Blockbuster's Rivalry with Netflix

3189 Words Feb 10th, 2011 13 Pages

Blockbuster history Blockbuster was founded by David P. Cook in 1985, a 34 year old entrepreneur from Dallas, Texas. Having past experience in providing database software and other computer services to industries like oil and gas, Cook had strong information system knowledge. His innovative idea of running a video rental business using a scanner to keep a track of the customer’s data and their rented movies, he came up with Blockbuster Inc which was a great success. Creating a family-oriented atmosphere and providing good customer service with better information system he opened 19 stores in the same year. In 20 years Blockbuster opened 2,100 stores in 25 countries possessing 40% share of the U.S
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In May 2006, Netflix sued Blockbuster on business method patent.
In June 2006, Blockbuster counter files a case against Netflix on monopolizing the online movie rental business.
In July 2006, Blockbuster raised their 3 out DVD price from $14.99 to $17.99
In September 2007, they raised their 3 out DVD price from $17.99 to $24.99
On 27th December 2007, Blockbuster again raised their 3 out DVD price from $24.99 to $34.99
In September 2010, Blockbuster filed for Chapter 11 bankruptcy.
Netflix did hit the nail on the head, right when the internet was in reach and got common among people; they revolutionized the video rental market – Eliminating physical stores and using internet & postal service to interact with the customers. Netflix not only had a superior technology advantage over Blockbuster but it employed marketing tools such as penetrating pricing which helped ignite a positive feedback. The switching cost for the customers was minimal; they got better deal with the monthly subscription, convenience of selecting movies, instant mailings of DVDs are a few customer-focused innovations they did to grow in the market. Netflix also used controlled migration strategy by offering live movie streaming on TV with Netflix ready device.
What wrong did they do?
As Shapiro and Hal said “To discourage entry avoid greed and play tough”, Blockbuster is known more inclined in making quick buck rather than focusing on the competition. When

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