Case 6 Netflix’s Business Model
and Strategy in Renting Movies and TV Episodes
How strong are the competitive forces in the movie rental marketplace? Do a five-force analysis to support your answer.
Currently the competitive forces in the movie rental marketplace are not very strong. There are not very many players seeking to gain share in the market. The only competitors that come to mind when thinking of the movie rental marketplace are Netflix, Blockbuster and Red box. The evolution of technology has allowed many people to stream movies from online at no charge, for most and without any required subscription. Places like Blockbuster and Movie Stop are not as vivid as they have been in previous years due to the market shifting as technology has advanced to that of a cyber marketplace. Without Blockbuster’s newly added online services it’s difficult for one to say if they would be considered a competitor or not.
Using Porter's five forces analysis:
Rivalry: As stated there are not many players in the movie rental marketplace, so rivalry is kept at a minimum, the competitors are:
c. Red box
d. Possible local vendors
II. Threat of Substitutes
There are substitutes out there such as websites that allow free video streaming and cable or satellite companies that allow “On Demand” movie rentals at no charge and give concessions to customers for loyalty. Both methods are appealing to customers because they have the option to view movies from the comfort of their homes with no charge. III. Buyer Power
In the state of the economy buyers are powerful in most markets and the movie rental marketplace is no exception. If a buyer does not want to rent a movie, or simply does not have the money to pay for a subscription, they simply won't order it. Buyers have alternative options, other than going to a movie rental company store or having movies delivered to their home, on a monthly subscription basis. Furthermore,...
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