While I was doing some research for our presentation I came across this article that I thought was kind of interesting especially considering what we're talking about this week with business strategy.
http://seekingalpha.com/article/30771-why-netflix-can-t-match-blockbuster-s-competitive-advantage
Note it was written in 2007 - its basically talking about how he sold his Netflix shares because Blockbuster had started their program where they now let you return movies to the store. This wouldn't have been really interesting in 2007 - but I like it now because Netflix responded to their changing strategy with their "Watch Instantly" feature which negated the near-instant gratification that Blockbuster was offering. This guy should have kept his Netflix stocks!
I was trying to think of any other companies that reacted so quickly to change their company strategy...and then I thought that may be a good discussion post for all of us! The only other ones I can think of didn't do so well - like Kmart trying to partner with higher end names (Martha Stewart) to save their stores.
During a prior class a few years ago, I did a company analysis on Blockbuster and Hollywood Video. At that time I had not heard of Netflix and Blockbuster was definitely the dominant company in the video rental industry, but things have definitely changed. I think most people would subscribe to Netflix over Blockbuster so they don't have to do much of anything to receive a movie. If you lived near a Blockbuster then I think that would be a huge deciding factor to subscribe to Blockbuster. Now there are the red box rentals that are popping up everywhere - and I think they have and will continue to change the competitive mix for the movie rental industry. Everyone is trying to react quickly to their competitors because this industry does make alot of money. If your competitors are rapidly changing, then you have to change just as quickly to stay in the game.
ReplyDeleteI think it is kinda funny how the guy who wrote the article ignored some of his own points. 1 When he said Netflix can't match this advantage, "At least for now." 2. when talking about selection, "I prefer independent and foreign films, and Netflix offers a superior selection of these, at least for now." Did he really think that Blockbuster would decide to move away from mainstream movies? 3. "Download services will negate both Blockbuster's instant-gratification advantage and all the benefits of the rental-by-mail model." He predicted the downfall, unless Blockbuster substantially changed their strategy. He even goes on to say that Netflix will adjust better than Blockbuster. It almost seems like someone not being able to take their own advice. Then agian, hindsight is usually 20/20.
ReplyDeleteI am slightly biased regarding Netflix vs Blockbuster. I was really disappointed when I realized all Blockbuster stores were going out of business. I am definitely one of those people that is slow to acquire the newest and latest in technology. I liked going into the store to pick out a movie when the mood struck me. I'm that "instant gratification" type of person in the article! The idea of picking out movies and having to wait for them to come in the mail didn't really appeal to me. Guess I'm going to have to give it a try! All of that said, I think the author of this article missed the trend in a big way. Maybe the time frame is to blame for his misread of the market, the article was written in 2007. I think part of his mistake in giving Blockbuster the competitive advantage is he only considered Netflix as a competitor. He did not mention movie channels (HBO, Cinemax), Cable On-Demand movies, and downloading movies online (legally or illegally)as other potential threats to Blockbuster. I don't think Netflix is the only external threat that forced Blockbuster to shut down its bricks and mortar locations, but rather a combination of all competitiors and consumer options. In addition I think Blockbuster's demise is just what Jen described in class, they were too slow to adjust to the changing environment!
ReplyDeleteOhh Redbox was a good one ... I totally forgot about that. That would have been good in the presentation too. I almost wish I was doing my industry paper on video rentals or something.
ReplyDeleteSarah Netflix is really fun...you should try it. Seriously though I think Blockbuster also just priced itself out. I'm not going to spend five or six dollars to rent ONE movie when for 15$ or so I can have unlimited rentals for the entire month. Once Netflix improved their shipping (new hubs) they seemed to really take off. Theres an appeal, especially in households where everyone works, to just having a movie waiting at home instead of running out to get it. NO late fees (something Blockbuster did try to emulate for a little while didn't they?) is another plus.
When I lived in Washington there were a ton of Movie Galleries, they had a deal where for 15$ a month you could rent unlimited, 5 movies at a time (just no New Releases). Now had Blockbuster done something like that I think they would have been a good match for Netflix. Sadly I do think that Blockbuster is going to keep slipping downward. Between Netflix and Redbox, which have little overhead and can offer much lower rates, Blockbuster is going to continue going downhill.
Jennifer, this would be an interesting topic to do an industry analysis on, b/c it seems to be changing daily. Just this past weekend I went into a Blockbuster that was closing their doors b/c they can't compete with the Netflix's and the Redbox. I mean they now have Redbox booths in front of most 7-11s and other gas stations. It is hard to compete with instant download or convenience when pumping gas.
ReplyDeleteSarah I am with you. I enjoy going to the movie store and picking out what movie I want to watch. I guess if I have something specific in mind instant download would be beneficial; but for me, I go back and forth all the time that I would probably end up being disappointed and download 2 or 3 movies before I pick the one I want.
It was kind of hard to go back to 2007 and remember where we were in the age of movie rentals but it sure was interesting to look back at his perspective on the way he thought things would end up. Slightly off!!!
As with any industry/company, when the market changes they too will have to change to keep up.
I wanted to say that we all did a great job during the presentation. I know that he already posted our grades and we got an A, but I think we deserved it!