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8/16/2009
06:59 PM
Bob Evans
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Global CIO: JetBlue Genius And Hollywood Lunacy: 5 Essential Lessons For CIOs

Why are Hollywood studios attempting to stifle customer choice by hamstringing two high-growth DVD-rental partners? On the flip side, JetBlue once again leads the way in customer engagement.

CIOs looking to help drive revenue and optimize customer value across sales channels can learn some great lessons from recent developments in the movie business and the airline industry. The common thread: do customers exist to serve companies by adhering silently to old-fashioned business models and value exchanges, or should customers be engaged as co-creators of innovation that leads to higher-value experiences for the buyer and increased revenue for the seller?

This is not just artsy-fartsy prattling; rather, it goes straight to the heart of the new metrics by which CIOs are being evaluated and rewarded, or conversely being viewed as inflexible and being replaced: as top-level executives who help companies grow.

Here's how it's playing out in Hollywood: DVD are sales slumping but DVD rental revenue is soaring via Netflix (revenue up 21%) and Redbox (revenue up a whopping 110%). So why are several Hollywood studios attacking those high-growth partners in the rental business by withholding new movies from them for 30 or 45 days?

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With millions of customers showing that traditional DVD pricing models just don't measure up to Redbox's $1-a- day rental fees and Netflix's innovative and customer-centric combinations, why would several studios insist on giving second-class treatment to millions of customers who consume movies through Netflix and Redbox?

With technology continuing to disrupt entertainment-industry business models as it has done for the past 20 years, do Hollywood studios really believe their customers will accept more-expensive and less-convenient options purely because those options will make life more profitable and less difficult for studio execs?

By being being slaves to antiquated business models in the hope that consumers will somehow revert to being predictable, passive, and choice-restricted consumers of the past, these head-in-the-sand studios are creating enormous opportunities for competitors willing to embrace innovative new models such as Redbox and Netflix that are predicated on customer choice rather than industry tradition.

As one stock analyst put it, "I just hope that the studios realize that they are simply delaying the inevitable. As physical platforms give way to the broader acceptance of digital delivery, "they'll all be toast."

But it doesn't have to be that way, and any attempt by the movie companies to rationalize their blockheaded thinking by claiming their industry is unique with dynamics unlike those in any other business is nonsense. As an example, just look at another old-line, high-cost, legacy-bound industry: airlines.

Taking a very different approach, JetBlue last week rocked the inscrutable pricing logic (or lack thereof) of the airline industry by offering an entirely new pricing model for customers: you give us $599, and you can fly anywhere you want in our system as often as you want for an entire month, with very limited restrictions and requirements.

JetBlue is putting freedom and choice and options into the hands of its customers and prospects, while the Hollywood studios are looking to restrict customer choices and options. Which one do you think is more likely to work?

How about within your own company: if your CEO asks you to come up with a JetBlue scenario for your business, what new approaches would you come up with? Do you and your team have in place the flexibile IT architecture and operations that will allow high-speed experiments along the lines of the JetBlue model, or you have to tell the CEO that it's going to be 18-24 months before any unique plans can be put into place?

It's interesting to note that JetBlue and Netflix and Redbox are all relatively young companies with much less baggage than many of their competitors: no aging fleets or unions, no sprawling studios and aging theaters to maintain, no brittle 40-year-old proprietary IT systems to try to drag into the 21st century, and perhaps most important of all, no long-defined and deep-seated perception of the customer as someone for whom you get to dictate all the rules of engagement: when you'll fly, which movies you'll see at what time and in which locations, and which services are bundled into the price you pay for your ticket.

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