Netflix vs Blockbuster
Chances of succeeding for Blockbuster or Netflix on this business depends on how fast they can capture larger market share with the help of the latest technology, who can offer more options and availability of new releases as well as hard to find movies… They need to be on top of their ‘technology game’ and invest on new means of delivery as well as movie rental per see. IT plays a great role in their business and their viability depends on how adaptive they are and how creative they are in using information technology to their advantage.
In the movie rental industry, there has been an intense competition between two major business rivals; Netflix and Blockbuster. The competition in the movie rental industry has been so frighteningly fierce for the precedent few years that it has been termed by many opinion leaders as unhealthy business wise. Netflix and Blockbuster are actually the current leaders in the booming rental movie industry and by extension and to that effect the major rivals. The Blockbuster has been in the business for long, in fact, since 1985 on the other hand, Netflix only entered its 12th existence year this year. Actually the founder, Reed Hastings did establish Netflix in the year 1997. Nevertheless, at the moment, Netflix appears to lead the market in terms of market acquisition. Netflix which is largely viewed as a newcomer does have around 9.6 million online customers who have subscribed to their services. In comparison, Blockbuster has just slightly more than 3 million online subscribers despite its longer years of existence. In the United States of America, there are other online movie rental companies which include companies such as Intelliflix, Redbox and GameZnFlix. However, GameZnFlix and Redbox do not serve the locals most of the time. Instead they more often than not target Asian markets. Additionally, Wal-Mart also did attempt to spawn profits in the movie rental industry but sooner was outrun in the business by Netflix. These days Wal-Mart merely possesses an advertising contract with Netflix in the industry. Several forces do propel the movie rental industry especially with regard to the performance of one of the market leaders, the Netflix, and they include such forces as i) Market Features-The industry was in actual market maturity stage previous to the application and utilization of the Internet technology as a medium of distribution. Netflix did capitalize and subsequently utilized the Internet sophistication to gain huge market share by offering customers and members with direct movie download accessibility and undeviating shipments to their home. As earlier stated, Netflix was and for that matter still remain a market leader that realized the first potential of the market which did exist for Internet movie rentals.
Both companies have their headquarters in the US. Netflix is the younger of the two having been in the business for slightly over fourteen years compared to Blockbuster’s twenty five years. Both entities display distinct business approaches that are clearly evident in their financial performance. Blockbuster, by virtue of it s age has a larger network spread over seventeen countries with approximately 1700 stores (Ireland et al., 2011, p. 105). Netflix on the other hand has a smaller area of operation compared to its older competitor, with stores in the US, Canada, and a handful of countries in Latin America. However, the company has in place plans to expand to Europe specifically Spain, UK and Ireland. Both companies offer more or less the same services. Even so, Netflix appears to offer a wider variety of services compared to Blockbuster (Schermerhon, 2011, p. 21). Besides disc rentals, Netflix also offers internet vide streaming as well as original programming.Additionally, the company offers device support services by availing hardware and software support, video game consoles, set-top boxes for better quality digital transmission, Blu-ray disk players and hand-held services. Block buster on its part is only involved in online rentals and retail operations such as GameRush stores and Blockbuster Express (Schermerhon, 2011, p. 27). Given the above status of services offered by both companies it is clear that Netflix has diversified its sources of revenue more than Blockbuster. Unlike Netflix whose ownership has been steady, Blockbuster has had to change ownership a couple of times. The company stock’s tumble in 1994 led to a takeover by Viacom. Blockbuster however de-merged from Viacom in 2004 and immediately introduced the Game Pass nationally. At the same time, the company introduced Blockbuster Online, an online DVD subscription. The takeover and apparent boardroom fights have had an adverse effect on Blockbuster, something its competitor Netflix has been successful in avoiding. Netflix’s cautious approach to expansion and successful avoidance of the business twists that come along with takeovers and change of leadership are evident in their financial results (Hill & Gareth, 2008, p.50). At the same time, the effect of the above trends is clear in the financial performance of Blockbuster. Near bankruptcy has led to the closure of numerous stores in Europe and a chapter 11 bankruptcy protection filing saw Blockbuster purchased by Dish Network. The company sought protection due to apparent failure to service its $900 million debt as well as mounting losses. Management by the new owners has seen the closure of hundreds of stores in its areas of operation including a wind up of the Canadian unit.
Finally, back before the internet became integrated into nearly every facet of our lives, it was hard to imagine brick-and-mortar Blockbuster stores disappearing. Blockbuster initially succeeded because they did one core job better than anyone else: delivering entertainment to people’s homes. But as we all know, technologies change. And instead of investing all of their efforts into finding a new way to deliver on their true purpose (more on that in the next section), Blockbuster’s innovation stagnated. That reality hit Netflix founder Marc Randolph when the business was pivoting from a Mail-order DVD service to online streaming.
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Ireland, D.R. et al. (2011). Understanding Business Strategy: Concepts and Cases. New York: Routledge.
Klein, T.D. (2010). Built for Change: Essential Traits of Transformative Companies. New York: Routledge.
Light, L. (2011). Taming the Beast: Wall Street’s Imperfect Answers to Making Money. Berlin: Springer Verlag.
Schermerhon, J.R. (2011). Exploring Management. New York: John Wiley & Sons.