Blockbuster Inc Company: Factors of Fall

The Executive summary

The movie rental industry in the United States has been declining swiftly through the years due to changes in technology. The advent of the internet, cable TV, online downloads and online streaming of videos has resulted in the decline in revenues and clients of the movie rental industry. This paper evaluates the factors that have led to a decline of revenues and the clients of the blockbuster movie and DVD Rental Company through the years.

The study utilizes data obtained from both primary and secondary sources to identify the key factors that have made the blockbuster company experience significant challenges in the movie and DVD rental market. The key factors identified by this research paper that have contributed to the fall of the market share in the movie rental and sales business of the blockbuster Inc. is competition.

Blockbuster Inc. has faced stiff Competition for market share in the movie rental and sales business from technologies such as cable TV, the internet, Netflix, red box and online streaming and downloading of videos. Through the identification of the key factors responsible for the fall of the blockbuster movie company , this research report serves as a benchmark for providing insights into how the blockbuster company can remain relevant in the changing market of movie and DVD rentals in the united states.

­­­­­­­­­Introduction

Blockbuster LLC is a company based in the United States of America that provides video games and video rental services.The Company was established in 1985 in Dallas. The company offers movie, rental, through movie rental shops. Blockbuster also delivers DVD by mail and provides video streaming on demand. The company had enjoyed tremendous growth through the years. At its peak in the year 2009, the company had over 60,000 employees and 500 stores across the United States and, managed to open 17 stores in seventeen countries around the world (Newsman, 2011).

However beginning the year 2009, the company began to experience revenue losses until the company had to file for bankruptcy in September of 2010. The dish network then acquired the company for 233 million dollars in April 6 2011 (Newman, 2011). The steady fall of the company from periods of rise in profits to a steady fall in the profits and the eventual bankrupuncy of the company represents the changes that have occurred to the video games and DVD rental market in the United States.

Research background

The sudden decline of the share market of blockbuster in the movie rental business and the sudden fall of blockbuster into bankruptcy raises a fundamental question of what factors contributed to fall of the company. The company had enjoyed many years of tremendous success in the movie rental business.

Type of research study

This research study is a descriptive study that analysis the factors responsible for the fall of blockbuster Inc.

Specific research instruments

This descriptive research study utilizes literature available from primary and secondary sources to evaluate some of the internal and external factors responsible to the sudden fall of the company.

Research methodology and procedures

This research study will utilize data obtained from primary and secondary sources about the fall of blockbuster. By analyzing this data, the research study will establish the key factors responsible for the fall of the blockbuster Inc.

Key population and sample size

Target population and sample size

The data used in this research study analyzing the decline of the share market of blockbuster in the movie rental business in the United States is obtained from surveys made by research companies on the share of the movie rental market across all the states in the United States. The main sources of the data used are valuation studies, 2011, David, 2011 and Newman, 2011. There are indications that the traditional movie-rental industry revenues has been decreasing on a rate of 9.9 percent every year. This has been attributed to the fact that nowadays more people are now using the online platform to access movies (Valuation studies, 2011). Most of the research done indicate that, majority of people in both developing and developed nations have access to online movies. United States being the target population, citizens have proved to rely more on internet movies, hence the drastic fall of movie-rental business of blockbuster.

The data used in analyzing the factors that led to the fall of the blockbuster LLC narrows down to the main cause of the fall of blockbuster LLC.i.e. competition from emerging technologies in the movie rental business. The data used therefore entails an analysis of the strategies used by the main competitors of blockbuster in the movie rental industry in the united states chiefly among them Netflix and red box as well as the competition from the internet and cable TV. The availability of online movies and the presence of potential competitors in the market, have contributed greatly to the downfall of blockbuster business of renting out movies.

The data used compares the strategies used by the main competitors of blockbuster that edged out blockbuster as the leading provider of movie rental business in the United States. The data used narrows down to the strategies used by the competitors of blockbuster to respond to market needs. For example, how Netflix and red box diversified their business to offer better and superior online movie rental business ahead of blockbuster capturing a large share of the market in the process.

The data used compares the strategies employed by blockbuster and its main competitors on how each responded to the challenges of the movie rental market. In addition, consideration on how the strategy of each competitor contributed to the process of the fall of blockbuster LLC, as the leading player in movie rental market in the United States. This research study also utilizes data on cable TV and the internet usage and how each have contributed to the fall of blockbuster company through offering clients of blockbuster other avenues of accessing movies.

Through comparing the data obtained from the main competitors of blockbuster and blockbuster LLC, the research study reveals how the complacency of blockbuster in entering into the business of online video rentals contributed to the fall of the company through not taking the chance of capitalizing on their unique selling position as the leading company in movie rental business.

The data obtained from the primary and secondary sources is used in this research study to provide insights on the strategies used by blockbuster to respond to the threat of competitors and to changing market trends, and how these strategies contributed to the downfall of the blockbuster LLC.

Key research findings

According to valuation studies (2011), the main factor that contributed to the fall of the blockbuster LLC is competition from rival companies who were quick to adopt new technologies in the movie rental business. The DVD, video games and rental business in the United States is rapidly declining because technology is fast replacing in stores rentals of DVDS, movies and video games. The availability of substitute technologies such as the cable TV, internet downloads and online streamlining of videos has contributed to a drop in number of clients accessing movies through the traditional movie rental stores.

These emerging technologies have adversely affected the movie and DVD rental business significantly. These technologies have resulted in fall of the industry revenue by an average rate of 9.9 percents annually from the year 2007 (Valuation studies, 2011).

Competition from emerging movie rental companies is also another reason responsible for bankruptcy of Blockbuster. Red box movies and DVD rental kiosks are the main competitors who have contributed to fall in share of the market of blockbuster clients. Red box DVD rental kiosks have altered the entire landscape of the movie industry in the United States (David, 2011).

Red box movie rental kiosks has over 15400 machines in supermarkets, discount stores and big retail stores such as Wal-Mart, MacDonald’s and Walgreen’s. These machines carry about seven thousand discs in their systems. Red box charges one dollar per night rate for DVDs rentals from these kiosks. Around four million people use the service every month (David, 2011).

Red box started as a subsidiary of the McDonalds.The company was able to leverage its parent companies heavily trafficked fast food locations to penetrate an already crowded market place. This self-service program of renting DVDS and movies by red box has catapulted the company to great success in an industry that has many players. Red box has been able to leverage technology focused on the customer in varied physical locations (Galindo, 2010)

Red box has made the video and movie rental experiences a very efficient and simple process. Red box has therefore, disrupted the entire movie and DVD rental industry with its customer focused, simple and convenient movie rental business. Red box has collaborated with many retail chains and supermarkets that have widened the reach of red box to many customers. Red box therefore, adapts itself to reach many locations through delivering a customized experience (Galindo, 2010).

The success of the red box movie rental company prompted blockbuster to try partnering with the NCR corporation, one of the largest provider of ATM and cash registers in deploying over 10 000 kiosks for dispensing DVDs and movies around united states. However, this venture did not leverage blockbuster against its competitors (Galindo, 2010). The convenience that red box has made in the process of movie rental the company to be the leading choice for movie renter’s.Red box now generates over 270 billion dollars every year (David,2011).

Red box is also planning to start an online video streaming service that will be streaming live videos and movies to its clients (Newman, 2011). The company seems to have realized that the future of the movie rental business is going to be largely on the online platform. This is one of the companies, whose unique business model has knocked out blockbuster out of the movie rental industry with its convenient, easy method of the movie and video game rental business.

The other main competitor that has made blockbuster go under is Netflix. Netflix is one of the world’s largest movie rental businesses on the online platform. The company has over 6.3 million members and over 75 000 titles of movies in its database. The company is known for its excellent customer service and very user-friendly user interface. The company has thrived in the movie rental business on the online platform since it was founded (Julian, 2011).

Advances in technology have enabled the company to provide very quality streaming of videos to subscribers of the company. All subscribers of the Netflix services rent movies for a small fee through subscribing to the video on demand program. Netflix has been able to differentiate itself from the competitors such as blockbuster and has reduced competition over price. The company also offers a movie streaming service rather than a movie downloading service that have also differentiated itself from other competitors (Julian, 2011).

The popularity of the online streaming videos has increased over the years and pursuing this strategy into the future mean, that Netflix has a good future because the new technologies will dominate the movie rental market in future. The strategy of Netflix positioning itself as a premier provider of digital entertainment has made the company dominate the movie rental market on the online market (Julian, 2011).

Netflix has about 9 million subscribers while the online service of blockbuster: Blockbuster Total Access has three million subscribers. The companies almost charge the same prices from 10 dollars a movie and above. Blockbuster allows the customer the chance of physically returning a movie to the offices and for a very long time the company used to impose legal fines for movies unlike its competitors (Julian, 2011).

Netflix also delivers a movie within a day while blockbuster takes two to three days to deliver movies. Netflix also offers more movies than blockbuster and has the advantage of online viewing of movies unlike blockbuster. Netflix also ships movies faster than blockbuster. Netflix also bought rights for independent films to allow it to rent even more movies because only 30 percent in its online stores are new releases (Julian, 2011).

Blockbuster seems to have lost the battle for market share in the movie rental industry its competitors like Netflix and Red box. Red box and Netflix have gone a step ahead because they have embraced the online platform and do not have large overhead costs of running movie rental stores.

The popularity of the internet movie and DVD searches has also affected the movie industry significantly. Today, many sites on the internet allow internet users to view or download movies and DVD series free or for a cost. Sites such as you tube and I tunes among other allow viewers the privileged of watching movies and videos directly on the internet (Seeking alpha, 2011)

Illegal downloading of copyrighted videos and movies on the web has also become rampant nowadays (Seeking alpha, 2011). The movie rental business has to compete with these new forms of competition. These new avenues of accessing movies are changing the dynamics of the movie industry because the movie industry seems to have embraced the online platform.

The number of movie downloads and views on the online platform have increased considerably through the years. Companies like Netflix ,Red box itunes and Amazon.com and very many other websites also offer movie rental downloads where people pay a small fee per download.The future of the movie rental business seems to evolve more towards the online platform rather than through the movie rental stores (Anders, 2006).

The popularity of cable TV is another factor that has led to shrinking in the market of blockbuster in the movie rental industry. For example, apple TV offers viewers the chance of unlimited downloads of movies by connecting the Apple TV dish to the internet. Apple TV also offers viewers the chances of viewing you tube videos, listen to music, and listen to pod casts (Seeking alpha, 2011). These factors have significantly changed the movie rental market in the United States.

Data analysis

Blockbuster has been slowly loosing the market share of the movie rental industry to competitors on the online platform. Its competitors such as red box and Netflix have gone a step ahead to develop unique business models that appeal to the changing times of the movie industry. Failure of blockbuster to embrace the online platform of its business made its competitors overtake it in the movie rental industry. The future of the movie industry is on the online platform and a movie rental company that does not embrace this online platform will eventually loose out majority of their clients to competitors (Anders, 2006).

According to a research study by the Adams media research in the year 2007, seventy-three percent of the movie and DVD purchases were done at the traditional brick and mortar movie, rental stores. In 2008, Fifty-nine percent of people rented their movies from the brick and mortar, movie rental stores. Online stores accounted for thirty two percent of the movie rental market. This trend has continued to the present day because more movie and video content is being built online. The traditional brick and mortar movie and DVD rental stores will loose out majority of the market to the online movie rental stores (Newsman, 2011).

The traditional video and movie rental stores are competing for time with customers as they watch movies from the internet and cable TV. Most of Movie rental business is moving towards the online platform. The failure of blockbuster to embrace these technologies early enough gave a competitive edge to its competitors (Newsman, 2011). This mistake eventually made the competitors lock it out of the market. This shows the importance of movie rental business to embrace the online business-trading platform for the business.

Sample design and data collection method

This research study is based on data obtained from the general American populace and not from a specific sample. The data collected from both primary and secondary sources is then analyzed for the contribution it made to the fall of the blockbuster Inc.

Conclusion

Competition is the main factor that contributed to the downfall of the blockbuster Inc. The company did not embrace some of changes that were occurring in the movie rental industry. This made its competitors have a competitive edge in the market and gain a large market share within a short time. The advent of technologies such as the internet and associated technologies and cable TV are the main culprits for the downfall of the blockbuster company. The company did not respond quickly enough to the changes in the industry to remain relevant in changing times.

The trend in the movie and DVD rental business is in the online platform. However, there are still clients who may still find hard to substitute the personalized services of the traditional brick and mortar movie-rental business to embrace the impersonal style of online movie rental services. Blockbuster can continue to attract these clients through offering better and safer services. Blockbuster Inc can regain its share of the market by coming up with unique online business models convenient for their customers to capture some of the market from its competitors.

The future of the movie rental business is in the online platform. Blockbuster needs to develop good online movie and DVD rental business models that address the needs of customers. Good online business models that embrace the changes that occur in the industry can build a good online client base for the company and allow it to capture some of the market share back from competitors and rise back from bankrupuncy to profits.

Benefits of this research study to management

This research study identifies the main factors behind the fall of blockbuster Inc. The management of the company can use the information in this research study as a benchmark for devising strategies for overcoming competition in the movie rental industry to return to profitability.

Limitations of the research study

The research carried out has identified competition and changing consumer trends as the main factors behind the fall of blockbusters. Although, the results indicate that they are responsible for the fall of the company, the research is limited because it narrows to two main factors. There may be other factors, which might have contributed to the fall of Blockbusters Inc, which this paper might not address.

References

Anders B. (2006). Block busted! Movie rentals of today and tomorrow. Web.

David W. (2011).How red box is disrupting the movie rental industry. Web.

Galindo E. (2010). Video Rental Industry Succumbs To Red box. Web.

Julian E. (2011). Netflix versus blockbuster . Web.

Newman R. (2011). 15 companies that might not survive 2009. US news world 14 (1). Web.

Seeking alpha (2011). Movie rental industry adapts to changing times as should Investors. Web.

Valuation Resources. (2011). Movie, DVDS and rental stores. Web.