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Blinkbox CEO: We're Unconcerned by Netflix
While Netflix has swept across the U.S, it will struggle for profitability in the U.K, says CEO.

The CEO of U.K. movies-on-demand service Blinkbox says he is unconcerned by the imminent arrival of U.S. rival Netflix on European shores, which is expected by Q1 2012.

 “Tesco/Blinkbox play in a very different window to Netflix,” says Michael Comish, the company's CEO and co-founder. “That said, I think  in the U.K. Netflix will struggle to be profitable since the market is heavily weighted in favour of BSkyB and also the entrenched services such as Amazon. I’m sure they will enter, but quite possibly regret it in the years to come. If I were them, I would look elsewhere -- other European territories offer greater opportunities.”

Comish co-founded Blinkbox in 2006, building it to 2 million customers a month before selling to retail giant Tesco earlier this year to grow the business. He says the cost and technical complexity of building a service across different devices remains a substantial barrier to claiming market share.

“If anything, the cost and complexity has gone up; distinct DRMs, operating environments,  players, and the need to develop a unique service per device means that only a small number of key providers have the skills or capital to offer these services,” Comish reports. “The combination of the technical build, the rights, and marketing means that unless you have very deep pockets you simply cannot compete.

“Once that became clear we began looking for a partner. Tesco serves 10 million people a week in its stores, all of whom I have an opportunity to sell to. It has 17 million Clubcard customers that they know a lot of information about. It is the second largest DVD retailer in the U.K. and the third largest consumer electronics retailer. So in terms of a partner with synergy and clout there was none better.”

Blinkbox’s clients, the Hollywood major studios, want to see content on a myriad of different devices, but they are also concerned to retain profit margins from the DVD window.

“One of the biggest challenges we face is getting the partners you work with to embrace change,” says Comish. “A big challenge is trying to help studios better understand the fundamental change that is occurring in the way people will consume media online.”

He elaborates: “Whereas consumers used to value ownership, they now value access. There will always be people who purchase, but a much greater percentage will rent. Consumers want immediate access across multiple devices with a picture quality they’d expect from a DVD. They don’t care how – the just want immediate access to the films they love on the device they have at hand. The trick for content owners and service providers is to create enough value in the proposition that consumers rent online, on mass, and avoid the ‘free’ option that has crippled the music industry.

“The hype about the connected home exceeds the reality on the ground,” he believes. “The vast majority of views for premium OTT services is currently through games consoles (in the U.K., there are around 10 million Xbox and PS3 owners). However, in two to three year’s time the number of connected TV devices will be around 20 million. The tipping point for take-up is 2012 partly because of the Olympics, and the launch of [BBC-backed IPTV project] YouView, and improved broadband, but also because of the breadth of devices consumers can access services such as Blinkbox on.”

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