Blockbuster Company. a Case Study.

Topics: Blockbuster Inc., Short Message Service, Renting Pages: 9 (2995 words) Published: October 19, 2012
Bykova Alina
Dallakyan Lilit
Muradyan Lilit
Stepanyan Tatevik
Vahanyan Greta
Zakaryan Anush

Blockbuster Company is one of the largest providers of videos, DVDs and video games worldwide. Blockbuster’s revenue reached $5.5 billion in 2002, and during the same year, nearly 80 % of Blockbuster’s revenues were generated in the U.S., where the company has 48 million member accounts. At first Blockbuster was grown from a single video rental store to more than 8,500 stores in the United States, Mexico, the United Kingdom and other countries in less than 20 years. Blockbuster was acquired by Viacom in 1994, and since then Viacom still controls 81% of Blockbuster's equity. Situation Analysis

First, when company was established, it was a question mark, according to Boston Consulting Group Matrix, or a problem child, if we go back to 1985. By the 1987 Blockbuster Entertainment became a Star still requiring investment but growing very fast, only in one year about $18 million was invested in. In 2005 company could be described as a Cash cow – it had a very large market share, while the market itself stopped growing fast. Spreading of fast internet connection and ability to download large volumes of data changed the market, demand for DVD discs was gradually decreasing still allowing Blockbuster to generate cash, and the company managed to hold that position for rather a long period of time. Company purchased several companies, such as Game Station, Film Cadyy, etc. to stay competitive and to increase a market share. However within next few years Company was losing its position and came across multiple problems discussed further. (Alina’s Part)

Continued discussion of Blockbuster’s current situation focuses on the external strengths and weaknesses currently challenging the organization (refer to figure 2). External situation analysis

External strengths * Movielink on-line services’ potential * Possibility to target adults * Development of game section * Partnership with Motorola, Samsung| External weaknesses * Decline of DVD industry * Tough competition * Growth of Netflix, Redbox * Market enlargement for cable TV and satellite TV * Replacing of DVD industry with developed internet * Risks associated with world economic crisis * Imperfection of piracy related legislation|

Figure 2. External situation analysis

External Strengths (Opportunities)
Movielink On-line Services’ Potential
In 2007 Blockbuster acquired Movielink, LLC (on-line service, that was created by 5 major Hollywood studios – MGM, Paramount, Sony Pictures, Universal, and Warner Bros.) Movielink offered both sales and rental of movies from their vast libraries through downloading. This acquisition can equip Blockbuster with great potential for creating shared value proposition as a response to high online demand for the new movies. Possibility to Target Adults

Since the creation of home entertainment systems, technology played a leading role in the evolution of movie industry. For example, the growth and development of home theaters created a change in competitive environment. A study by the Pew research Center reported that 75% of adults prefer to watch movies at home and 50% watch at list one movie per week via DVD rental or pay-per-view. Taking this market opportunity Blockbuster could have been able to become popular among older age group, who prefer watching movies at home. Development of Game Section

Introduction of the next-generation game industry product (such as Wii) and its rapid rise in popularity assumes possible beneficial collaboration for Blockbuster with new companies in electronic game section. This is a great possibility to expand gaming section of the stores and to include equipment sales and rentals. Also these new technologies can become a basic for creating innovative children entertainment industry. Partnership with Motorola, Samsung...
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