Blockbuster v/s Netflix : Who will win out?

Case Study

By:
Bahar Shoogufan
Nupur Jain
Sanchit Makhija
Seher Contractor
Ridhi Bhatnagar
Vishalakshi Verma
Sanchit Sawhney
 Summary of the Case provided
• Introduction - Blockbuster
 Blockbuster – After entering in 1985, in 20 years
opened 9100 stores in 25 countries .
 By 2004 : 40 % market share in US video rental market
of $ 7-9 billion.
 New innovations used in IT:
 Automated point of sales system using laser bar
code scanner.
 Data used to monitor sales and analyze
demographics to improve its marketing decisions.
• Moves to counter competition - Blockbuster
 Online rental service - Movie Pass , Game Pass
 “No More Late Fee” Program
 Company decided to undertake both strategies to
develop an online store in competition to Netflix
and focus on traditional stores.
 New Online division with headquarter at Dallas.
 Unlimited DVD rental at $5.99 /movie

Undercutting Netflix in pricing and distribution via
its 30 distribution centers and 4500 stores.
 But still some problems with integration of online
and physical stores remained.
• Introduction – Netflix
 Launched in 1998 for customers who value
convenience.
 New Measures:
 All interactions on internet and postal
 Users can go online and create a wish list of movies.
 No late charges
 Tried to make physical movie rental stores obsolete.
 Gained 5 % market share in 1 year between
2003 and 2004.
• Problems with Blockbuster
 According to SG Cowen , online rental
service remained inferior to Netflix.
 Most costly change – “No More Late Fee” -
shortfall of $250 - $300 million no longer
fulfilled adequately
 Corporate Raider “ Carl Icahn” –acquired 9
% stake in blockbuster – which entitled him
a place in Board of Directors. Where he
heavily criticized the company policies.
 Summary of the Case provided
 New Challenges for Both companies:
 Video On Demand (VOD) technology
 April 2006: Internet as means for selling
movies came into being.
 Six big studios including Sony reached
an agreement with Movielink to sell
movies online.
 CinemaNow and Bit torrent also
capturing market share away
• Problems with VOD services :
 Technology doesn’t permit bandwidth
for VOD suppliers to provide the same
kind of titles which blockbuster can .
 Huge issue of piracy of the movies also in
the picture
 Movie Download didn’t come with extra
stuff which is available on DVDs.
 A regular download required complex
modifications to view it on TV
 Bandwidth issues : 90 minutes to
download a movie
• New Developments
 With the entering of Apple iTunes into
movies from songs and with their loyal
customers and nominal pricing they pose a
serious threat to the existing companies.
 Apple’s Involvement viewed as the tipping
point in the movie download industry.
 Question before us:
• Could there be another player to
compete with Blockbuster and Netflix
in the near future and if so what
challenges it will pose to the
companies?
• Is their a possibility for a new
partnership in the industry which is
maturing?
Thank You