Today’s market landscape looks much differently than it did when Blockbuster Video was at its peak. Many more competitors fight for the consumer’s dollar; however, there are still a few dominant companies that stand out among them. These include Netflix, Redbox, Apple, and Amazon. 2. Hypothesize the basic short-run and long-run behaviors of the model in the industry you have chosen in a “market economy.” Blockbuster became an almost instant hit with its brick and mortar stores.
Being the first mover, Netflix was able to establish a strong market share early and has thus been able to easily develop strong customer loyalty. In addition to this competitive edge, there are strong barriers to entry into this particular market. Building a base of movies and keeping it constantly updated with the latest films is costly and makes it difficult for new competitors to enter the industry. Another costly barrier to entry is the price of setting up channels of distribution. With 100 distribution centers and the ability to deliver DVDs to 97% of customers within a one-day period shows that Netflix already has a well-established distribution systems that give it a major
Netflix SWOT Analysis- Strengths and Weaknesses. Valuation too high Many people are watching Netflix’s (Nasdaq: NFLX) stock rise into the stratosphere, leading to a mania of momentum buying, which often bypasses the fundamentals of the company. Let’s do an old fashioned SWOT analysis, where we analyze the strengths, weaknesses, opportunities, and threats the company faces. • Strengths •Brand- to "Netflix" is fast becoming a verb in today’s society. Everyone knows the company’s name and the association is generally positive.
Over the years though, Blockbuster has lost it strangle hold over the competition and filed for Chapter 11 bankruptcy protection in September 2010. Blockbuster competition won because they evolved to meet the demands of the current customer. The biggest rival that Blockbuster competed with was Netflix, which was started in 1997 and established its subscription service in 1999. The competitive forces in the movie rental marketplace expanded in the early 90’s with the creation of the DVD movies. Like pervious attempts to move away from VHS tapes, DVDs players were very costly at first.
Opportunities: 1) The rapid adoption rate of DVD players among U.S. households 2) New relationship with studios, Netflix transition to revenue-sharing agreements with the major studios. 3) VOD/Online, customers were able to watch their selections immediately. 4) Relationship with USPS, Being the USPS fastest-growing first class customer allowed Netflix to
Video streaming, in relation, only accounts to less than 10% of its contribution margin. Despite that fact, Netflix was set on spinning of its most profitable product until the backlash from customers had its board members rethinking their strategy. This strategy not only confused Wall Street (which ultimately led to its plummeted share price) but left many customers alienated. Another issue is that Redbox, a company that solely relies on offering popular movie content in a cost effective, vending machine-like delivery has undercut Netflix’s DVD sales, and in result, has seen its profit margins dwindle in the last few years. Enter Amazon.
Opportunities are still available for Blockbuster to reevaluate and implements new strategies. The suggested strategic options include: focusing closely on competitors while making it a goal to always stay ahead innovatively; adding more quality to the customers experience whether it be in store, online, or kiosk; finding efficient ways to drive prices even lower to attract quantity in rentals while focusing on cost leadership. Analysis and Evaluation The Media entertainment industry has changed drastically since Blockbuster was established in 1985. Blockbuster has come a long way with revenues of more than 5 billion in 2008 considering the vast changes in technology over the years. While keeping in consideration all of the threats that the Internet imposes, Blockbuster must continue to evolve with technology and if possible be a step ahead of their competitors.
Disney's broadcasting division competes with organizations such as CBS and Fox, with strong market presence and technical expertise to challenge it in every aspect of business. The parks and resorts segment competes with other parks and resorts operators like Xanterra Parks & Resorts and smaller local US based amusement parks for visitors.Thus, intense competition threatens to erode the company's market share in its different lines of business. Proliferation of piracy in entertainment industry The proliferation of piracy in the entertainment industry is a significant and rapidly growing phenomenon. New technologies such as the convergence of computing, communication, and entertainment devices, the falling prices of devices incorporating such technologies, and increased broadband internet speed and penetration have made the unauthorized digital copying and distribution of films, television productions and other creative works easier and faster and enforcement of intellectual property rights more challenging. This facilitates the creation, transmission and sharing of high quality unauthorized copies of Disney's content.The proliferation of unauthorized copies and piracy of these products has an adverse effect on the company's businesses and profitability as
In 2010, Netflix passed a significant milestone with the majority of our subscribers viewing more of their TV shows and movies through streaming than by DVD. Going forward, they expect that will be primarily a global streaming business, with the added feature of DVDs-by-mail in the U.S. Netflix believe delivery of entertainment video over the Internet will be a very large global market opportunity, and that our focus on one segment of that market—consumer-paid, commercial-free streaming subscription of TV shows and movies—will enable the company to continue to grow rapidly and profitably. How Netflix made its place in the Home Video Rental Environment and its struggle to remain on top. The Idea The year was 1997, the 1997th year of the Common Era; the 997 the year of the second millennium, and the 97 year of the twentieth century. Saddam Hussein was threatening
Problems The first actionable problem is the increase in pricing for the service that we provide here at Netflix. Netflix has dropped 15% in heavy trading stock and has also lost over 2.5 million subscribers and projected to lose another 6.5 million due to the immense price jump. As you can see by reading the symptoms the problem in pricing is the major reason why revenue has dropped in the last year and is continue to fall. The price increase has caused customers to rethink their subscription to the company as most customers believe that watching movies is a pass time and not a necessity. Another problem the company is facing is the decline in market share.