Rob Hall isn't afraid of Netflix Inc. - On the contrary, the chief executive of Momentous.ca Corp.—parent company of Canada's Zip.ca, the country's largest DVD rent-by-mail service—believes the imminent arrival of the U.S. video rental chain will breathe new life into the home movie business on this side of the border. For Zip, the Canadian foray of its U.S. counterpart comes as the Ottawa-based company is busy preparing plans to reintroduce the brand to Canadians as part of a new strategy the company is calling Zip 3.0. So while some might see Netflix's arrival in Canada as a threat to the "Canadian Netflix," Mr. Hall is convinced Zip is on the verge of a breakthrough.
"[Netflix is] going to expand our market, and I believe we win when that happens," Mr. Hall said in an interview. "They're going to get a lot of attention, and when people look at the offerings, they're going to find out about Zip and I believe they're going to choose Zip."
Netflix has scheduled a press conference for this morning in downtown Toronto where it is believed the company will offer further details about its Canadian expansion.
In July, Netflix announced plans to launch a video-streaming service in Canada this fall that will allow people to watch movies over the Internet. Since then the Los Gatos, Calif.-based company has remained tight-lipped about the details of its Netflix caservice. Netflix's announcement was greeted with an excited fervor on Twitter, but Mr. Hall doesn't think Netflix's northern expansion will chip away at Zip's traditional DVD-by-mail business.
"There's all this buzz about Netflix coming to Canada, but Netflix isn't really coming to Canada," Mr. Hall said. "Netflix is bringing a limited streaming offering to Canada, not their mail business, which is what they're built on... They're going to help us educate the market about why brick and mortar is dying in the U.S. and why it will follow suit here in Canada, and we're the only game in Canada right now for mail."
As well, Mr. Hall says that Zip remains focused on the market for new release rentals in its DVD and streaming offerings, while he expects Netflix to focus on older films. Netflix has not spoken publicly about what titles it will make available when the service goes live in Canada.
"Netflix is going to introduce Canadians to streaming with the old movies, and we're going to be there to offer them the new ones," Mr. Hall said.
Mr. Hall said Zip's chief competition instead will be other services that focus on new releases, including Apple Inc.'s iTunes and video-on-demand services offered by cable and telecom companies.
Until now, Zip has channeled its efforts primarily towards its DVD-by-mail rental business, similar to the one made famous by Netflix in the United States.
But over the next few months, the company plans to aggressively expand both its online streaming service -- due to launch this year -- and its kiosk business, mirroring that of Redbox in the U.S., which will allow users to rent new releases for $1 per night from automated vending machines inside grocery stores.
Zip has already deployed eight of the specially designed kiosks—each capable of renting as many as 1,020 DVDs—throughout Ottawa and Montreal as part of a trial partnership with the Montreal-based grocery store chain Metro Inc. Mr. Hall said he expects to have Zip kiosks renting new releases in most of Metro's 800 stores across Canada by early next year.
In Canada, revenue from rental kiosks accounted for only about 1% of the $1.4-billion the movie rental business generated in 2009, according to data from Toronto-based Convergence Consulting Group.
In the U.S., where rental chain Redbox has steadily eroded the power of established brick and mortar rental businesses such as Blockbuster and Movie Guy, kiosk sales account for about 10% of the US$8.8-billion rental market.
However, while mail-based businesses account for about 23% of the rental market in the U.S. due to the strength of Netflix, in Canada the market is still dominated by traditional video stores, while rental-by-mail makes up only about 1% of the market.
Because Zip is a private company, launched in February 2004, and doesn't disclose membership figures it is difficult to gauge the size of its user base.
Mr. Hall said the company recently shipped its 16 millionth DVD and that the company's growth rate is up more than 80% over the same period last year.
Convergence estimates that Zip had about 50,000 subscribers at the end of 2009.