Netflix vs Blockbuster

Topics: Blockbuster Inc., Renting, Video rental services Pages: 17 (4436 words) Published: November 23, 2012
Competition in the Movie Rental Industry in 2008: Netflix and Blockbuster Battle for Market Leadership

June 15, 2012



Inside Netflix3

Current issues at Netflix5

Netflix strategies5

SWOT Analysis6

Netflix Strengths6

Netflix Weaknesses6

Opportunities for Netflix7

Threats facing Netflix7

Application of Techniques of Strategic Analysis8

The Five-Force Model of Competition8

Market Position: Strategic Group Map9


Inside Blockbuster10

Blockbuster SWOT Analysis11





Blockbuster Business Model and Strategy13

Industry Key Success Factors15

Conclusion and Recommendations15



Movie rental companies are integrated in the entertainment industry. The 2008 market size for rentals through mail was $2,128,000,000. Streaming content and downloading movies are areas that companies dealing in movie rentals are exploring to increase revenues. Each year since 2000, there has been an increase in subscribers overall in the industry. DVD rentals through online have progressively grown from 2,000,000 customers in 2000 to approximately 12,000,000 at the end of 2008. This trend gives Internet movie rentals companies a positive outlook on future growth. The aggressive DVD rental business is swiftly changing and being influenced by the continuous advancement of video technology. The biggest change in the video rental business is the transition from store-based video rental to online video rental (Tarzijan, 2011).

In-home filmed entertainment is offered through various distribution channels such as the retail home video production, the online video industry, movie download, the cable industry, and the satellite industry. Of these distribution channels, the retail home video industry includes the rental or sale of movies on DVD. As home-viewing technology improves and becomes cheaper, downloading movies over the Internet and watching wide-screen televisions at home is an emerging trend. Online DVD rental services are appropriate and allow customers to find, rent, and watch movies whenever they want.

Online video retailers provide various methods of access to customers for watching movies. They require a license to watch a movie and allows for unlimited viewing. The movie can be stored on a hard disc. The cost of purchasing a movie ranges from $8.99 to $19.99 and a movie rental ranges from $0.99 to $4.99. The paper takes a closer look at two online movie rental companies, namely the Netflix and the Blockbuster. The paper discusses strategic issues, does a SWOT analysis, and discusses the internal and external environments in which both companies operate in. Where applicable, the companies’ current issues and business models have been discussed in detail.


It was established in 1998 by Reed Hastings Netflix to become the market leader in online movie rentals, in the United States. The company originally started out as a rental service that charged fixed charges for each movie. The company offers movie rentals subscriptions that differ in terms of cost and quantity of movies over the Internet via online steaming. It has a library of over 100,000 titles available through mail. Its mission describes it as that whose success and appeal aim at making available to its clients, un reserved DVDs, a rather easy way of choosing movies as well as fast and free delivery. Out of 0000 online movie subscribers in 2008, Netflix subscribers were estimated to be a staggering 9,400,000. During the past five years, Netflix had emerged as the world’s largest subscription service for showing TV episodes and movies through the Internet as well as using the mail to send DVDs. Netflix has costs of revenues that are higher as...
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