MOVIE RENTAL BUSINESS Harvard Case Solution & Analysis

Movie Rental business Case Study Solution

Memorandum

To:

From:

Background Information

The case provides an insight on competition in video distribution business. It highlights that how Netflix and Redbox challenged the supremacy of decades-old video rental company Blockbuster. It further put emphasis on how technology plays an important role in the business where there is a high probability of redundancy and uncertainty of success.

Alternatives Considered

Blockbuster has responded appropriately to the competition posed by the newcomers after a severe glut. Closure of branches and need for new technology have left it in severe need of equipment. Blockbuster needs to partner up with leading tech industries to help it keep on top of the competition. Its investment in kiosks and vending machine can be feasible in short term, but in long term, with fall in trend of DVDs, it will have the same problem as it has now regarding closure of branches; closure of kiosks and vending machines.

Recommendations

The companies operating in video rental business have to adopt a really agile business model which can respond appropriately to technological changes. This is because of the highly volatile nature of the industry in which these companies operate. It further needs to work upon integration of technological advancement in its operations.

Closing

With increase in feature of videos on demand (VOD), the companies in video business will have to come to terms with changing trends of video viewership. They need to adapt to this change and analyse the trend of video streaming and try to base their system on these recent developments. The industry is highly flexible, and the company which manages to bend most will be the one most likely to stay on top of the competition.

Blockbuster, Netflix and Redbox (Background and Overall Industry Review)

Dramatic changes in entertainment industry have been appropriately met with relevant response from entertainment providers. As Hollywood geared up for producing more movies in past two decades than it did in last century alone, the distribution channels such as Netflix and Blockbuster are also gearing up their ways for gaining control over entertainment viewing markets. Technology can be seen as the biggest factor causing a major upheaval in the entertainment sector.

Technology have introduced various innovative methods for movie production and distribution. With evolving technology, various possibilities have opened up in the industry. Movie makers used up to date technology such as 3D and IMAX. This means that even distribution channels have to change with time.

Hollywood have undergone major changes in the past two decades alone. Where most of the movies in previous century were more focused on love and romance and were earth based, the movies produced now are not complete without including at least on (computer generated imagery) CGI character.Technology have shaken up the very basis of movie business. Now movie makers are making extensive use of technology in their production process.

Furthermore, the distribution of these movies have also undergone many changes. Where these movies could be viewed, by the general population, through purchasing or renting tapes 1980s, the turn of the century saw rise in DVD based method of viewing. Further technological advancement saw even DVDs getting replaced by digital media and online pay per view movies being made available to general masses.

Comparison of Companies (Individual and SWOT Analysis)

Blockbuster

Blockbuster operated in a time before technology had taken over. It began its operations by renting out tapes. At the point when it existed the mode of watching movies was either through theatre or through renting or purchasing tapes. Blockbuster did not even have to face competition for almost two decades with its existing business idea and business model.

Being a monopoly at that time, Blockbuster enjoyed huge success that it went to create its presence all across the world. By late 1900s it had around 3400 branches across the world, carrying on business of renting out and selling tapes. Its business model was further boosted by its arrangement with studios which enabled them to reduce costs through obtaining videos directly in return for sharing around 40% of its revenue.

Even though Blockbuster did not face any real competition until 1999, it faced problems on completely different fronts including their compatibility with their existing business model. Blockbuster have been at disadvantage in the sense that the company was subjected to change in ownership several times, especially when the company was forced to sell shares just one year after its inception, due to low capital.

Blockbuster’s business model was also severely challenged by ever-changing technology which put a huge strain on its operation. The video company failed to adapt itself to the rapid technological advancements taking place in the film industry. This proved to be the biggest mistake made by them as with passing years the competitors which rose up like Netflix and Redbox made extensive use of technology to gain advantage over the company.

Blockbuster did adopt itself to the recent technological trends but at the cost of its physical presence. The changing trend including focusing on virtual presence led to closure of many branches of Blockbuster operating across the globe.

MOVIE RENTAL BUSINESS Harvard Case Solution & Analysis

 

 

On technological front, Blockbuster went on to partner up with Samsung and TiVo to make video rentals and purchasing more technologically friendly. They are further trying to increase DVD vending kiosks from their existing number of around 2000 kiosks. The company still need to make its virtual presence felt with more and more entertainment systems being operated through PCs.

Netflix

Netflix came into the video renting and selling business on back of two business models. First was pay per rental mail order and second was subscription based. After experimenting with both these methods, it settled on subscription based model and went on to improve its business through that model. Netflix’s greatest advantage in a surging video business competition was its ability to comprehend the market flow of the industry...........................

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