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Catching up with Peerflix

peerflix.gifJournalists too often fall into the hit-and-run reporting trap, where we write about a start-up and then rarely, if ever, check back on its progress. So when the Peerflix guys invited us in for a chat last week - nearly a year after our first posting on them - we accepted.

Peerflix is the peer-to-peer DVD movie trading service in Menlo Park. Users create "want'' and "have'' lists online and then Peerflix looks for matches. Users mail each other the DVDs, and the recipients can then keep them as long as they want - they now own them. There are no monthly fees; trades cost a buck each.

When we last chatted with co-founder Billy McNair, the company had about 5,000 users, and there were plenty of skeptics to balance out McNair's optimism.

Now, a year later, McNair says he has 150,000 registered users, and 250,00 DVDs have been added to the network. The 250,000 DVDs is an especially important number because without a large number and wide variety of movies to trade, users won't find the service attractive, especially compared to a Netflix or Blockbuster. The company also took another $8 million in funding, as we reported here.

"The service has kind of exploded over the last 12 months,'' McNair said. "What we've done in January has already matched what we did in Q4 of last year. So the adoption is starting to pick up to where we hoped.''

McNair has also beefed up his management team with refugees from Netflix and Amazon's A9 search engine. Paul Gutierrez joins the start-up from Austrailia's Homescreen Entertainment and Netflix, where he managed content acquisition. And Barnaby Dorfman comes from A9, where he was VP in charge of local search and helped develop the noteworthy BlockView effort.

McNair said the duo will help improve the user experience and build new community tools that help users interact with each other.

One of the downsides of peer-to-peer trading is that users are at the mercy of other users to fullfill their requests. Unlike Netflix, where you know the DVDs will ship within a day, Peerflix members might be less-reliable. Gutierrez will work on trying to optimize the trading process so that DVDs move from one member to another more quickly and efficiently, and so that users can better predict when their DVDs will arrive.

Dorfman, meanwhile, is a big film nut, it turns out . He worked at the Internet Movie Database, his father was a filmmaker, and he produced a film last year called Police Beat. "I'm really passionate about films and love to work in the space. And this concept of an efficient marketplace, where someone says, 'I have one of these, I want to trade it,' got me excited.'' He'll be VP of products.

"When we spoke initially a year ago, I had great ambitions for what this service was and could become,'' McNair says. "But you always have that unknown. 'OK, there are 3 or 4,000 people using this. And I think this is what will happen, and I think this the direction it's going.' But you never really know....Don't me get wrong. There's defintely an education process of bringing consumers up to speed on this notion of trading. It's differnnt from a rent model or a buy model. But we've seen an explosion in the service over the last year and it definitely confirms that there is a demand for this.''


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From: Startup Blog
PeerFlix re-reviewed
Excerpt: SiliconBeat catches up with PeerFlix. When we last chatted with co-founder Billy McNair, the company had about 5,000 users, and there were plenty of skeptics to balance out McNair's optimism. Now, a year later, McNair says he has 150,000 registered...
Tracked: February 6, 2006 10:08 AM
From: Blockbuster Store
Blockbuster Store
Excerpt: These coupons are only valid in store and are not redeemable online With Blockbuster Online dvd rentals, you get 3 movies out at a timeEach co...
Tracked: March 11, 2006 5:20 PM

Comments

For a questionable idea like this, I think you need to dig a bit deeper. How many trades are actually taking place? Is Peerflix making any money? Why would I do this instead of NetFlix or Blockbuster?

pwb on February 6, 2006 1:08 AM
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Another question is do they have plans to expand this model beyond DVDs? I'm thinking the concept could be expanded into other collected but rarely used items we all have in our homes that could instead be incorporated into a larger "sharing" community. Also, are they seeking or do they have any patent protection?

Norm on February 6, 2006 5:53 AM
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I'm with the other commenters in that I'm skeptical of this service. What sort of long term viability can it have when it relies on snail mail as the main delivery mechanism?

Also, unrelated but in Opera you have had an IceRocket error message for quite some time:

Warning: strpos(): Offset not contained in string. in /home/icerocket/public_html/citations.php on line 11

TDavid on February 6, 2006 10:18 AM
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It is amazing that the VC's invested in these guys because there is no real cashout here. These numbers are very deceiving if you think there is actual business momentum here, and I am surprised that the Mercury News did not probe a little deeper on their follow up.

They took $8.75 million in total venture capital money, and completed 100,000 trades in September 2005

250,000 DVDs in their network. With $8M in cash, they probably bought and added many of those themselves so that they would have some selection or available media. Somehow you have to kick start these things, and the best way is to buy inventory. How many of these DVD's belong to PeerFlix, and how many to actual users.

In their current promotion, they give away a free DVD - probably $1- $1.50 their cost used...and one free trade... So a member joins on the free program, gets a free used DVD, watches it, and then gets a free trade and trades it with another user. In this case, the actual user he may be trading with is PeerFlix so that they can turn over the inventory. No revenue in site in that transaction, and we know that much of the posted inventory is the free DVD from PeerFlix.

150,000 members but only 100,000 trades back in September. So is this really 150,000 active members, or just people that sign up but don't do anything. The biggest problem with Peer-to-Peer trading is that you can't always count on the members to carry through, so you have an enormous customer support issue dealing with cheaters, or getting people to actually want to trade.

So you have to figure that they have less than $50K in revenue but paid dearly in advertising to get 150,000 members. A good figure of merit would be $5/member in promotion before they gave away the free DVD. So they have to convince that member to trade at least 6 times at $1 a trade before they can turn the member profitable. That assumes that you can get everyone to turn 6 trades. More than half will quit after the first transaction. So active members need to turn 12 trades or 1 per month for them to turn a gross profit before accounting for overhead.

So the next question that comes up is why would anyone want to do this kind of trading? You don't get the DVD case, linernotes or cover in the trade. So the resulting disc has no resale value, and is a pain to find in your DVD drawer if you wanted to keep it. So its real value is for churn in the system. If you wanted to do that, why not use NetFlix...at least you wouldn't have to worry about some individual actually following up on a trade. You know that NetFlix will send you the DVD.

Well I guess if these guys can convice a VC into giving them $8M in cash, they can convice the Mercury News that they are getting traction. In this case, my guess is that no one really dug down deep into the numbers. If NetFlix struggles to turn a profit competing with BlockBuster, and they have millions of subscribers paying $15 a month, how is PeerFlix going to go anywhere. I see a fire sale on the horizon for these guys when their investors wake up.... I also see a trademark infringement fight when NetFlix realizes that these guys are coat-tailing on their name.

searching4aBizHere on February 6, 2006 6:13 PM
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The patent for exchanging or trading items, particularly DVDs on the internet is owned by a woman out in New England somewhere. So they don't have any patent protection for this business model. Instead, they just have patent infringement liability building. My guess is that the woman that owns the patent will wait until the business generates a profit before going after them for patent infringement. Judging from this analysis, she may be waiting a long long time.

DM on February 6, 2006 6:43 PM
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If there are over 150,000 members and only 250,000 dvds in the system isn't something wrong? That's not even 2 dvds added per person. Looks like a lot of people got their free dvd and saw the service was weak so did nothing else. I don't see people paying $0.99 to trade their own dvds, especially if all your get in return is the disc with no case or artwork. I don't see these guys staying around for long.

ThatGuy on February 7, 2006 8:45 AM
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Why use PF over NF? How about not wanting to spend the $15 a month? Do I care that I don't have liner notes (who reads them, anyway) or jewel case? Not at all. I'm an (unaffiliated) PF user, who was able to monetize the 6 dvds that I got free with my dvd player 5 years ago. Every few weeks I get a request for a dvd in my collection, and every few weeks I get a new flick in the mail. My DVD collection is constantly being refreshed. It costs me next to nothing. I'm not arguing that the metrics they've published aren't anaemic, all I'm saying is that I think that there's a place in the world for the PF concept. What I'm wondering, is why they won't facilitate trading of music CD's. Is there a DMCA issue there (once people buy, then rip, then trade their CDs?)

aaccss on February 7, 2006 9:20 AM
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I think snail mail is out, especially when Apple iTunes and sites like 4Flix.Net are already offering downloadable video content, for $1.99 each! 4Flix already has hundreds of hours of feature-length DRM-free content, to boot!

AVChamp on February 7, 2006 9:42 AM
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I thought I would chime in with my own thoughts as well.

There are many compelling reasons to use Peerflix either in addition to, or in lieu of, an online rental service. First, we charge only $0.99 per trade with no monthly subscription (in our service, our best customers are the ones who watch the most DVDs; in an online rental model, their best customers are the ones who watch the least movies). Second, you own each of the DVDs you receive. Third, it enables you to use the DVDs that are lying on your shelves collecting dust to get the DVDs you really want to watch. On average, each of you purchased ~20 DVDs in the past 12 months and you've likely watched them 1-2x max. We are building a community of movie enthusiasts who want to drive repeated value from those one-time purchases. This community will absolutely expand into other forms of media (games, etc.) as well as non-media. We have built a trading platform that our members will be able to leverage for all types of products.

I'd also like to clarify a couple of the factual details that people raise in the comments above. Over 250,000 DVDs have been added to our network, but contrary to what people have stated above, over 98% of them have been added by members. The only DVDs that Peerflix has added to the network (less than 5,000) have been the result of promotions that we have run for our members.

We are continually improving our user experience and the community elements of our service. We pride ourselves on taking feedback from our users (just as the feedback you have left above) and using it to develop new product features and enhancements that our members want. We are 100% focused on building the ultimate trading community for our members. If you haven't tried it yet, take a few moments to create a free trial account. After all, what else are you going to do with that DVD your mother-in-law or co-worker gave you for Christmas that is still sitting shrink-wrapped on your shelf? ;-)

-Billy McNair, Peerflix Co-Founder

Billy McNair on February 7, 2006 10:06 AM
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I would like to echo comments above about using a service like Peerflix. In short, what is there to lose? In the worst case scenario, I get rid of a DVD I no longer want and get another one I may want to keep. Hmm...and the downside is?

From a consumer viewpoint, I'd rather pay $0.99 to get a DVD than $20/month to not have time to watch the 3 DVDs a month I could get from Netflix. It's a better deal. I am no VC, but something that is good for the consumer is usually a good business to be in.

Iamafan on February 7, 2006 11:03 AM
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I have a lot of movies that I collect. Some I have because - well it is a classic, or just fun to watch - even if it is once a year. When I want to watch other movies, I TIVO them, or do a pay-per-view, or frequent my local mom-and-pop video store because they are so nice.

When I want to clean up my collection and get rid of duds, I use Amazon or one of the other movie sales sites. Have you looked at how cheap the used movie market is on Amazon? You can buy a movie for $1.50 or less. If you want to buy and sell used movies, you can do it for about a buck on amazon. In other words...sell your used one, and buy a used one and the result is about $1.

The problem with Peerflix and the other trading services like this is there is always a chance that the other guy will not ship their movie to you. Even if that is fairly low, they can be very slow to mail, and that is a pain - I want it now, not in 2 weeks when they get around to mailing. The other problem is that the only movies on their system are the ones people want to get rid of because they sucked. If they were great, they would want to hold on to them to watch again sometime.

I don't care if they bamboozled a VC into giving them $8M. That is the VC's problem. The downloadable "pay-per-view" market is going to weaken the strong (Netflix) and kill the weak ones like PeerFlix. As the price drops in the iTunes music store, and the technology gets better to pay $1.00 and get a movie downloaded, why would I bother with the postage or hassles of going to the mailbox.

NotConvinced on February 9, 2006 2:57 PM
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I can't believe how fast NetFlix turns around movies for me. I get them in an average of about 2 days from the time I drop my DVD in the mail. I think they have optimized their distribution to have mailing centers all over the US. This is why I get the new movies within a day.

If someone on PeerFlix mails from the west coast to someone on the east coast, it will take at least 5 days to get there, assuming the other guy is diligent and jumps up to mail your DVD to you as soon as he agrees to a swap.

NetFlix only charges me $9.99 a month for one movie out at a time...(I can only watch one at a time - ;-) , and swapping the movie within 2 days is great. That means that I can get about 12 movies a month, and I know I am going to get them, and I know what order they will arrive..all for a fraction of what PeerFlix is advertising.

NetFlixFan on February 9, 2006 3:11 PM
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I agree Netflix or Blockbuster is better for Most users.

People ask why use Peerflix? I know the reason most people do use it.

I for one use Peerflix because they have some movies you can't get on either Netflix or Blockbuster.

For example Netflix and Blockbuster do not carry most violent, Fighting, Gang related, Drug related, or Adult(Girls Gone Wild, etc.) DVD's, but you can get these on Peerflix if you wait a little while for someone to send it to you. I would rather use Peerflix for these type of movies, than buy them.

I use Blockbuster, and recently starting using Peerflix also for anything I can't get at Blockbuster online or in store with my free coupons.

Steve on February 10, 2006 4:51 PM
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I did a little research on this dvd trading thing and actually found another site that does it...

http://www.switchdiscs.com

but they offer it all and its free. interesting...

ThatGuy on February 10, 2006 8:38 PM
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Why is no one acknowledging the elephant in the room? If I get a movie for $0.99 plus $0.39 shipping this is much better than renting or churning (buying and selling). Say I have 100 movies I bought from wherever and I rip them to my computer and then send them to PeerFlix members, somebody is going to get a good movie (I picked it myself) and I'm getting a pick from what's available. I don't have to go to Blockbuster and I can quit whenever I want.

Joe Cool on February 17, 2006 11:21 PM
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Come on Joe Cool. Are you advocating stealing movies by subscribing to PeerFlix. The MPA would love to know where you live. Probably would want to visit Peerflix too.

The real Elephant in the room is PeerFlix, and it stinks. Joe Cool uses illegal tools to steal movies, and make compressed copies of them. This method gets around the copy protection on the DVD, is a criminal violation of the Digital Milenium Copyright Act, and the results suck. Most DVDs are over 7 gigabytes of data. To make a copy of a DVD, you have to compress it because DVD burners only support 4 gigabytes of data. So you spend $1.00 for the trade on PeerFlix. $.39 to mail it, and $.50 for the blank DVD, and about 4 hours making a copy. You could buy a used copy of the movie for $2, that is much much higher quality. ($.11 more and I get a cover, liner notes and something that still has value.)

PeerFlix advocates sending just the disk in their special envelop. I would put up with this, when I am borrowing a DVD from NetFlix. But I am taking a perfectly good DVD, with Case, Cover Notes etc, and removing the disk and mailing it to someone. The results have absolutely no market value. You have no case to store it in, no cover, no notes. You can't find it in the drawer, and you can't sell it on Amazon.

I have tried trading services in the past. (Ones that actually included the whole DVD package.) They suck because 2 out of every 10 trades are either very slow, or never show. If Joe Cool wants to get a lot of movies without going to Blockbuster - NetFlix is the only way to go!

Elephant Sweeper on February 24, 2006 11:39 AM
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Peerflix is great.

You can't get Girls Gone Wild on Blockbuster or NetFlix. I don't want to rent what Blockbuster and Netflix want me to rent, I want my choice of any DVD out there.

Blockbuster and Netflix are good for regular movies. But most violent, Fighting, Gang related, Drug related, or Adult(Girls Gone Wild, etc.) are not carried by Blockbuster or Netflix. I don't want to watch what Blockbuster and Netflix want me to watch, this is a free county with free speech so I can watch whatever DVD I want. And since Peerflix carries DVD's that Blockbuster and Netflix do not carry, Peerflix is a much needed service.

Elephant does not get the idea of the service. Who uses Peerflix to keep movies for good, not one I know. Sometimes you may want to keep a movie a while so you have a chance to watch it (or watch it a second time). You can't do this with Blockbuster or Netflix or they will never send you a new movie if you keep one that they sent you. Peerflix will send you as many as you have trade credits and Peefbux for, and you just send them back when you please. Maybe Elephant does not like the idea of the service, but many people do and you obviously have not tried the service so why comment on it?

And you have some wrong info. It does not take 4 hours rip a DVD, it takes 10 minutes to read full DVD9, and about 8 minutes to write DVD-R at 8x (total 18 minutes). If you need to compress add another 15 minutes (total 33 minutes) which is still less than an hour. I don't copy movies, I just know how to do it incase I need to make a backup of one I own.

Oh yeah you don't need to compress any movie either, you ever hear of DUAL LAYER DISCS. ELEPHANT SWEEPER IS A MORON! Obviously does not know what he is talking about (4 hours to copy a DVD, you moron).

Steve on February 25, 2006 12:01 PM
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Elephant man says you can get a $2 used movie, yeah right. Only bad movies no one wants. Any good movie will go for around 10 bucks, even is previously viewed.

If it is $1-$2 itās pre-played, and means the movie sucks because people purchased it, and then sold back to the store because it sucked.

And there are many DVD's you will never find pre-played, because they are good movies to begin with. So those movies you either pay $15-$20 for at Amazon, or you rent from Peerflix (Blockbuster and Netflix do not carry any DVD's I rent at Peerflix, that is why I use Peerflix).

Steve on February 25, 2006 12:10 PM
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I've been using Peerflix since November of 2005. I had no DVDs to trade so I bought eight Peerbux for $35 and got one free when I joined. With these 9 credits I usually have 4 movies in my possession.

I like Peerflix because I can browse for movies online, they come in the mail and I can keep them as long as I want. Sometimes at our house we don't get around to watching a movie for several weeks. This is no problem as there are no fees and late charges accruing. It costs 99 cents plus postage regardless.

Some people may find this laid back approach Peerflix's weakness. Sometimes I have to wait weeks for a popular movie to become available. If you want instant gratification, Peerflix is not for you. If you're an occasional movie watcher, patient and flexible, it's great.

I hope the network continues to grow.

muckamuck on March 7, 2006 5:17 PM
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I just wanted to share that a compareable services exists in Germany. It is called Hitflip and is available at http://www.hitflip.de
Besides DVDs users trade audiobooks, music CDs (lika la la media promises), computer and console games.

FreudFreund on March 8, 2006 3:00 AM
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peerflix is terrible...customer support is terrible...their "peermailer" is a terrible idea...whoever thinks you can send a dvd disc through the mail wrapped in a piece of papers is a moron...there are other sites out there that are WAY better like switchdiscs.com or titletrader.com and they are both free unlike peerflix. save your $1 per trade and use one of the free options.

peerflix sucks! on March 10, 2006 7:50 AM
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I tried a similar service called BarterBee. I was screwed out of my DVD in the very first trade. The other person never traded, and it wasn't worth pursuing so I just canceled.
I thought I would check out PeerFlix, but scanning through the comments conviced me this is no better than that crappy BarterBee.

The only DVD's I want to get rid of are the ones that I think aren't worth watching again. Why would I think that anyone would be that much different from me? The only inventory we will find on this system are the duds no one wants any more. A bunch of white elephants. I get very skeptical when the only positive comments I see, are obviously posted by PeerFlix employees.

None of these services are very compelling. For the money, I just use pay per view. Much less risk, and much more convenient thanks to digital cable.

very skeptical on April 14, 2006 3:56 PM
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Mr. McNair advertises 30,000 discs on his network as "long-wait" that he is aware are completely unavailable. You will not find a single listing that says unavailable. He collects $4.98 (non-refundable) on the promise that these discs will one day be available. This is Internet theft by deception. The FTC Consumer Fraud folks will shut this site down and some greedy attorney will find one customer on which to build a class action suit against PeerFlix. $8M is a nice sized target.

Mr. McNair is nonresponsive to his userbase. The forum for PeerFlix is http://www.DVDTradeTalk.com. Mr. McNair steps in about once every three months for damage control and sales spin (just as he did here). The forum is interesting reading and shows that new and long-time users are equally fed up with Mr. McNair weak management, arrogance, and incompetence. Mr. McNair's user-base has provided him with a gold mine of suggestions and ideas to improve his service. Mr. McNair ego will not allow him to accept an idea that is not his.

His business plan is based on deception.
His customer service skills are atrocious.

PeerFlix Scam on April 26, 2006 10:19 PM
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There is also another similar service for trading video games exclusively called Gamershare http://www.gamershare.com and it's a blend of Netflix and Peeflix.

Min on July 29, 2006 5:44 PM
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There is even a better site for video games at http://www.goozex.com

Goozex on August 10, 2006 9:07 PM
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