In the realm of video, I’m fast becoming a fossil. I’m not still spinning VHS tapes, thankfully, although in the age of Blue Ray even my DVD players are beginning to seem like (I love this euphemism) “legacy technologies.” No, I’m a fossil because I persist in renting videos from a local video store, while almost everyone I know subscribes to Netflix.
Since 1998, Netflix has emerged as one of the leading DVD rental outfits in the United States. It has quickly distinguished itself from — and gained extraordinary ground on — its competitors by challenging video rental’s prevailing business model.
Instead of relying on a vast network of physical storefronts, à la industry leader Blockbuster, Netflix interfaces with customers exclusively online. With infrastructure consisting mostly of computer servers and regional warehouses, Netflix is a far more capital-efficient operation than its competitors.
The company’s other key innovation has been to replace the traditional video store membership program with a subscribership. For a flat monthly fee, Netflix delivers any in-stock DVDs you’ve requested straight to your door through the mail — postage paid, both ways. An added bonus is that there are no late fees.
With over 10 million customers Terrarium and more than a billion DVDs shipped thus far, it’s no wonder why Netflix has garnered so much attention. What might the publishing industry learn from the company’s success?
This probably seems like a bizarre question to ask. After all, when was the last time you or anybody you knew rented a book? And why would you even want to, given the preponderance of bookstores and public libraries?
It turns out that so-called “rental libraries” used to be a mainstay of U.S. book culture. They filled an important niche, especially during economic hard times.
The Waldenbooks chain (now owned by Borders) got its start that way, back in 1933. Founders Lawrence W. Hoyt and Melvin Kafka believed in books, but in the throes of the Great Depression, they decided against opening a retail bookstore. The pair saw books as something of a luxury, and reasoned that few people would be willing to part with what little money they had to purchase these non-essentials outright.
Like the founders of Netflix, Hoyt and Kafka bucked industry trends. They decided to set up shop in a department store in Bridgeport, CT, where they leased floor space in the hope of reducing fixed capital costs. And instead of selling books, they rented them out for three cents per day. By 1948, Hoyt and Kafka had opened as many as 250 rental libraries in department stores spanning from New York to Maine.
The rental library business declined after the Second World War. Rising wages and fuller employment meant that rental culture could once again give way to consumer culture. Waldenbooks followed the trend by introducing retail book sales in 1945, and abandoning book rentals in 1957.
Given the current economic downturn, the rampant fears of plummeting book sales, and the slashing of public library budgets, now seems like an opportune time in which to revisit the book rental option. A 21st century book rental outfit might look to the early Waldenbooks for inspiration. It would do better in the long run, however, were it to model itself on Netflix.
The online book rental experience — call it “Netboox” — might go something like this. You log on to the website, where you’re immediately greeted by name. If you’re a new customer, then you’re invited to sign up for an account — which is free, although you will be asked to choose from among three different monthly rental plans. The plan prices are scaled according to the number of books you expect to check out at any given time.
Netboox allows you to search for specific authors, titles, and subjects. Powerful algorithms aggregate your past selections with those of other customers, and the site makes personalized recommendations accordingly. Ordering is as easy as finding a selection and clicking the “RENT” link appearing on screen. User-generated book reviews and other interactive features round out the picture.
Most of Netboox’s infrastructure exists behind-the-scenes, like Netflix. Its distribution facilities contain none of the amenities of a retail bookstore or public library; they are nothing more and nothing less than large warehouses teeming with books, conveyors, and workers busy filling orders. And in contrast to many public libraries, new releases and bestsellers are always in ample supply. Netboox’s capital-efficiency means that an extraordinary back-list is available, too.
Could it work? I’ll leave that up to the entrepreneurs to decide — but be warned: shipping books is a whole lot more expensive than shipping DVDs! Nevertheless, history shows that something along the lines of Netboox has worked in the past. Perhaps it may work again today.