Interview with Peerflix Co-founder Billy McNair

Peerflix has become my favorite way to watch DVD’s – I’ve given up on other DVD services such as Netflix. Peerflix allows you to trade DVD’s with other members for only $0.99 – and they are yours to keep. No late fees, no hassles. I think it’s a great service and it’s only getting better. They just launched a new Friends feature that lets you trade your DVD’s with your family and friends for free – and there’s more to come. Peerflix co-founder Billy McNair was kind enough to take time out of his busy schedule to do an email interview with me that you can read below.

 

Give us a brief overview of how Peerflix works. How is the value (peerbux) of a movie assigned?

Peerflix is a peer to peer trading community where members can legally trade DVDs they own and no longer want for the DVDs they really want to watch. An individual can go to the Peerflix web site located at www.peerflix.com and sign up for a free trial by providing their first and last name, shipping address and email address. Immediately upon registration, Peerflix will mail the new user a "Welcome Kit" which includes the DVD mailers that members use to trade DVDs on Peerflix. The free trial allows a new user to execute one trade via the Peerflix network completely risk-free and without obligation.

Upon successful registration, members then create two lists. Members add DVDs they own to their "Have List." They add DVDs they would like to receive to their "Want List." Peerflix then does all the matching on the back end without any additional steps required by the member. The system takes into consideration transaction frequency, timing, and geographic location in order to determine the best match. When someone wants a DVD on a member’s "Have List", that member will receive an email notifying them that another user wants their DVD. The recipient clicks a link to send the DVD, which provides a web page for them to print containing the shipping information. This shipping information and DVD are placed in the provided Peerflix mailer, the member adds a $0.37 stamp, and drops it in the mail.

The sender then receives the Peerbux for the DVD sent. Peerbux are the internal currency that relates one movie to another and ensures that members that add new releases or other high value DVDs to the network will receive similar DVDs in return. When a Peerflix member sends out a DVD, the next DVD on their "Want List" will automatically be sent to them.

Peerflix determines the Peerbux value of a DVD by accessing certain factors which include: release date, retail value and relative demand for the title. The majority of titles on Peerflix are worth 2 Peerbux, with certain high value and new release titles being worth 3 or more, and certain lower value titles worth 1 Peerbux.

Once a member’s free trial expires, Peerflix charges that member just $0.99 for each DVD received via the Peerflix network on a pay per trade basis, i.e., without a fixed monthly subscription.

How did you come up with the idea for Peerflix? The site design and the process of choosing DVD's and sending/receiving them is very fluid. Was this the original model or were there different prototypes leading up to what you have now?

The idea for Peerflix originated from the desire of the two founders, Danny Robinson and Billy McNair, to trade their DVD collections, as Danny was in Vancouver, BC and Billy was in the Silicon Valley area. The two founders wanted a quick and easy way to access each other’s DVD collections. As they started trading their movies, they recognized that others could benefit from the ability to trade DVDs as well. They realized that people are buying more and more DVDs and many of those DVDs are sitting on shelves collecting dust. So why not give the public a way to leverage the equity in their existing DVD collection? And Peerflix was born!

Peerflix is very focused on building a site and community where members can conveniently, quickly and easily trade their DVDs. We constantly listen to our members to determine ways in which the site, flow and overall process can be improved and made even simpler.

Peerflix was only launched (beta) in 2004 and yet you seem to be getting a lot of attention and increasing members. Do you think there was a tipping point for your service somewhere along the way?

Peerflix has been fortunate to receive a substantial amount of media coverage over the past 90 days. Peerflix was profiled as a cover story in the San Jose Mercury Business section. From there, Peerflix was covered by a number of outlets including the USA Today, Business Week and many others. In the past 2 weeks, Peerflix has appeared on the NBC evening news in many markets including: San Diego, Dallas, Philadelphia, Chicago, Columbus and Dayton (OH). This interest in the Peerflix story has helped propel substantial organic growth in our service and, as more people join, more DVDs become available and more trades are completed.

Peerflix currently has nearly 30,000 DVDs available on the network and that number is growing by the thousands each week. The availability of a growing number of titles across a wide spectrum of genres makes the Peerflix service more and more valuable and useful to our members each day!

Your business model is significantly different than the Netflix's out there - people trade DVD's instead of renting them. How do you see Peerflix competing with Netflix like companies - and do you think they will try to offer trading as part of their services in the future?

Peerflix believes that our service is complementary to other services that provide DVD rentals by mail. Results of our proprietary research study fielded in December ’04 showed that people who rent a large volume of DVDs also tend to buy numerous DVDs and vice versa. Peerflix provides an opportunity for people to exchange their unwanted DVDs for those they really want and people are enthusiastically embracing that opportunity. In addition, with the ever-growing size of our network, many members use Peerflix as their primary movie source and trade unlimited numbers of DVDs with no at-a-time restrictions – many of these members rely on Peerflix as their sole DVD entertainment source.

Peeflix is a peer to peer network and, as such, Peerflix is able to keep overhead to a minimum. Peerflix has no regional distribution centers (in fact, every household in America is a Peerflix distribution center!) or other logistical overhead. As a result, Peerflix is able to save on these significant capital costs and pass this cost savings along to our members enabling them to receive DVDs that they’d like to watch for only $0.99 each!

Tell us about the new Friends feature which I think is going to be great. Any other new features coming out soon that you want to let us in on?

Peerflix is really excited about the new "My Friends" feature introduced last week. In the spirit of innovation and incorporating our members’ feedback, it became apparent that our members wanted to incorporate the social aspect of movies into their Peerflix experience. The My Friends program enables Peerflix members to share their Want and Have Lists with specifically invited friends and family. Members can see what movies their friends and family have and want and vice versa. Unlike other sites, Peerflix takes this one step further by empowering our members to then trade with their friends and family with one simple click of the mouse. Friends and family can trade with one another even if they don’t have Peerbux in their account. Better yet, when current Peerflix members invite a friend or family member to join Peerflix, the inviter will receive 1 free Peerbux in their account for each invitee that becomes an active member of the community.

Currently people mail DVD's to one another. Do you see a point where people might download digital copies of the movies instead of mailing them? It seems to me this service might be a great way to legalize P2P trading in some aspects.

While we think that the U.S. is still a few years away from the masses downloading digital movies, Peerflix is absolutely well positioned to take advantage of that opportunity when it arises. While early adopters will move to digital files of movies within the next couple years, the mainstream American consumer probably will not be at that point for at least 3-5 years. There are a number of factors in play to move to digital movies including, for example, integration of Internet connectivity/PC/television, as most people aren’t interested in watching movies on their PC. In addition, there are bandwidth and distribution limitations.

All that being said, Peerflix has the technology today to legally enable our members to trade digital movie files via the Internet. We are waiting for the right market opportunity in terms of technology adoption, consumer preferences and legal environment to deploy this technology to our user base.

Peerflix works great for movies, but I can also see it working for CD's as well as books. I think books would be huge because they can be expensive to purchase and many people only read a book once. Does Peerflix have any plans to branch out into different media/products?

Peerflix is a trading platform and the first application of that platform enables our members to trade physical DVDs. Because we have built a trading platform -- and not just a DVD swapping network --, the site is completely extensible to empower our users to trade more than just DVDS, whether it be CDs, video games, books, etc. We believe that, as early as in late 2005, our members will be able to trade other forms of media on Peerflix in addition to DVDs.