Block Buster Vs Netflix Case study
Blockbuster entered the movie rental business in 1985. Blockbuster business model consisted of independent store locations serviced each of which serviced the local population in the surrounding neighborhood. They also offered in store video sales apart from the video rentals.
In the first 20 years of business they opened 9100 stores in 25 countries. By 2004 Blockbuster had 40 % of the US market share estimated to range from $7 billion to $9 billion per year in sales and around $16 billion in video sales.
2. New market entrants that differentiated their services by offering video rentals more conveniently challenging Blockbuster’s traditional mom-and-pop-style stores.
Customers could select their rentals via Netflix internet portal and these DVD’s were mailed to customer via postal service. Netflix customers had access to thousands of movie titles without leaving their homes.
Netflix did not have any cost incurred to buy and maintain local stores in cities and also their reach to customers was limitless.
The online video rentals business strategy has destroyed many local video rental stores and also dampened sales of DVD’s across major electronic retail giants.
The revenues for online movie rentals which were non existent in 1998 rose to $522 million in 2004.Netflix increased its sales and its subscription model became popular which helped them gain a market share from 2 to 7% from 2003 to 2007.
The entry of Netflix was a cause of concern for Blockbuster and they addressed the competitive market place by launching their own online rental store and a monthly subscription service for in store customers.
5. It is very hard to predict the success for both Blockbuster as well as Netflix given their existing business model.
Rapid technology advancements are changing the way we can access movies and music and has made the future of video rental very unpredictable.
Many cable operators offer video on demand technology that offer movies and programs that are not yet made available on DVD. Several cable companies like Dish Network and Dish TV provide video recording technology that would make DVD rentals obsolete.
Moreover with Apple’s success with Itunes store where one could download music for a small fee is considering to add movies at a flat rate pricing model.
There are also several firms that sell movie downloads through their websites.
Amazon.com the world’s largest online retailer has entered the online movie rental service in United Kingdom.
Many new entrants already have a large customer base and robust technology to support their business strategies which makes the survival of Blockbuster and Netflix questionable in the long term.
