A Brief History

The founder of Video Mailbox, Peter A. Bobley, recently responded to reader questions over on the Hacking Netflix website. Below we've reproduced one of his posts in which he gives a brief overview of how he started Video Mailbox and why it eventually went out of business. (You can also read the original post on the Hacking Netflix site).

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I'm Peter A. Bobley, the founder of Video Mailbox. Thanks for posting. Here's some more information to answer questions from your readers.

In the 80’s my company published The American Express (AE) Appointment Book and sold a variety of books and later VHS tapes though the mail to AE cardholders via “solo” mailings and “credit inserts.” The books and tapes were charged to the consumer’s Amex card. VHS tapes sold well via “credit inserts” (both new - and particularly the used ones which we purchased from video stores) so we soon published a catalog of new/used VHS tapes. By the late 80’s a number of elements of the video business started to change. Independent video stores found themselves in financial difficulty due to the rise of Blockbuster, and the price of used videos declined because the independents needed cash flow, and some went bankrupt, making it possible for people like me to buy up their libraries on the cheap. The retail price of VHS also declined to meet the demand of the rising audience of purchasers. Then the studios started altering their new video pricing or often introduced a video at $80 to take advantage of the rental window and then slashed the priced to $29.95 a few weeks later to cater to the sales market. A few months later these videos could be purchased in bulk, used, for $5-$10.

Then I went to Paris, walked into a bustling video rental store who was charging the dollar equivalent of $30 per month (when many US stores were charging as much as $7-$8 for a single rental) for all the videos one wished to see (one video at a time) and my Video Mailbox (VM) idea was born. In my head this French guy had $10 out the door and $20 in the door because I knew I could obtain VHS tapes for about $10 on average, and I also knew prices were falling. I felt certain that if I could launch the business and start building a membership that the cost to purchase the tapes would soon turn a so-so business, or a cash-flow minus business into a bonanza.

When I got back to New York I immediately met with Amex, who loved the idea and gave us permission, subject to making certain that we created a sound business plan, to include a four page VM offer inside the Amex VHS catalog.

Then the work began. I hired a team of software engineers (and remember that computers in those days looked like refrigerators) to write a basic program that would record what tapes were initially selected by the consumer for his queue, record a VHS title when it was returned to inventory, and instructed the warehouse what title to mail. I should point out that we were already operating a large warehouse operation for Amex to accommodate the Amex Appointment Book program which received a ton of returns because the books were sold on a negative option basis, and we also had a computer tape-to computer tape relationship with Amex.

To answer Ann from Brooklyn's’ question about obtaining the queue data, we including a blank “GET STATED FLIER” queue in the initial offering/mailing (along with a list of about 750 titles...just like book clubs were doing at the time) and then sent blank queue forms out with the initial videos, along with the catalog, which we called “FAVORITE FIFTY LIST.” The initial catalog contained, as I recall, 10,000 titles.

To answer Tom Wolper’s question about overcoming the postage cost, the postage was charged to the consumer’s Amex card.

To answer Sara’s post about seeing an ad in Sports Illustrated, sorry, but we never advertised in SI.

To answer Nate G. Tangs post suggesting VM did not exist, sorry again, Nate, but with a bit of research (start with American Express) you’ll find we did indeed exist. For some Peter A. Bobley credibility checkout the data on the last company that I owned, PhoneCharge, Inc., and the sale that took place three years ago to CheckFree. And what can I say about Hagler/Leonard other than it was an amazing fight.

For everyone who is wondering why we closed up shop, that too has a surprise answer because it had nothing whatsoever to do with how well we were doing (fantastically!) - or even our own ability to finance it (we were making big bucks from The American Express Appointment Book at the time) -- but simply a battle between partners. My equal partner could not emotionally handle the required absorption of losses (even though the VM profits and membership roll direction was sky-high up) and would not even entertain bringing in a money partner, which we could have found handily. We blew up at each other one day and I walked out and started producing Broadway plays for about ten years.

Then I started PhoneCharge. Now I’m working on uscanteen.com.

Peter