How Netflix Beat Blockbuster: A Case Study

Running head: CASE STUDY 1
Case Study
Student’s Name
Institutional Affiliation
Date

CASE STUDY 2
Netflix beat Blockbuster Video
Introduction
Netflix is one of the biggest media company in the United States that offers services such
as streaming media, DVD by mail, and video-on-demand online. Netflix started marketplace
battles with Blockbuster in the 1990s. The rise of Netflix had led to the ultimate fall of
Blockbuster. At this time, Blockbuster had the largest DVD rental store were over the country.
Blockbuster also was the major household name for the movies found in the United States
(Almeida, 2011). Blockbuster made a lot of investments in the inventory of all its stores, and
made profit when a customer rented a movie (Dana Jr, 2017). Customers had to watch the
movies quickly and return them quickly so that other customers could rent the same movies and
use them. It was after a long time that blockbuster realized its customers did not like the trend of
returning the movies quickly and thus led to the increase of the late fees and most of the profits
estimating to 70 percent came from these fees (Wooldridge, Matulich & Riddick Jr, 2007).
However, with the emergence of Netflix in the year 1990, came with a different method
where it introduced a subscription fee which was to be paid monthly in order to avoid the hassle
of the late fees as Blockbuster had made people to pay for late returning of the movies. The pay
made every month was made with a few dollars but one could order many DVD’s as they could
(Burroughs, 2018). With this, some of the users borrowed one or more movies each month but
they were to pay the same fees of subscription per month.

CASE STUDY 3
Institutional Background
Blockbuster
Blockbuster is one of the major home video and movie media company which offers the
rental services of the movies and videos through the rental shops, streaming, cinema theatres,
and video on demand in the United States. Blockbuster was internationally well known from the
1990s. It had employed at least 84,300 people throughout the world which included 58,500 from
the United States and 25,800 people from other nations (Dana Jr, 2017).
The competition which rose from Netflix led to its eventual demise since it offered better
services from the mail-order services, the automated rental kiosks, and the video on demand
services. Netflix had started a niche market and begun to slowly take the entire market that
Blockbuster had dominated. Blockbuster became hesitant to make bold moves and imitate the
business model that was used by Netflix, claiming it was a confused one (Fleder & Hosanagar,
2009). In the efforts to maintain their business model, the customers were all lost to Netflix for
they had better and convenient services as compared to those that were offered by Blockbuster.
Blockbuster, having had a huge dominance at that time, did not bother to adapt to the changes
that were implemented by Netflix to ensure its longevity in the market (Adkins, Conlon,
Huffman & Hahn, n.d.). Blockbuster hence started to lose its revenue as a result and prompted it
to file a bankruptcy protection. The remaining Blockbuster’s stores were then bought by the
satellite television provider, Dish Network.
Netflix
The company Netflix was firstly launched in the 1990s and played a major role in the
distribution of DVDs which mainly filmed by use of mail. The competency of their services

CASE STUDY 4
interrupted the major film renting services such as Blockbuster (Burroughs, 2018). The
emergence of Netflix provided different services such as DVD by mail, streaming media, and
video-on-demand. Having been founded in the year 1997, it expanded to be a television and film
production and also an online distributor. The initial business model of Netflix involved the
sales of DVD’s and rental business. Since most of the channels got revenue from the subscribers
together with the advertisers, the programs became successful even if they did not reach the mass
audience. In the year 2000s, the advancement in the compression technology ensured most of the
homes gained access to the high-speed internet services and allowed the large video files to get
easily streamed over the internet space (Greenberg, 2010).
In the year 2007, Netflix Media Company then expanded its business by introducing
streaming of the media and retaining the DVD and Blu-ray rental services (Christensen, Raynor
& McDonald, 2015). The company then expanded its business internationally, by introducing the
streaming services to Canada and other areas in the world. Recently, Netflix services have been
made available in over 190 countries which have been made available in the world except for
some parts of Mainland China, North Korea and Syria (Kerr, 2013).
How Netflix Beat Blockbuster
Netflix rise had exposed weaknesses in the existing movie rental services in the
1990s. First was the customer satisfaction and convenience. Blockbuster having had a large
number of stores across the country, Netflix had to come with a strategy that was to beat that of
Blockbuster. Netflix improved on the customer convenience by leveraging usage of the mailbox
to get videos which ensured that the customers did not leave their homes in order to rent the
movies or return them after watching. Netflix also started off with an effective management team
with good leadership skills as compared with that of Blockbuster (Fleder & Hosanagar, 2009).