Still in the wake of Blockbuster's Chapter 11 bankruptcy, Netflix is probably feeling pretty good about itself. While it's third quarter numbers won't be ready for about a month, for the second quarter it reported (.pdf) a healthy $43.5 million profit and 42% year-over-year subscriber growth. That kind of progress makes it very hard for a company to complain. But its competitive landscape is changing, and its road ahead will have new obstacles.
Although the Blockbuster bankruptcy might seem like a huge win for Netflix, it isn't all good news. Its competitor is not gone -- just reorganizing. When a company goes to Chapter 11, it's a little like going through detox. It sheds some of its liabilities and costs, and ends up a leaner, more focused firm that can reinvent itself. Just ask General Motors.
So when Blockbuster emerges from bankruptcy, it won't be the same company that Netflix found so easy to smack around. That doesn't mean Blockbuster will necessarily triumph over Netflix, but Netflix can expect a different and more difficult challenge from Blockbuster going forward.
Streaming Tech Companies
The real future of Netflix is its streaming service. It has been doing pretty well extending its library of movies that customers can watch instantly, but it still has work to do. Verne Kopytoff of the New York Times today reports today, however, that its competition is fierce in this space:
Netflix faces a number of well-financed and innovative companies like Apple, Amazon and Google, as well as the cable TV providers. This time the war will not be won by the company that perfects the logistics of moving DVDs, but by whoever can best negotiate with Hollywood studios.
These are some companies that nobody wants to take on today. Given their incredibly significant presence in business these days, they'll also have some nice advantages when bargaining for content. Again, Netflix will have to be savvier than ever to negotiate better deals for streaming than these tech titans and cable companies.