4. Who will be the final winner?

original article

DVD-rental business competition:
Blockbuster VS Netflix

1. How successful Blockbuster & its business model
- Blockbuster entered the video rental business in 1985, at that time, only certain customers were using it, but after 20years, it rapidly has been prospered. John Antico is CEO of this company. The rental giant opened 9,100 stores in 25 countries, gaining a market share that has been enjoyed by few companies in any industry.

1) Blockbuster simplified the procedure - using bar code scanner system
Blockbuster equipped each of its video rental stores with custom software it had designed to simplify rental and sale transactions. An automated point-of-sale system uses a laser bar code scanner to read data from items being rented or sold and from a Blockbuster customer’s identification card.

2) Blockbuster’s CRM(Customer Relationship Management) – Knowing customer’s needs on the basis of the record
These data are transmitted to Blockbuster’s corporate computer center. Management uses these data to monitor sales and to analyze the demographics, and rental and sales patterns for each store to improve its marketing decisions. Blockbuster’s success was based on video tape rentals and sales and rentals of DVDs. By 2004, Block buster possessed a 40-percent share of the U.S. video rental market, estimated to range from $7billion of business per year to $9billion; Blockbuster also had video sales of around $16billion.

3) Benchmarking – Analyze competitor and apply their strength to ours
Blockbuster faced a crisis as a new business model emerges to the industry. Unlike Blockbuster Nflix sells products via online. It was sensational and competitive at that time. So, it generates lots of profit. Seeing and analyzing this business model, Blockbuster decided to adopt it to survive in the industry. More commendable thing is Blockbuster doesn’t only adopt other’s model but also restructure their old system by offering “a monthly subscription service for in-store customers”, “a subscription service for video games”, “a trading service for movies and games” , etc. to the customers.
Finally, Blockbuster yielded 100$ million increase in capital expenditures from 2003 to 2004.


2. How successful Netflix & its business model?
- Netflix is one of video rental industry like Blockbuster. Reed Hastings is a CEO of this company. When it first emerged into online DVD rental industry, it was focused on customer’s convenience by giving new way to rent&buy DVDs; via internet. All interactions between Netflix and its customers took place on the Internet and through the postal service. Only thing that customers need to do is make a wish list and click some buttons to order it. Another good thing is that customer could keep for DVDs as long as he or she wanted without incurring late charges. That way, customers feel more secure and comfortable when they use Netflix. It was truly successful. According to Kagan Research LLC, revenues from online movie rentals, which were nonexistent in 1998, rose to %522 million in 2004. Also, total revenue would approach $1billion in 2005 and $3 billion by 2009. As Netflix caught on and its subscription model became popular, Netflix’s gains in market share, from 2 to 7percent between 2003 and 2004, gave Blockbuster true cause for concern.


3. Future of Blockbuster&Netflix
- I don’t think nor Blockbuster and Netflix will succeed in the future unless they innovate present system and organization. Because, as time flows lots of new entrants will be coming into this industry with better contents. Since science and technology are developing fast these days, position of the bricks and mortal industry like Blockbuster is getting smaller and they are now facing crisis. To survive in this tough, competitive environment, Blockbuster and Netflix should innovate on their present structures and ideas to catch up changing trends.

Reference:
http://writer111.blogspot.com/2006/02/blockbuster-beats-netflix-in-service.html
http://www.thelogicofsuccess.com/blockbuster-netflix-innovation-competition.htm
Management Information System -Pearson Education- P121-123

Student# 20601016 entry:4