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Peerflix: compelling and problematic

Demofall HUNTINGTON BEACH, Calif.--After Tuesday morning's opening session of presentations at the Demofall 2005 conference here, one company whose allotted six minutes on stage had lots of people buzzing was Peerflix out of Menlo Park, Calif.

The year-old Peerflix has an oddly compelling, yet annoyingly problematic service. Essentially, it's Netflix with no centralized processing center. Actually, that's not true. It's more like an open-source version of Netflix, with users sending their own DVDs to other members instead of everyone borrowing from the company's massive library of movies.

The idea is that collectively, users have the movies that everyone wants. So, if one user has a copy of "Pulp Fiction" and another member wants to borrow it, the first sends it off to the second.

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Simple, right? Well, yes and no. It's true that the idea can be boiled down that way: All users submit lists of DVDs they're willing to contribute to the larger Peerflix community. At the same time, they add requests for movies they want to borrow. The company acts as the middleman that automatically finds matches and hooks the parties up.

When there is a match, one user sends the film off to the other, and the borrower pays Peerflix 99 cents for the rental.

In reality, it's a little more complex than that. Actually, users pay for their rentals with "peerbux," which they can accumulate either by sending films of their own to other members or by buying them with cash.

The overall concept is attractive, and it could end up working really well. But it has some significant flaws. First, in its current iteration, Peerflix requires users to print out 8.5-inch by 11-inch pieces of paper and fold them carefully into envelopes in which they send the DVDs. They must also add their own stamps, although the company does plan to provide pre-printed postage sometime in the future. That sounds like a bottleneck, as asking users to have to figure out how to fold an envelope might keep a lot of people from taking that crucial step. After all, Netflix works pretty well as it is.

Also, as some people here were overheard to say, Peerflix is likely to suffer from an inability to take advantage of the so-called "long tail," Wired Magazine editor Chris Anderson's concept that services like Netflix, Amazon, iTunes and others can bring readers, viewers and listeners to even the most obscure media.

By comparison, the thinking goes, Peerflix might not be able to leverage the long tail because it's hard to imagine DVD collectors sending strangers their favorite limited-edition import films. Thus, it could end up being tens of thousands of members sending copies of "The Wedding Crashers," "Mission: Impossible" and "Sideways" back and forth. If that ends up being the case, Peerflix will not last.

However, DVD trading may just be the Trojan horse for Peerflix's real plan, which is to be the enabler behind the decentralized distribution of just about any kind of item, be it video games, books or baseball cards. The company said it plans to open its APIs and allow users to create their own trading platforms.

And if it can survive long enough to make that happen, the company could be onto something very, very interesting indeed. But if it depends on revenues from DVD trading to get to that point, Peerflix may have a short shelf life.