Netflix’s unique DVD rental service has revolutionized the industry. They successfully took the best of traditional conventions (like physical media, the U.S. Postal Service) and mixed them with new world internet-conventions. They have also effectively managed to discourage competition from both more established businesses and new entrants. The future growth of Netflix as it expands into streaming media, poses challenges in legal, infrastructure/technology, and through additional costs. In order to remain competitive, it is imperative that Netflix partner with companies with global reach to overcome these challenges. This presentation was part of an MBA class assignment to audit and industry in the the technology sector. The presentation has multiple authors listed on the title page. If you would like copies of the executive summary, complete S.W.O.T. analysis, and/or the transcript of the presentation please PRIVATE MESSAGE ME and I will email it to you.
Netflix’s unique DVD rental service has revolutionized the industry. They successfully took the best of traditional conventions (like physical media, the U.S. Postal Service) and mixed them with new world internet-conventions. They have also effectively managed to discourage competition from both more established businesses and new entrants. The future growth of Netflix as it expands into streaming media, poses challenges in legal, infrastructure/technology, and through additional costs. In order to remain competitive, it is imperative that Netflix partner with companies with global reach to overcome these challenges. This presentation was part of an MBA class assignment to audit and industry in the the technology sector. The presentation has multiple authors listed on the title page. If you would like copies of the executive summary, complete S.W.O.T. analysis, and/or the transcript of the presentation please PRIVATE MESSAGE ME and I will email it to you.
Researched Netflix's existing market and recommended strategies for them to develop.
Conducted SWOT analysis, product and market analysis
Based on their market growth ad financial overview, developed marketing strategies
Developed BCG Matrix and understood Porter 5 forces to estimate the competitive strategy
Researched Netflix's existing market and recommended strategies for them to develop.
Conducted SWOT analysis, product and market analysis
Based on their market growth ad financial overview, developed marketing strategies
Developed BCG Matrix and understood Porter 5 forces to estimate the competitive strategy
[The Impact of the Internet on the Video Rental Industry.docxdanielfoster65629
[The Impact of the Internet on the Video Rental
Industry: Blockbuster vs. Netflix]
2
Table of Contents
INTRODUCTION 3
VIDEO RENTAL INDUSTRY ANALYSIS 5
BLOCKBUSTER BUSINESS DESCRIPTION 7
BLOCKBUSTER BUSINESS MODEL 7
BLOCKBUSTER HISTORY 8
BLOCKBUSTER SWOT ANALYSIS 10
NETFLIX BUSINESS DESCRIPTION 14
NETFLIX BUSINESS MODEL 14
NETFLIX HISTORY 15
COMPETING ONLINE SERVICES 16
FINANCIAL ANALYSIS 18
THE FUTURE OF THE VIDEO RENTAL INDUSTRY 24
CONCLUSION 25
REFERENCES 26
3
The Impact of the Internet on Video
Rentals: Blockbuster vs. Netflix
Could Brick and Mortar Video Rental Stores be a thing of the past? The Internet has
challenged the way movies are rented in the United States. Blockbuster, one of the
biggest video rental companies, has completely restructured its operations to meet the
market demands due to the emergence of the Internet and companies like Netflix. The
first impact the online video rental industry made on Blockbuster was making late fees
obsolete. Blockbuster enacted a “no late fees” policy in 2004 to remain competitive in the
industry. The company gave up about $450 million in late fee revenue and $250 million
to $300 million in operating income the first year the policy was enacted (Halkias). This
is not counting the increased number of new releases the company needed to purchase to
meet customer demand due to the policy. Under the "no late fees" program, a customer
was charged the purchase price for a movie if it was kept longer than 14 days. The charge
was dropped if it was returned within 30 days, and the customer was then charged a $1.25
restocking fee (Halkias). Blockbuster then created Blockbuster Total Access in attempts
to compete in the online video rental market. With Blockbuster Total Access, customers
would pay a subscription fee of $24.99 a month and rent up to 2 movies online at a time.
4
Netflix, the online DVD rental pioneer, sold a similar service for $21.99 a month.
Company CEO, John Antioco, said the overall online subscriber market is about 3
million to 5 million households, and he believes Blockbuster can attract a 30 percent
market share (Halkias). Blockbuster spent between 70 and 90 million dollars on the Total
Access program in hopes of reinventing itself. Program costs and continued decline in
rentals caused the company’s 2004 earnings to fall about 10 percent below the $1.48 a
share earned in 2003 (Halkias). The company will have to continue developing in this $8
billion dollar a year industry as it continues to change. Within another four years,
customers are expected to spend about $1.7 billion getting movies from cable to watch at
their convenience (Cohen). The video rental industry is also moving to legal downloading
sites such as CinemaNow Inc. Founded in 1999, the service lets people download movies
as a rental with a viewing window, or buy the film outright and burn it on a di.
Australian Online Feature Films - Stuart Cunningham SPAA 2010simonbritton88
Stuart Cunningham - Distinguished Professor
Director ARC Centre of Excellence for Creative Industries and Innovation, Queensland University of Technology.
From a DVD-delivery service to a global production powerhouse
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Netflix and the Global Streaming Video Market - A Business Case - By L. Kazmi
1. Netflix and the Global Streaming Video Market A Business Case by Laila Kazmi COM 591 MCDM Spring 2010
2. The Business Question How will Netflix stay ahead of its competitors as it enters the international market in a rapidly changing technological environment?
3. The Company Reed Hastings Co-Founded Netflix in 1999 Reached 1 million subscribers by 2004 14 million subscribers by 2010 Revolutionized Video Rental Business Ships 2 million DVDs (56,000 unique titles) per day Has a catalogue of 100,000 titles More than 2500 employees
4. The Context Economic impact : Motion Picture & Television industry is “a cornerstone of American economy” - (2006 Report)* - Employing 1.3 million Americans - $30.24 billion in wages - $30.2 billion in revenues to vendors and suppliers - $10 billion in income and sales tax Social Impact : Shaping public perceptions * http://universitytoolkit.org/press_releases/mpa%20us%20economic%20impact%20report_final.pdf
5. The Context Michael Jackson’s memorial service marked the next largest global streaming video event testing bandwidth President Obama’s inauguration prompted 7 million concurrent streams globally, CNN reported 27 million streams throughout the day Increasing number of sites offering streaming video content (YouTube, Hulu, Amazon VOD, Blockbuster, iTunes, IndiemoviesOnline, online film festivals, etc.) The Internet has created a global film market Streaming video audiences increasing (Pew Internet) Web enabled large screen TVs starting to appear on the market (Sony, Vizio, etc.)
6. The Collaborators Netflix signed deals with major film studios to delay new release rentals by 28 days in exchange for rights to stream more films online, 2010 Shipping 2 million DVDs per day by mail Netflix expected to pay the US Post Office $600 million in 2010
8. India Nigeria (Nollywood) China Argentina Japan Germany Iran Mexico Sweden World’s Largest Film Industries and Markets India (low broadband adoption rate) Nigeria (Nollywood) Hollywood France Germany France Hollywood UK UK China (low broadband adoption rate) Hong Kong, Taiwan Hong Kong, Taiwan
20. Considerations for Approaching Foreign Markets No mailing cost Restricted by bandwidth availability Restricted by technology availability But higher cost of purchasing streaming rights Requires growing the catalogue of foreign titles Local norms and habits for the film watching public
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23. Netflix Planned Strategy “ We are focused on entering one country and seeing how we do.” - Reed Hastings Netflix expected to offer service in one European country this year Hastings: After US, the biggest markets for Hollywood films is Europe, then Asia, then the rest of the world