Movie Rental Business: Blockbuster, Netflix, and Redbox Harvard Case Solution & Analysis

Movie Rental Business: Blockbuster, Netflix, and Redbox Case Solution

Introduction

The case is about the movie rental business and between the global players in the market Blockbuster, Netflix, and Redbox. The three companies were in intense competition between each other and strived for significant market share.

Blockbuster Inc.

In 1985, David Cook established Blockbuster Inc. in Dallas, Texas with a rental outlet. The company intended to take the advantage of the video rental market, thus started a store with large collection of the movies than most its competitors. The store was equipped with a computerized system, which was used for controlling the inventory and checkout. Therefore, the store got immense popularity and success. It then expanded to three other locations.

However, in order to expand further, the company went into IPO. Moreover, the company accounted for successful business between 1987 and 1993. It expanded aggressively by establishing rival chains and began to dominate the local market. In 1990s and 2000s, the company realized competition in the market from the online rental market of DVD, which started to replace the tapes. Netflix emerged as a major competitor and became a threat to Blockbuster’s business. Since then, the company has implemented significant changes but the sales volume declined continuously.

Netflix

Netflix was established in 1997 by Red Hasting. The company was engaged in the video rental business. The company chose to settle on the subscription based strategy and thus, established a strong reputation in the market.  By 2010, Netflix became the world’s largest company in subscription service, DVD by mail, and streaming movies & TV episodes. Netflix provided high customer value, which contributed in the success of its business. However, it also faced immense challenges and competition such as DVD Express, Reel.com etc. In addition, the company also faced competition from Amazon and Wal-Mart but it coped up to the problems and responded effectively. Netflix offered wide selection of DVD’s, including foreign and independent films.

Redbox

The company operated under the ownership of McDonalds to increase customer attention at McDonalds’ outlets and to provide convenience to the customers. Redbox started independently with a small counter, which was launched in 2004 in Denver. After the positive customer feedback, Redbox expanded to more than 800 restaurants in different markets. However, the Redbox was separated from McDonalds in 2005 when Coinstar Inc. purchased it. Redbox pursued its business by targeting budget conscious movie renters. Redbox offered its customers an instant DVD on rent for immediate use without any membership. By 2012, Redbox doubled its kiosks and expanded successfully in local markets. The company benefited and differentiated itself as a low cost leader. In 2010, the company accounted 25% of the DVD-rental volume, which was greater than Blockbuster. The company became a tough competitor in the market as well as a major competitor for both Netflix and Blockbuster.

Companies Channels Competing factors
Blockbuster Inc. Stores collection of the movies inventory
Netflix Online channel/ subscription DVD by mail and streaming movies and TV episodes
Redbox Kiosks instant DVD on rent for the immediate use without any membership

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