Day: February 26, 2007

Netflix vs. McDonalds vs. iTunes

McDonalds likes to boast about its billions of burgers served. According to a BusinessWeek article it took slightly more than 8 years for the franchise to hit the first billion mark. But Netflix reached the same milestone in seven months less, which is the main point of the article. At its current pace of 1.5M DVDs in the mail every week, the projected time for next billion is another two-and-half years. Even more telling is the growth rate which promises to cut down that time drastically: Netflix added over 2 million customers last year to reach 6M+ total subscribers and expects to reach 20M by 2012.

While entertaining, this comparison between making burgers and mailing out DVDs falls flat for many reasons. First is relative population: McDonalds started in 1955, when US population stood at less than 200M. Today in the wake of crossing 300M, Netflix has a much larger customer base to draw on. In relative terms, McDonalds expansion in its earlier years was faster. On the other hand a single Netflix DVD could mean multiple views, since the average family of 4+ individuals will all watch the same single disc. Burgers are not exactly intended for sharing. Netflix also does not face the same geographical challenges. While the company operates warehouses around the country for receiving and shipping DVDs, its reach within the continental US is a function of the postal service. No physical presence is required. By contrast proximity to customers is crucial in retail and the Golden Arches depends on a relentlessly following suburban sprawl to build new franchises.

A better comparison may be iTunes, which recently crossed the 2B threshold. A creature of the technology industry, free from any geographic limitation or even the problem of transporting stuff around by mail, its meteoric rise has been hailed as a sign that traditional music distribution is obselete. (A cautionary second opinion points out that online sales are still a tiny fraction of all music purchases and news of the RIAA dinosaur extinction may have been slightly exaggerated.)  It shows similar exponential growth pattern: hitting half billion on July 2005, one billion in February 2006 and two billion recently in January 2007.

cemp

Past anniversary of congressional hearings: US companies and China

“I do not understand how your corporate leadership sleeps at night”

(Rep. Tom Lantos, democrat CA)

You might think that Rep Lantos had been grilling representatives from oil, energy or tobacco companies. But this harsh criticism on Feb 15th 2006 was aimed at the technology giants Yahoo, Google, Cisco and Microsoft, over their business operations in China. On that day the House Subcommittee on Africa, Global Human Rights and International Operations called the three online giants and the networking hardware vendor on the carpet over their impact on online freedom in China.

One full year passed since that day, but there is still no compelling solution to the problem of doing business worldwide while grappling with questions of different jurisdictions, rooted in values that are fundamentally at odds with each other.

Link to full transcript of the hearing.

cemp

Back in the USA

After one week in Istanbul, arrived in snow-covered Chicago yesterday afternoon, via Munich complements of the always punctual and efficient Lufthansa.

A series of blog posts will cover the differences in basic parts of life in Istanbul that stood out for this blogger, who had last seen the city in April 2004.

cemp