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RE: No wait?

By Spivonious on 6/29/2007 3:02:20 PM , Rating: 2

Actually, Blockbuster is/was losing money in millions because they couldn't figure out how to compete with Netflix.

I'm glad that they can now offer some serious competition to Netflix. Competition is good for the market.

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RE: No wait?

By BladeVenom on 6/28/2007 9:59:41 PM , Rating: 2

quote:
If only other people had just stood back and marvelled at the Ford Model T and not tried to emulate them the world would be a much better place;

Actually Ford and the Model T were almost stopped by patent law. He lost the first trial.

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RE: No wait?

By crimson117 on 6/28/2007 6:56:59 PM , Rating: 4

So, what true innovation was there?

Rent DVD's? Old, well known, obvious by now.
Buy things on the internet? Old, well known, obvious by now.

and thus...

Rent DVD's by mail? Natural, obvious progression. Just as obvious as selling books online.

Netflix got their first-to-market bonus - they were unchallenged for a long time before walmart and blockbuster caught up, and hopefully made some money, and optimized their system. Blockbuster and walmart had to work quickly and expensively to set up their own systems to quickly compete with netflix.

Now that competitors have caught up, Netflix must innovate and compete to stay ahead.

And the consumer wins :)

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RE: No wait?

By Oregonian2 on 6/28/2007 8:59:19 PM , Rating: 2

As I recall both Amazon and Ebay have been sued for aspects amounting to using the "innovation" of having a web page button that one clicks on to buy an item. Serious patented innovation!

Most put the buy button on the right side. Think I'll patient putting it innovationally on the left. If it weren't for me, it'd never get thought of!

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RE: No wait?

By Kuroyama on 6/29/2007 6:40:46 AM , Rating: 2

Netflix is not an online DVD rental service. It is an affordable "unlimited" no-late-fee video service, that happens to use an online interface to keep costs down.

Considering that late fees accounted for around 50% of Blockbuster's profit at one point, the idea that these could be cut out was surprising enough. Delivery of your rentals by mail, and the low priced "unlimited" parts were also likewise new.

Anyways, I wouldn't go so far as to say other companies should be banned, just that I don't like that they waited until Netflix proved that the business model could work, and only then tried to copy it. Blockbuster is perhaps slowly being put out of business by Netflix (good riddance), so certainly they have to do whatever they can to keep on their feet.

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RE: No wait?

By GlassHouse69 on 6/28/07, Rating: 0

RE: No wait?

By Spivonious on 6/29/2007 3:04:22 PM , Rating: 2

I went to my store the first weekend that movie was out and there were at least 30 on the shelf. Why would anyone want to see that piece of trash??

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Gotta say...

By Spivonious on 6/29/2007 9:22:01 AM , Rating: 2

Blockbuster's service is better than Netflix. $9.99 a month gets us one movie at a time plus one coupon a month for a free in-store rental of a movie or game.

So the sequence goes:
1. receive movie in mail
2. watch movie
3. return movie to store and pick up another movie for free
4. watch store movie
5. receive movie in mail
6. watch movie
7. return both store and mail movie to store
8. repeat

This cycle happens roughly once per week. After returning it to the store we get a movie in the mail no more than 3 business days later.

I'm not super familiar with Netflix but maybe someone can enlighten me how it can get better than this?

RE: Gotta say...

By Kuroyama on 6/29/2007 10:09:18 AM , Rating: 2

Since Netflix doesn't have stores they instead give you 10 hours of free movie downloads per month (if you use the $9.99 a month plan, or 18 hours with the $17.99 plan, etc). The selection of available downloads mostly consists of old movies, B films, or BBC shows, but they do start playing within 30 seconds of when the download begins, even with my slow 768kbps DSL. But if you just want something spontaneously then this'll suffice as you can probably find something to kill time with, and there's no need to ever go to a video store.

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RE: Gotta say...

By Spivonious on 6/29/2007 2:54:31 PM , Rating: 2

So I would get roughly 3-4 movies downloaded per month and I have to choose from a crappy selection (not to mention having to watch it through a computer)?

I know going outside is dangerous these days, but I'm willing to risk a trip to video store on the chance that they'll have a movie on my queue in stock or I'll see something I never thought of watching.

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