U01A1 Case Study Blockbuster vs. Netflix: Which Will Win Out?
Blockbuster vs. Netflix: Which will win out?
Blockbuster’s business model is selling and renting out videos/DVDS, and offering what the consumer wants in one of its 9,100 brick and mortar locations in 25 countries. The business model was a huge success, dominating the video rental market by 40% of the U.S rental market. Now the industry and technology forces, that is challenging Blockbuster’s business model is the integration of the rentals online. Netflix has made this challenge by offering customers access to thousands of movies by simply going online and creating a wish list of movies that will be mailed to the comfort of your home for a fee of $19.95 a month. What’s more you can keep the movie for as long as you want without incurring in late fees and the sooner you return the movies with a pre-stamped packaging provided by them your next selection on the wish list will be prompt and sent out. Netflix has created a new business model that caters to the customer who values convenience above all else.
I feel that Blockbuster has not developed successful solutions, they just created more problems. Example, The creation of the “No More Late Fees” campaign was not a good idea instead of helping to step up and be competitive, it hurt them, they saw a small increase in rentals but it was not sufficient to offset the loss of $250 to $300 million of annual late fees revenues that was collected in the pass. They also have too many disagreements on the board; Carl Ichan thinks that the online service is too risky and that they should keeping working with the brick and mortar rentals. Despite Ichans opinion CEO John Antico maintained the online rentals, saying that online service is the only piece of the industry open for growth. Now Netflix has a lawsuit over patents and antitrust violations, which will cost Blockbuster to lose more money in the legal battle. I feel that they are making irrational decisions not taking the time to carefully think or plan the
Blockbuster’s business model is selling and renting out videos/DVDS, and offering what the consumer wants in one of its 9,100 brick and mortar locations in 25 countries. The business model was a huge success, dominating the video rental market by 40% of the U.S rental market. Now the industry and technology forces, that is challenging Blockbuster’s business model is the integration of the rentals online. Netflix has made this challenge by offering customers access to thousands of movies by simply going online and creating a wish list of movies that will be mailed to the comfort of your home for a fee of $19.95 a month. What’s more you can keep the movie for as long as you want without incurring in late fees and the sooner you return the movies with a pre-stamped packaging provided by them your next selection on the wish list will be prompt and sent out. Netflix has created a new business model that caters to the customer who values convenience above all else.
I feel that Blockbuster has not developed successful solutions, they just created more problems. Example, The creation of the “No More Late Fees” campaign was not a good idea instead of helping to step up and be competitive, it hurt them, they saw a small increase in rentals but it was not sufficient to offset the loss of $250 to $300 million of annual late fees revenues that was collected in the pass. They also have too many disagreements on the board; Carl Ichan thinks that the online service is too risky and that they should keeping working with the brick and mortar rentals. Despite Ichans opinion CEO John Antico maintained the online rentals, saying that online service is the only piece of the industry open for growth. Now Netflix has a lawsuit over patents and antitrust violations, which will cost Blockbuster to lose more money in the legal battle. I feel that they are making irrational decisions not taking the time to carefully think or plan the
References: Tirrell, M. (1995). Bloomberg. Retrieved May 22, 2009, from Bloomberg L.P.: http://www.bloomberg.com/apps/news?pid=newsarchive&sid=afOZgc1sX_g0 Laudon, K. C., & Laudon, J. P. (2006). Manaement Information Systems: Managing The Digital Firm. New Jersey: Person Education.