Netflix Vs Blockbuster

Study Case Questions:
1. Blockbuster Entertainment set out to dominate the video rental world by having the largest selection of DVD rentals of any of their competitors. They were well funded and with a very influential CEO, they soon became the Goliath of the industry and life was good at the top. In many industries, particularly retail, a solid physical infrastructure with the best selection in a nearby location is a recipe for success and can give you a significant advantage to fend off new competition. This advantage is enhanced because of the impatience of today’s consumer. We are all products of the “I want it now” generation and I think that Blockbuster was focusing on meeting that demand. Most people didn’t plan ahead for their entertainment and Blockbuster felt comfort with that social norm.

2. Meanwhile, a new fad called the internet was changing how companies interacted with consumers. Blockbuster was caught off guard by a different business model based on changing technology. Most people would attribute the technology that beat Blockbuster was internet based ordering, however the real innovation that hurt them was the DVD. VHS tapes were much more difficult to ship, and more prone to damage while DVD’s were cheap and lightweight to ship and less prone to damage. In addition, Blockbuster misunderstood a small a segment of their consumer base who were frustrated by the late fees and who were willing to plan ahead in order to avoid them. The DVD allowed a new business model, adopted by Netflix, to try challenge the traditional way consumers watched movies at their leisure. Keying on the fact that most consumers overestimate the number of movies in a month that they will watch, Netflix slowly started capturing a some consumers from Blockbuster.

3. Both Blockbuster and Netflix will be challenged in the future to remain growing companies, and in the end, both will become historical footnotes. Just as the DVD opened new options, changing technology is again forcing business to modify to meet consumer demands. VOD (Video on Demand) is quickly becoming a reality and will soon be the preferred delivery of choice due to the convenience and reduced cost. No longer will there be a need for a physical warehouse to distribute rented items. Servers will be able to download the videos as desired to computers and DVR’s that are now becoming prominent in many homes. Both Blockbuster and Netflix have tried to convert and capture the market by offering video on demand to download requested video files to the customer, however, eventually, their current value of being a single site will be usurped by search engine technology eliminating them as a one stop video shop. The streaming technology will advance so that any company can stream video in massive quantities thus eliminating the two competing companies as distributors.