Competition in the Movie Rental Industry in 2008: Netflix and Blockbuster Battle for Market Leadership
2. What forces are driving changes in the movie rental industry and are the combined impacts of these driving forces likely to be favorable or unfavorable in term of their effects on competitive intensity and future industry profitability?
-The economy is one of the reasons why rental industry went down. Less people are able to rent a lot of movies. -Second and main reason that drives the change is Internet and streaming of video. Suddenly on the market we have some companies they offer unlimited watching movies for same price. One of them is Netflix.
5. What is Netflix’s strategy? Which of the five generic competitive strategies discussed in Chapter 5 most closely fit the competitive approach that Netflix is taking? What type of competitive advantage is Netflix trying to achieve?
Through my research about these two competitors I discovered they work completely different and they are using two different strategies.
I think Netflix has much better strategy than Blockbuster competitor. Netflix has complete development network. They developed Development Kit for developers where you can use their API functions and integrate their service wherever you want. So, it is not coincidence we have Netflix on each TV as application channel. It is not coincidence we have Netflix everywhere; in WII, Xbox, PlayStation, Google TV, Apple TV, inside Blue-ray players, and on each PC and Mac. That is the part of their strategy and that helped to Netflix get more than 23 million streaming members globally and become the world's leading Internet subscription service for enjoying movies and TV shows. For $7.99 a month, Netflix members can instantly watch unlimited movies and TV episodes streamed over the Internet to PCs, Macs, Gaming consoles, and TVs.
On the other hand Blockbuster I think made startup bad strategy. They actually started streaming service together with Dish Network. Their streaming service is not independent. You have to have Dish Network satellite service in order to have Blockbuster streaming service. Consequently their competition is very limited. For example I have lived in the condominium where my balcony is turned to the east. I wanted to take Dish Network service couple months ago and they told me that my balcony has to be on south-east side. I was not able to take Dish Network service and consequently I was not able to use Blockbuster’s streaming service. Also, satellite service is not reliable as cable or DSL internet services.
If we compare cost of these two competitors, we can conclude that Netflix is much better. We can have Netflix service for $7.99, what is much lower than cost of Blockbuster where you need first take Dish Network service and paid for it.
Actually Blockbuster merged with Dish Network before they started streaming service and compete with Netflix. I guess they did not have enough assets to start this without somebody’s help. Now, Dish network is making Blockbuster just as part of own service and this binding limit completion with Netflix.
7. What is your appraisal of Netflix’s operating and financial performance based on the data in case Exhibits 2, 3, and 4? What positives and negatives do you see in Netflix’s performance? Use the financial ratios in the Appendix of the text as a guide in doing the calculations needed to arrive at an analysis-based answer to your assessment of Netflix’s recent financial performance.
Through my research I found that Netflix stands much better with everything financially than Dish Network service which actually parent company of Blockbuster. I made calculations for price/earnings ratio which is the most important factor for investment.
| Dish Network
Earnings per share
Here are some tables and factors I used for my above...
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