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ENTERTAINMENT 2.0

Netflix spawns a mailbox full of imitators

In 1998, when Netflix began sending shiny DVDs via the postal service, the battered metal mailbox was primarily a halfway house for credit card come-ons, charitable beseechments, and the bimonthly Pottery Barn catalog, all on their way to the recycling bin.

Now, as a cavalcade of other companies have joined Netflix by shipping various discs through the mail, the mailbox has become a central part of the home entertainment ecosystem, along with the flat-screen TV, the DVD player, the PlayStation, and the stereo.

Netflix is still the big kahuna, with 5 million subscribers and 65,000 movies available. But lesser-known services have been attracting customers by focusing on niches that aren't served by Netflix, including video games, audiobooks, Christian fare, ultra-arty movies, and porn.

Executives at each of the services feel they can build nice-sized businesses in the shadow of Netflix, and many are already profitable. ``There are 100 million households that can play DVDs," says GameFly co-founder Sean Spector, ``and Netflix has about 5 million subscribers, so they have a lot of runway in front of them. There are about 60 million households with gaming consoles, so I think we have a lot of runway, too."

But there's also looming uncertainty: How much longer will physical media like CDs and DVDs last before they are replaced by digital downloads?

For consumers, the services offer an appealing alternative to building an expensive collection of discs, for an average monthly subscription fee of about $10. GameFly of Los Angeles has an inventory of about 4,000 videogames that can be played on seven different consoles -- and the company will support the new PlayStation 3 and Nintendo Wii systems when they hit the market later this year. Subscribers who want to add a game to their collection simply let the company know they're keeping it, and their credit card is charged for the retail price (minus a 10 percent to 30 percent discount, since the game is used). The company promptly mails out the packaging and manual.

``A big part of our business model is `try before you buy,' " says Spector, observing that videogames, priced at $50 to $70, are far more expensive than movies.

Simply Audiobooks of Toronto offers about 9,000 titles for rental and serves more than 15,000 members. Unlike Netflix, which uses thin red envelopes, Simply Audiobooks often sends out sets of four or five discs, so it uses cardboard boxes for packaging . Chief executive Sean Neville says that its most popular rental is Stephen Covey's ``The 7 Habits of Highly Effective People." (Apparently, highly effective people prefer renting to owning.)

GreenCine focuses on ``auteurist and experimental filmmakers" such as Hal Hartley, Caveh Zahedi, and Craig Baldwin, according to the company's head of business development, Jonathan Marlow. ``We have over 10,000 films that Netflix doesn't carry," says Marlow. That includes a selection of adult movies offered by a subsidiary service called, appropriately, BlueCine.

For those with more clean-cut tastes, there's ChristianCinema.com, which carries only Christian-oriented and family-friendly fare. ``People want to go to a place where they know they're safe with all the movies that are there," says Jared Geesey, vice president of marketing and development for the Visalia, Calif., company. Many of the site's members are churches that organize weekly or monthly movie nights. (The top rental last week was ``The Moment After," a thriller about the end times.)

Peerflix isn't really a rental service like the others, but rather a site that allows DVD owners to trade DVDs they no longer want with others through the mail, for a fee of $1.50 a disc. The site has about 300,000 DVDs listed for trade. When one member requests a movie from another, the second member prints out a custom envelope, complete with postage, inserts the disc, and drops it in the mail. The first member pays the fee to Peerflix, and the second member earns a credit he can use for his next trade. Peerflix chief executive Billy McNair says the company may eventually support trading of videogames and audio CDs, but for now, his company is focusing on movies.

Netflix chief executive Reed Hastings has long assumed that the future of media delivery will be digital, but the company hasn't yet unveiled a digital downloading service. In contrast, many of the smaller disc-by-mail companies, like Simply Audiobooks and GreenCine, have started experimenting with download services.

``The rent-by-mail model is not the model of the future," says GreenCine's Marlow. His company has made a few thousand movies available for digital rental (with a 10-day rental period ) or permanent ownership in digital form.

The main problem with digital downloads is they're still too complicated. ``My mom has an iPod Shuffle," says Neville, whose company offers a selection of about 4,000 downloadable audiobooks. ``But she hasn't really figured out how to load content onto it on her own."

Bandwidth, storage space, and mobility are three other barriers: Movies take up plenty of space on a PC's hard drive, and it's often hard to move them to a television set or portable device for viewing.

Audiobooks will likely shift to digital downloads first, because of their smaller file size and the relative ease of loading them onto an audio player and plugging that device into a car stereo. Movies and video will shift next, and videogames will likely shift last.

Many of the rent-by-mail companies are hedging their bets about the future. ``For us, the timing of the transition from physical media to digital delivery doesn't matter," says Neville. ``We'll provide you the audiobook in whatever format you want. We're format-indifferent."

Scott Kirsner is a freelance writer in San Francisco who maintains a blog on entertainment and technology, cinematech.blogspot.com. He can be reached at kirsner@pobox.com.

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