The media had to go through $1.25 billion in damage and lost battle. In fact, the industry claims that 30-70% of the videos on YouTube are illegally downloaded. Since customers were now watching movies for free, this put a great impact on them. Sales of DVDs were declining while downloading and watching movies online were growing. So, to solve this problem, the movie and television studios decided to do something about this.
Netflix and other Companies; Marketing Intermediaries at a Glance To provide easier access to most of the top movies companies such as Netflix, Inc. Amazon.com, Inc., and many other Kiosks appeared. Netflix, Inc. provides subscription based Internet services for TV shows and movies in the United States and internationally. The company allows its subscribers to watch unlimited TV shows and movies streamed over the Internet to their televisions, computers, and mobile devices. To keep up with the fast paced consumer environment, companies such as Netflix had to create integrated marketing strategies to promote business to the average consumer who have no extra time to spend in line at the local video store. Netflix, Inc. appears to fit the marketing concept of marketing intermediary.
As is stated in the article, the company used to have a major competitive advantage in terms of movie selection, where, “…customers could browse through thousands of titles…” (Hitt 106). Now, the entire scope of the market has changed and Blockbuster was much too slow to respond. The recent moves that it has made will surely generate profits, but not enough to sustain the company in the long run, seeing as there is nothing that differentiates Blockbuster’s services from that of its competitors. In order to fully gain lost market share back, the company would have to create some sort of highly innovative way of viewing or renting movies that none of its competitors has already thought of; It would have to be something that is rare, difficult to imitate, not easily substituted, and able to generate above-average returns. Unfortunately, at this point it looks as if none of this will come into fruition because Blockbuster has essentially decided to latch on to other companies, creating a sort of symbiotic relationship where the company feeds off of the success of its competitors.
1. Threat of New Entrants: Because firms like Blockbuster and Redbox are so well known and have a reputable name, I think the threat of new entrants is fairly low. Not to mention, the increasing trend toward subscriptions, internet streaming, and video on demand will most definitely prevent more movie rental firms from entering the marketplace. Threat of Substitute Products: The threat of substitute products is relatively high in the movie rental marketplace as a whole. With firms like Netflix, there is an increasing amount of consumers who pay for a subscription and can stream movies directly to their TV, computer, tablet, or even cell phone.
Additionally, there are copies such as Netflix who offer the movies the day the theaters stop featuring the movie. b. Bargaining Power of Suppliers- the Cineplex is one of four theaters that significant in the market, which makes the film industry less competitive and theses theaters headline the most popular movies at the same time. c. Threat of Substitute Products- the emergence of the bootleg dealers has changes the dynamics of the movie experience as the dealers have been able to produce theater quality movies sometime prior to the movie debut in the theaters. d. Rivalry among competing firms-v Cineplex is one of four popular brands; there is little competition among the top four brands as they all preview the top movies at the same time.
Date： Feb.16th 2011-2-18 To : Sabine Turnley From: Vincent Xu Re： Case Analysis：Competition in the Movie Rental Industry in 2008: Netflix and Blockbuster Battle for Market Leadership Executive Summary The movie rental is the most popular way to watch movies outside a theatre in the U.S. As the improvement of technology, this industry has been increasing in market position of the whole movie industry and cutting the sales of movie DVD. In this Memo, I will first give a overall analysis of the entire industry, identifying the upcoming trends, specifically addressing the competitive factors, the driving forces, and the key success factors of this industry. After that, the analysis will go to the two main competitors in this industry, Netflix and Blockbuster, about their strength and weakness, future opportunities and threats, and their current financial performances. Finally, I will give some advice to recommendation to both companies based on the conclusion of the analysis. Analysis The competitive forces of this industry, which mainly come from rivalries and suppliers, are relatively strong, and thus make this industry highly competitive.
Kodak provided the technology to make this magic commonplace. The company that George Eastman started over 130 years ago was to become part of the lives of everyone who wanted to take pictures of events both special and mundane. Indeed, the fact that it also sold the film - its Kodachrome was accepted as the best available - meant that Kodak grew to a position that made it unassailable. In 1976 in America Kodak accounted for 90% of film and 85% of camera sales. Kodak was a brand that was both profitable and enjoyed high levels of sentiment from customers.
They assumed that unlimited streaming service had more demand than DVD service. Before Netflix changed its pricing structure, the customers paid $7.99 per month for unlimited online streaming plan, or an additional $2 per month for the DVD-by-mail service. So the total cost for the user who wish to use both service unlimited online streaming and the DVD-by-email was $9.99 per month. However, this pricing was not financially sensible for the company because of the misconception of the demand of DVD rental service. Therefore, Netflix set the price $7.99 for both service unlimited online movies and unlimited mail-order DVDs respectively.
ANALYSIS Netflix, Redbox and Competitors Netflix is the world’s largest subscriptions service for streaming of online movies and TV episodes as well as sending DVD’s through mail. Redbox has over 22,000 kiosk locations within the continental United States and United Kingdom with DVD rentals and the cost of one dollar a day to its customers. New Entrants Ease of entrance is a main factor in the strength of both Redbox and Netflix, in the number of competitors, now with mostly online video streaming you only need computers, software and servers and distribution rights to enter the market. With more companies and competition Netflix and Redbox do not have to fight over customers. Buyer Bargaining Power The buyer bargaining power is increased with more entrance it is more likely that the consumer will have the choice to purchase a product with the lowest price.
A mere decade and 4 million subscribers later, Netflix has taken on established video rental companies such as Blockbuster, Hollywood Video, and Wal-Mart and emerged as the leader in innovation and customer service. In addition to betting that the Internet would be the future of the video rental market, Hastings made a few other key predictions that helped him develop a