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During the 80s and 90s, Blockbuster dominated the US home video rental market. However, the emergence of Netflix in 1997 with its 'rental by mail' model challenged Blockbuster's business model (and market dominance). Blockbuster's market position was further weakened when Netflix began to stream video content directly to consumers' computers. In this case study, you are required to prepare a 3,000 word report which examines how 'Netflix beat Blockbuster Video'. In preparing your report, please consider the role of technological diffusion, first movers and followers, and innovation. In addition, please consider whether Netflix will continue to remain as the dominant online streaming provider in the US?
Your report must be structured as follows:
1. Introduction (5 marks)
2. Institutional Background (5 marks)
2.1 A brief history of Blockbuster
2.2. A brief history of Netflix
3. How Netflix beat Blockbuster (20 marks)
3.1 Changing technology
3.2 Retail outlets versus operating online
3.3 Pricing strategies
3.4 Netflix's innovations
4. Will Netflix remain the dominate provider of online video streaming? (15 marks)
4.1 Netflix stumbles: The demise of Qwikster
4.2 Netflix rebuilds: The rise of original content
4.3 The future of Netflix
5. Conclusion (5 marks)
Tips for preparing your report:
- Define your terms;
- Clearly explain the concepts;
- Make use of multiple industry and academic references (minimum of five); and ∙ Keep to the word limit.
The video streaming market has grown tremendously with the shift from rentals to online-streaming of content. Blockbuster Video which was once considered as an icon of the video disc rental industry had become a less profitable and bankrupt content distribution company (Kooser, 2013). Netflix became its contender with a subscription model where customers pay a flat monthly fee and gain access to unlimited video content with late fees which gained traction among the customers. Blockbuster's failure was attributed to the lack of management vision and its failure to understand the shifts in the industry.
The movie studios preferred the competition among streaming services and cable providers to maintain their power exerted over the content. If consumers were unable to get a cheap streaming option, they are highly likely to select several subscriptions or retain traditional TV (Pepitone, 2011). The monthly subscription model for video remained an attractive option for video rental companies along with a wide catalogue of content.
When compared to Blockbuster's DVD rental business, Netflix's DNA was its digital engagement (Mulligan, 2017). This allowed Netflix to gain real time understanding of consumption patterns of its membership, demographics, price points and content requirements which enabled it to succeed in streaming service where Blockbuster failed. Despite its success, Netflix is subject to challenges arising from content distribution rights and online streaming services of studios and TV channels. In this report, the failure of Blockbuster and the rise of Netflix in the video streaming business are discussed in terms of technology adoption, innovation, pricing strategy and the online store model. The shortfalls of Netflix and its future plans to remain a dominant player are discussed.
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