Netflixbuster On-Demand (OTC: BLOAQ.PK) (NASDAQ:NFLX)

NEW YORK - Blockbuster the iconic video rental company which filed for bankruptcy on September 23rd is looking to become a major threat in the online video, and TV streaming world. The company now offers a service which allows users to rent movies, similar to Netflix type products and that of on-demand providers. Blockbuster on Demand is now available on over 100 different devices. The service can be accessed on Blu-ray players, TVs, game systems, smartphones, and desktop computers.

The company's on demand service differs from Netflix in that it is not a monthly supplier rather it keeps its former business model the only difference is that the products can be ordered online or from other devices.

Blokbuster shares were up 58% today on the second day after trading was resumed on the OTC exchange. Though shareholders are especially likely to receive nothing in the reorganization due to the extent of the reorganization and the amount of equity the current Blockbuster has which is nil. However, the new product of Blockbuster On-Demand appears to be quite attractive.

If Blockbuster reemerges from bankruptcy it will have a stronger liquidity position than Netflix. And even with its sagging revenues it still has higher revenues in the current year than Netflix. Time Warner Inc Chief Executive Jeffrey Bewkes has said this of Netflix "It's hard to see how that kind of economics can fit into a service that charges $8 or $10 a month because the math doesn't work." When examining the prices that Blockbuster will offer compared to Netflix it is a pretty clear choice who the winner is (Netflix). But Bewkes is likely correct and that the Netflix business model may need fine tuning one day as Blockbuster's needs today. The question is how much business will Netflix win while engaging in a price war. As one learns in economics 101 a price war almost always leaves every player worse off. At some point the competition will lower its prices which will ruin profits for everyone and this causes players to leave the industry. Obviously if this was attempted by all the industry's players then the competition will enjoy cheap movies. Everyone wins except for the companies providing the service.

At some point the math will add up and the picture will be without Netflix.

To see the full Netflix report click here