Blockbuster

Blockbuster vs. Netflix: Which will win out?

Q1: Since Blockbuster entered the video rental business, they equipped each of its video rental stores with custom software it had designed to simplify rental and sale transactions. Moreover, to compete in the changing marketplace, they also made some dramatic changes in their business. Such as online rental service; Movie Pass, a monthly subscription service for in-store customers; Game Pass, a subscription service for video game; a trading service for movies and games; and ÐŽ§No More Late FeesЎЁ program to attract their customers. Further, due to Blockbuster had a strategic advantage in distribution channels, they deliver DVDs to most of its customers in only a day or two days at a lower shipping costs. Furthermore, in order for their online customers to maintain a relationship with the physical stores, they offered coupons for free in-store rentals. The intention for Blockbuster to do so is to integrate the online and in-store services so that customers could float back and forth between two channels.

BlockbusterÐŽ¦s success was based on the video tape rental and sales and rentals of DVDs. In its first 20 years of business, the video rental stores were opened 9,100 stores in 25 countries. By year 2004, they owned 40 percent of the U.S. video rentals market share, is about 16 billion in sales revenues.

Q2: Along with the technology development, the business model has been shifted from in-store video rentals to online movie downloads. Movie producing industry has turned to sell their movies online via download.

New technologies such as video-on-demand (VOD) system which is available for customers watch 24 hours per day. And iTunesÐŽ¦ success demonstrated that customers are willing to pay for legal digital downloads in order to watch movies immediately. This information technology development had challenged BlockbusterÐŽ¦s in-store video or