by Terry Mitchell

Created on: March 10, 2009

Which is the better value: Online DVD rental services (which I'll call the Netflix model) or premium movie channels (which I'll call the HBO model). Well, let's see.

It's hard to believe, but Netflix has now been around for tenyears. Since its debut in 1999, it has built its inventory of titles to more than 100,000. In addition, similar services, such as Blockbuster's online rental business and Intelliflix have become available. I believe these services compare favorably with premium movie services, like HBO, which have been around for 30 years.

All of the online DVD rental services have a similar business model: They allow their customers to rent DVDs by mail for a monthly fee, which includes all the necessary postage. The amount of the monthly fee is determined by how many DVDs the customer would like to have out at one time. This could range anywhere from just one movie out at a time, with a limited number per month, to eight movies out at a time, unlimited per month. Each customer must use the respective service's Web site to browse its selection of titles and build his or her queue of desired DVDs. They are sent out to each customer in the order that they appear on that customer's queue. When the customer returns a DVD in the postage-paid envelope that is provided, the next one from his or her queue is sent.

On the other hand, the HBO business model is completely different. Premium subscription services utilizing this business model offer a number of movies, programs, specials, and sporting events on one or more channels (delivered via cable, satellite, or phone line) each month to their subscribers for a monthly fee. The subscription fee covers all items playing on that service's channel(s) for the given month, regardless of whether the subscriber watches any of them. In addition, subscribers do not get to choose what movies or programs they would like to have from those services.

I used to subscribe to several of the premium subscription services at the same time. However, when I began by subscription to Netflix, I dropped all of them. That's because the Netflix business model offers two distinct and important advantages over the HBO business model.

First, it offers many more choices. In general, the number of movies and programs offered per month by the premium subscription services represents only a small subset of the choices offered by the online DVD rental services. In addition, almost every movie or program that appears on a subscription service is

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