The Marketing Strategy Of Blockbuster Essay

On the horizon, Blockbusters number of competitors should steadily increase from new emerging technologies. If Blockbuster extends into the realm of VOD, Legal Movie Downloads, or Digital Video Recorders (DVR), it must realize there are existing and powerful players in these markets already. This new technology is shaping the market for many deals or partnerships. They will face fierce competition, but in the future, Blockbuster must not find it self on the outside looking in.

The movie rental industry is a living industry; there are constant changes with advances in technology, rights management, and the slow, but steady, move away from physical Media. Companies such as Netflix, Hulu, RedBox, and Blockbuster are being forced to look at new business models and try to keep up with these changes.

Blockbuster implemented a new strategy for customers to access their rentals in “five channels of distribution: in-store, by mail, through vending machines and kiosks, online, and at home (direct to the TV)” (DATAMONITOR, 2009). However, this strategy was a reactive approach to the problem produced ten years behind schedule. Wooldridge et al., (2007) stated that Blockbuster should select and adapt their strategy to respond to the fast changing market and maintain a competitive position. This was an obvious failure for Blockbuster. The changes in the market produced a decline in profit at a faster pace than the strategies that Blockbuster implemented to combat these losses.

2. Pirogi, Jeanine. (2013). Titled: The Rise & Fall of Blockbuster: The very Long & Rewinding Road" (The Street). N.p., 23 Sept. 2010. Wide-Web. 11-Dec.

Blockbuster was “the largest movie rental chain” in the Movies industry around the world (Biesada a). According to Rourke, Rothburd and Stansell (2006), Blockbuster mainly focused on “providing in-home rental, retail movie, and game entertainment”. It created 9,100 video stores and provided services to almost three million of customers in America and 24 other countries (p. 74). In 2010, the company filed for bankruptcy since it failed to adapt new technology in their strategies, and “was sold to satellite TV service provider DISH Network in 2011” (Biesada b).

Blockbuster Entertainment, Inc. was once a highly successful and profitable brick and mortar home movie and video game rental store. At its peak in 2004, Blockbuster had up to 60,000 employees and more than 9,000 stores. The idea behind Netflix came from an unsatisfied, embarrassed customer of Blockbuster, Mr. Reed Hastings, now CEO of Netflix, paid a $40 late fee because he returned the movie Apollo 13 six weeks later (Zarafshar, 2013). He began to contemplate ingeniously about a notion to change the movie-leasing pattern into a more pioneering industry. In 1997 Netflix was started as a DVD rental-by-mail business without subscriptions. In 1999, taking a stride additional in the direction of evolving the industry, Hastings began the subscription-based business mode based on renting DVDs by mail with plans reliant on the quantity of titles taken at a time. Netflix put forward 120,000 titles for limitless monthly DVD rental with free shipping no late and per title fees. Since that time Netflix has become one of the most popular subscription services in the world, and is now valued at over $28 billion and steadily increasing. What factors contributed to the success and failure of these two companies?

The movie studios want customers to be able to get their movies and entertainment as easily as possible. The easier it is for people to acquire their products the more likely it is that they will. By offering many different options for customers to obtain movies and entertainment, Blockbuster has a strategic advantage over its competitors. The convenience that Blockbuster can offer in their ability to distribute the movie studios products is a definite advantage. Another advantage

Blockbuster is the largest movie rental retailer. With its opening in 1985, Blockbuster has pursued an ambiguous program of growth and expansion. Currently, Blockbuster owns and operates over 9,000 stores both domestically and internationally. In addition, Blockbuster franchises about a quarter of its stores. It is important to note that Blockbuster is undergoing a managerial struggle at the present time. The current CEO, John Antioco, and a major shareholder, Carl Icahn, are disputing Blockbuster’s strategy. Mr. Antioco has threatened to resign if Mr. Icahn succeeds at attaining a position on the Board of Directors1. Mr. Antioco believes that Blockbuster needs to develop new strategy to respond to the current market

Blockbuster’s restructuring of the company under its new owners shows how they were open to organizational change. The text describes organizational change as the movement of an organization from one state of affairs to another. Blockbuster completely changed their strategy and technology in order to compete with the new technology based companies that put them in this position in the first place. Simply put, no one visited the stores to rent movies when they could just turn on their television to order on-demand showings for the exact same price without leaving their home or grab a couple movies for a dollar apiece while grocery shopping. If they did not change they were sure to fail as a business and the company would disappear into the long list of companies that failed in the economic recession. The change was forced by other companies’ utilization of technology that caused a drastic change in the market conditions. This shift enabled the cheaper, more convenient home entertainment to steal a huge chunk of market share from Blockbuster’s traditionally structured company. Blockbuster enjoyed a long period on top of the movie rental/ home entertainment industry and this could possibly be what caused the success of these newer

untouchable and we were all doomed to a lifetime of late fees and limited movie

Even though it grew mainly due to the strategies and innovative ideas it developed in this industry, the fact that there was an absence of substantial competition also helped propel its success.

Blockbuster was too confident in their brand and their reach that failed to see the threat from the online rental business, meanwhile Netflix took advantage of their slow entrance to build a market and leverage on growing technology (DVD) that took off really quickly.

One the one hand, the fertility of the industry opened the doors to corporations that sighted substantial growth potential. New entrants with big pockets such as Walmart could pose a certain threat to Netflix, by exploiting a playing card based on cost reduction. On the other hand, barriers to entry became relatively significant as established video rental retailers such as Netflix have the experience and the knowhow to market movies to people. In this industry, firms that do not have a technological advantage can’t compete. The best example is Netflix’s CineMatch program that offered personalized film recommendations based on customer’s rental patterns. This way, Netflix was able to better serve its subscribers. From a cost perspective, the movie rental industry requires high capital expenditures, and the major expenses are highly related to acquisitions of DVD library and investments in technology (exhibit 2 continued). Thus, we may say that entry is difficult in this industry as the competing firms have reputation, experience and recognizable brand names.

The presence of Netflix and Blockbuster in the movie rental industry has assisted me in developing this analysis of each corporation’s strength, weaknesses, opportunities, and threats as followed:

Before the advent of movie rental stores, to watch a new movie, people had to go to theatres or cinemas spending a lot of money. Video rental was the answer to the new needs. Since the 90s, video rental industry has become a very big business; in those years, rental prices rose as more and more people began renting movies. At the same time, new players entered the market creating strong competition inside the industry. In the last years, the field of home entertainment has changed dramatically because of the presence of Internet and new technologies (Recorded DVD & Video in the United States, 2009).