Blockbuster’s lack of blockbuster
Frankie L. Jones
February 11, 2013
Blockbuster video, the once dominant force behind consumers’ movie rental needs has suffered a significant loss in revenue to the rise of RedBox and Netflix. The competitive advantage offered by the two companies has tapped into Blockbuster’s market and cause a lack of blockbuster for the company. Since 2009 the company has continue to reported decreased revenue and profits against its competitors. In 2010 the company filed bankruptcy and has since then implemented new services and products similar to its competitors, however, customer’s still prefer RedBox and/or Netflix.
Once upon a time on a Friday night after work, you were looking to go home, relax, and watch a good movie. You come up on a big blue sign with yellow lettering, and think, “I’LL RUN TO BLOCKBUSTER!” Today, we’re looking for the nearest RedBox, or browsing Netflix for a good flick. There was time when families would take a trip to Blockbuster, order a pizza, and make it a movie night. Today, people have the luxury of not even leaving the house to find a good movie; thanks to Netflix. After a routine run to Wal-Mart, Walgreens, or Kroger’s it has become second nature to browse the RedBox, especially since the cost is only $1. But what has happened to good ol’ Blockbuster? Over the past few years Blockbuster video locations have steadily declined. Blockbuster, the once powerful source for movie and video game rental, has become nonexistent in some areas. Due to the rise of Netflix and RedBox, Blockbuster has experienced a decline in sales, continues to close locations, and continues to post quarterly losses. Blockbuster has implemented new services; however, customers still prefer Netflix and RedBox over Blockbuster. This paper will test Blockbuster’s reported revenue from 2009-2011 against reported revenue from 2009-2011 of Netflix and RedBox, and elaborate on the declining Blockbuster locations against the expansion of Netflix and RedBox. Reported Revenue
In 2009 Blockbuster was still among the top two competitors for consumers’ movie rental needs. RedBox was establishing a foundation and surpassing forecasted expectations every year, while Netflix accumulated revenue between $1.63 billion to $1.67 billion, which was about $30 billion more than Blockbuster.
2009 Total Revenue for Blockbuster, RedBox, and Netflix
Blockbuster's market capitalization had dropped 47 percent to $62 million in 2009; Netflix's had shot up 55 percent to $3.9 billion that year (Chopra & Veeraiyan 2010). According to Blockbuster’s financial reports for fourth quarter 2009, total revenues were $1.08 billion as compared to total revenue of $1.31 billion for the same period in 2008, and gross profit was $540.4 million. Blockbuster ended the fourth quarter of 2009 with $188.7 million in cash and cash equivalents and $58.5 million in restricted cash related to the Company's letters of credit. According to Blockbuster’s financial reports for first quarter 2010, total revenues for the first quarter of 2010 were $939.4 million, compared to total revenues of $1.09 billion for the same period in 2009, and gross profit was $502.2 million. Blockbuster ended the first quarter of 2010 with $109.9 million in cash and cash equivalents. The company filed for bankruptcy on September 23, 2010. Fritz (2001) wrote an article on Blockbuster’s bankruptcy, and reported that on April 6, 2011, the company was bought by satellite television provider Dish Network at auction for $233 million with the assumption of $87 million in liabilities and other obligations. In 2011 Dish announced that the Blockbuster division essentially broke even by bringing in $347 million for the first full quarter (Smith 2011). In 2009 RedBox‘s parent company, Coinstar, reported a revenue of $1.1 billion. $773.5 million were from RedBox kiosks (Smith 2010). In first quarter 2010 Coinstar...
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