Netflix vs Blockbuster: Pricing Strategies and Technological Advancements

This report analyses the pricing strategies and technological advancements of Netflix and Blockbuster LLC. It discusses the rise of Netflix, changing technology, pricing strategies, and innovations. The report also assesses whether Netflix will dominate the online video streaming market.

Running head: STRATEGIC MANAGEMENT
Strategic Management
Name of the Student
Name of the University
Author note

1STRATEGIC MANAGEMENT
Executive Summary
The report has helped in analysing the overview of Netflix and Blockbuster LLC as to
analyse the competitiveness in both the companies. The different analysis and identification
of the Netflix company has been identified for analysing the role of the pricing strategies in
the market. The main aim and purpose of the report includes the pricing strategies that has
been adopted by both Netflix and Blockbuster LLC as to understand the adoption strategies
along with analysis of the advancement of technology in the market as well.

2STRATEGIC MANAGEMENT
Table of Contents
1. Introduction............................................................................................................................3
2. Institutional Background........................................................................................................3
2.1 Brief History of Blockbuster............................................................................................3
2.2 Brief History of Netflix....................................................................................................4
3. Rise of Netflix........................................................................................................................4
3.1 Changing technology.......................................................................................................4
3.2 Retail outlets versus operating online..............................................................................6
3.3 Pricing strategies..............................................................................................................6
3.4 Netflix’s innovations........................................................................................................7
4. Assumption whether Netflix will be dominating the online video streaming market...........8
4.1 Netflix stumbles: The demise of Qwikster.......................................................................8
4.2 Netflix Rebuilds.............................................................................................................10
4.3 The future of Netflix......................................................................................................11
5. Conclusion............................................................................................................................12
References................................................................................................................................13

3STRATEGIC MANAGEMENT
1. Introduction
The report throws light on understanding the carious technological developments as
well as the strategies of pricing that can be espoused by Netflix as to contend with
Blockbuster in the competitive marketplace. The various pricing and innovative strategies
will be debated in subsequent chapters that has been approved by Netflix. As to remain
dominant in the market, Netflix has to create different innovations as to be the most
protuberant provider of online streaming of the video.
The purpose is to analyse the technological improvements and the innovative pricing
strategies adopted by Netflix. The forthcoming of Netflix in comparison to Blockbuster will
be debated as to analyse the different techniques effectively. The entire assumption is based
on analysis of the past of Blockbuster along with Netflix to analyse the dominance of both the
companies effectively.
2. Institutional Background
2.1 Brief History of Blockbuster
Blockbuster LLC that was previously known as Blockbuster Entertainment Inc is one
of the American providers of video game or home movie rental services with the help of
video on demand along with rental shops of videos. There were more than 84300 employees
who worked under Blockbuster LLC and the total assets of the respective organization was
$37,000,000 till the year 2010 (Sawhney 2017).
Blockbuster LLC was founded in the year 1985 in Texas, however due to bankruptcy
the respective organization has been closed down. Blockbuster LLC began to lose their
revenues in the competitive market and they were finally shut down in the year 2010. More
than 1700 stores were shut down that were bought by the respective company in the midst of
2000 (Rayna and Striukova 2016).

4STRATEGIC MANAGEMENT
2.2 Brief History of Netflix
Netflix is one of the entertainment companies in America that was originated by Reed
Hastings and Marc Randolph in 1997 in August at California. Netflix mainly specialises in
providing the different customers in data streaming and the video on demand. There has been
global development of Netflix which commenced in the year 2010 and started with video
streaming as well (Lobato 2017).
In 2010, Netflix split service of streaming along with DVD mails and this caused
huge dissatisfaction among the customers in the market as well. Furthermore, it was noticed
that the share prices were plummeted down. Furthermore, it was noticed that there was
international expansion and development of original programming in which the prices of the
shares started rising in a proper and stable manner. It has been noticed that Netflix is leading
the entire online streaming market wherein the different competitors are Redbox, Amazon
and Hulu (Rogers 2015).
3. Rise of Netflix
3.1 Changing technology
Netflix has tried to implement different and various types of strategies as to change
the entire technique of selling the different kinds of products. The changes in the
technological advancements has assisted in helping beating Blockbuster LLC. The entire
transformation that is digital in nature has the accurate intensity in developing digital type of
initiatives in the organization to adopt the same in the digital age (Pittman and Sheehan
2015). Netflix is one of the finest example of fruition of the organization in which the
technology has altered in a radical manner.
Netflix had evolved and developed in the entire marketplace while developing game
plan for covering entire demand in an appropriate manner. In 2006, Netflix introduced

5STRATEGIC MANAGEMENT
various online services and DVD market has been shrinked and it has helped Netflix to grow
in a successful manner as well. However, it has been seen that the evolution is the not the
solution, it is important to respond to disruption which is digital. While disruption is being
digital is a big challenge in the respective sector, this is one of the most essential opportunity
for various other sectors as well. When it is seen that there is relation of social media, it is
seen that social media has disrupted the media related sector effectively and this provides
proper opportunity for the entire SME sector as well in the entire economy (Marchand 2016).
The entire usage of the entire internet and the WEB 2.0 has changed in a drastic
manner along with changes in the dissimilar habits of the customers as well. These kinds of
dissimilar habits are changed with the help of different networks on television that are
affected by such kind of change. Netflix has helped in growing the online library as to deliver
better kind of services for the different subscribers who stays online (O'brien, Knight and
Harris 2017). In 2010, Netflix tried to enter into the five years agreement with Starz
Entertainments along with the Paramount pictures as well. Netflix tried to construct
successful business model with accurate rental service in which the company has tried to
view various kind of changes in the company in a respective manner.
These types of innovative strategies that are disruptive in nature of Netflix helped in
creating new kind of market with the analysis of the value network. This has tried to disrupt
entire marketing and this displaced established kind of market leaders with the alliances. The
best kind of example that can be provided is that when Netflix launched mail in the
subscription that has helped them in appealing the audiences of Blockbuster by offering them
with wider selection and view of the respective content in an effectual manner (Gomez-Uribe
and Hunt 2016). These strategies adopted by Netflix has affected the brand image of
Blockbuster in the entire competitive market.

6STRATEGIC MANAGEMENT
3.2 Retail outlets versus operating online
With proper implementation of the online streaming program along with rental by
email, Blockbuster LLC did not able to compete with Netflix in the entire market. Netflix
tried to offer the different customers with online rental service based on DVD as there is no
requirement of such physical location. It was analysed that model of online streaming do not
require any kind of physical location for establishing their business in an effectual manner. It
was noticed that due to different kind of technological advancements, Blockbuster lost their
brand image and identity in the market as they did not follow any kind of strategic directions
like Netflix in the entire competitive market (McDonald and Smith-Rowsey 2016).
Furthermore, it was noticed that Blockbuster did not follow any kind of innovative
techniques and strategies like Netflix and they did not able to compete with Netflix as well.
The rental by email along with online streaming were not being performed in an appropriate
manner by Blockbuster LLC as done by Netflix (Siegel 2017).
3.3 Pricing strategies
Figure 1: Pricing Strategy of Netflix
(Source: McKenzie and Smirnov 2017)
From the respective graph, it was analysed and identified that Netflix introduced
various monthly kinds of subscriptions service for the customers in the market by providing

7STRATEGIC MANAGEMENT
them with unlimited access to the content that is provided by them. Netflix did not include
any kind of late fees in rental by email along with online streaming arms of Netflix as well.
The monthly based pricing strategy is in which $9.99 (one DVD or Blu-ray), $7.99 (one
DVD out at a time) and $43.99 for more than eight DVDs. The differentiator of the Netflix is
seen in which there is unlimited kind of online streaming available for the different movies
such as TV shows that are being made available for the company as well. Furthermore, it has
been identified that when the company needs low kind of subscription in the market, it is
necessary for the different customers to access and analyse the content of the library that
included online programming as well (McKenzie and Smirnov 2017).
3.4 Netflix’s innovations
There are various strategies of innovation that can be adopted and implemented by
Netflix such that this will assist them in performing in an effective and efficient manner. This
has helped the company in gaining competitive advantage in the entire competitive market as
well. Netflix has been better in performing their functions and this has helped the users in
providing proper navigation in an appropriate manner and this is also treated as the company
helps the users in providing navigation easily and this tries to specialise in video streaming
demand as well (Rigby et al. 2016).
The entire organization tried to make proper and appropriate effort in reducing the old
styles that was previously utilised by them. Furthermore, Netflix tried to implement different
strategies that was not inclusive of any kind of hardware. There are different types of
advantages and merits that provided faster and improved connection of the entire broadband
and this has assisted them in ruling the market in more effectual manner as well.
Furthermore, the strategies of pricing are utilised by Netflix is wherein this provides various
kinds of customers with huge and unlimited kind of access and there is no such charge of late
fees for their target customers in the market as well (McDonald and Daniel 2016).

8STRATEGIC MANAGEMENT
However, on the other hand, Blockbuster utilizes the different types of hardware
which specialises in different kinds of aspects. This includes their specialisation in inclusion
of the television sets which is limited in nature. Netflix did not try to perform various kind of
actions and they did not incur such kind of techniques as they generate the hardware that is
specialised in nature. Furthermore, they rather focus on providing the different customers
with innovative along with different specialised type of services that assists in meeting
various kind of hurdles faced by the company in the entire competitive business (Aversa,
Haefliger and Reza 2017).
4. Assumption whether Netflix will be dominating the online video streaming market
4.1 Netflix stumbles: The demise of Qwikster
In the month of July in the year 2011, Netflix announced that there is hike in the
various prices of the different DVD with service streaming. The different types of
subscription that was previously $9.99/month was now streaming at $15.99/month and this
has caused huge issues among the perceptions of the customers in the market as well.
Furthermore, it was noticed that Netflix was ready to perform different kind of activities in
order to improve the innovative techniques in building different kinds of adjustments (Jenner
2016).
However, it was an issue as the customers in the market were not in a position to
accept the type of strategies that was being accepted b y Netflix. Qwikster is one such DVD
by mail that was one of the services that was inclusive of various types of video games and
this was noticed by the different customers that there was separate account for both Qwikster
and Netflix along with different kinds of charges on credit card as well (Cox 2014).
Reed Hastings was the main reason behind not integrating the two DVDs together and
this caused huge issues in the Netflix and Qwikster as well. However, in the future it was

9STRATEGIC MANAGEMENT
noticed that Qwikster did not work out for various type of reasons in which the name change
was the main issue as the customers did not support such kind of innovation. The website
split was the major reason in which the credit card charges were dissimilar for Qwikster and
Netflix. Additionally, it was noticed that the price hike and different kinds of assumptions of
mail orders were kept in backburner as the main focus of the company was on something else
(Cox and Kaimann 2015).
Qwikster tried to include Netflix in different kinds of combination of the videos
streaming along with subscriptions of various DVDs as to create proper and separate
accounts for the two. However, it was noticed that the different customers tried to keep both
of them separate and this caused huge issues as the two of them received different ratings and
the channels were different for the both as well (Aversa, Furnari and Haefliger 2015). It was
seen that Qwikster was designed in such a manner, however it failed as the entire idea was
not satisfactory in nature completely. However, the CEO of the organization could have
implemented different strategies as this will assist in making design effective and efficient
and the idea would not have failed as well (Davis 2016).
The name that was provided to Qwikster was not accepted by the different individuals
in the economy as they felt there can be misspell of such kind of names and this was
confusing from the ends of the customers as well in the entire competitive market as well.
The new users of both Netflix along with Qwikster felt that the both websites are not the
same and there are huge differences in the approaches of the both as well. The customers felt
that the two of the systems are different from one another in various manners ((Sorescu
2017).
There are various kind of services of Netflix that was user friendly that was in
comparison to Qwikster. However, furthermore it was noticed that decision of the split of the

10STRATEGIC MANAGEMENT
Netflix and the Qwikster were creating confusion among the different audiences as they felt
these are the two different kinds of companies in the market. The application for Qwikster did
not try to offer the different customers with any such kind of DVDs along with the streaming
of video for the Wi-Fi and this is optional in nature as well.
Qwikster was not at all the easy solution for various subscribers of Qwikster and
Netflix as this did not lower the prices for the consumers in the entire market as well.
However, it was further noticed that the customers had to pay separately for various types of
services as well that was a huge disadvantage for them and this was affecting the brand image
of both the companies as well in the entire market that is competitive in nature as well
(Aversa and Haefliger 2017). It was assumed in the market that Qwikster should not have
compared with Netflix as the ideas that were generated by the CEO of the company Netflix
were not accepted effectually and this caused huge issues for the company in the
effectiveness of the same as well. The entire company officials and the CEO of the company
felt it was one of the most positive approach that can be applied by them, however it was
noticed that the different customers in the market did not accept the new idea and the entire
idea was flopped in the competitive market as well.
4.2 Netflix Rebuilds
The respective strategy that was applied by Netflix company officials was not at all
effective and it was flopped in the entire market as well. Furthermore, it was noticed that it
was a big mishap for the respective organization by introduction of Qwikster and furthermore
it was noticed that Netflix tried to rebuild different strategies in the competitive market that
will assist them in understanding the various tastes along with preferences of the customers in
the market effectively.

11STRATEGIC MANAGEMENT
Furthermore, Netflix could have tried to branch with other sub organizations that
included Netflix DVDs along with streaming of the videos as well. This has helped and
assisted the customers in the market in identification of the various issues in unofficial
manner. Netflix tried to keep various same websites n an appropriate manner as this tried to
help the different customers in the market in understanding their different requirements
effectively. Netflix could have used Qwikster in such a manner that both would have worked
together to perform and promote online streaming in an appropriate and efficient manner as
well.
For instance- “Stranger Thing, Black Mirror, Modern Family and this is us” is one
of the best examples that can be utilised as to analyse and identify the various techniques and
tactics utilised by various shows that have tried to use their original content. However, on the
other hand, Netflix has to use different kinds of original strategies that helps them in
maintaining effective competitive advantage in competitive market as well. With the
implementation of different examples from various shows, it can be analysed that Qwikster
was a huge flop and major mistake committed by the Netflix officials in the organization as
this confused the different consumers in the market about the two as they felt that both are
different companies.
4.3 The future of Netflix
Netflix needs to expand their business n the future in a competitive manner that will
assist them in lowering international expansion in the market. The strategies of pricing have
to be revised by Netflix as this will attract more customers in the market and will increase the
different subscribers in the entire market as well. Proper availability of various original kind
of programming is required to be done by Netflix in such a manner that this will help them in
competing in the future with other competitors in the market.

12STRATEGIC MANAGEMENT
Furthermore, these kinds of strategies will help Netflix in maintaining their
competitive position in the market and this will increase their potentiality in the market as
well. In order to gain sustainability in the market, Netflix has to include the original
programming with inclusion of diverse library as the dominant kind of model. Netflix needs
to understand the preferences of various customers in the market to dominate the entire
competitive market.
5. Conclusion
Therefore, it can be concluded that the entire report discussed about the various
organizational background of both Netflix and Blockbuster LLC. The analysis of various
strategies with changes in the technology has assisted in understanding the situation of
Netflix after introduction of Qwikster in the market. However, it was noticed that the
innovative strategies that was adopted by Netflix was disruptive in nature as there was a huge
rise in rental in mail along with online streaming as well. The different kind of strategies that
are innovative in nature helped Netflix in development of approach that was dominant in
nature.
Furthermore, it was noticed that Netflix is one of the dominant providers in the
competitive market in which the identification has been done on different strategies to
position themselves safe in the entire market. Additionally, it was noticed that international
expansion of Netflix has helped the company in understanding the issues and this was due to
the entire expansion of other effectual subscribers in the market as well. Lastly, it was seen
and analysed that Netflix has adopted different and various type of strategies in such a
manner that this can help them in beating the other competitors in the market in an
appropriate manner.

13STRATEGIC MANAGEMENT
References
Aversa, P. and Haefliger, S., 2017. Business Model Portfolio Diversification. working paper,
Cass Business School, London.
Aversa, P., Furnari, S. and Haefliger, S., 2015. Business model configurations and
performance: A qualitative comparative analysis in Formula One racing, 2005–
2013. Industrial and Corporate Change, 24(3), pp.655-676.
Aversa, P., Haefliger, S. and Reza, D.G., 2017. Building a winning business model
portfolio. MIT Sloan Management Review, 58(4), p.49.
Cox, J. and Kaimann, D., 2015. How do reviews from professional critics interact with other
signals of product quality? Evidence from the video game industry. Journal of Consumer
Behaviour, 14(6), pp.366-377.
Cox, J., 2014. What makes a blockbuster video game? An empirical analysis of US sales
data. Managerial and Decision Economics, 35(3), pp.189-198.
Davis, B.C., 2016. The Netflix Effect and Defining Binge-Watching.
Gomez-Uribe, C.A. and Hunt, N., 2016. The netflix recommender system: Algorithms,
business value, and innovation. ACM Transactions on Management Information Systems
(TMIS), 6(4), p.13.
Jenner, M., 2016. Is this TVIV? On Netflix, TVIII and binge-watching. New media &
society, 18(2), pp.257-273.
Kim, O.B. and Han, J.H., 2015. A Study on Online Business Model: The Case of Automotive
Market. Journal of the Korea society of IT services, 14(4), pp.269-281. (Kim and Han 2015)

14STRATEGIC MANAGEMENT
Lobato, R., 2017. Rethinking International TV Flows Research in the Age of
Netflix. Television & New Media, p.1527476417708245.
Marchand, A., 2016. The power of an installed base to combat lifecycle decline: The case of
video games. International Journal of Research in Marketing, 33(1), pp.140-154.
Matrix, S., 2014. The Netflix effect: Teens, binge watching, and on-demand digital media
trends. Jeunesse: Young People, Texts, Cultures, 6(1), pp.119-138.
McDonald and Daniel Smith‐Rowsey, eds. Bloomsbury Academic, 2016. 272 pp. $120.00
cloth. The Journal of Popular Culture, 50(6), pp.1443-1446.
McDonald, K. and Smith-Rowsey, D. eds., 2016. The Netflix Effect: Technology and
Entertainment in the 21st Century. Bloomsbury Publishing USA.
McKenzie, J. and Smirnov, V., 2017. Blockbusters and market expansion: evidence from the
motion picture industry. Journal of Cultural Economics, pp.1-12.
O'brien, K.H.M., Knight, J.R. and Harris, S.K., 2017. A Call for social responsibility and
suicide risk screening, prevention, and early intervention following the release of the Netflix
series 13 Reasons Why. JAMA internal medicine, 177(10), pp.1418-1419.
Pittman, M. and Sheehan, K., 2015. Sprinting a media marathon: Uses and gratifications of
binge-watching television through Netflix. First Monday, 20(10).
Rayna, T. and Striukova, L., 2016. 360° Business Model Innovation: Toward an Integrated
View of Business Model Innovation: An integrated, value-based view of a business model
can provide insight into potential areas for business model innovation. Research-Technology
Management, 59(3), pp.21-28.
Rigby, J.M., Brumby, D.P., Cox, A.L. and Gould, S.J., 2016, September. Watching movies
on netflix: investigating the effect of screen size on viewer immersion. In Proceedings of the

15STRATEGIC MANAGEMENT
18th International Conference on Human-Computer Interaction with Mobile Devices and
Services Adjunct (pp. 714-721). ACM.
Rogers, M., 2015. Videoland: Movie Culture at the American Video Store. The Velvet Light
Trap, 76(1), pp.76-78.
Sawhney, M., 2017. Blockbuster Entertainment Corp.: Growth Strategies for 1995. Kellogg
School of Management Cases, pp.1-7.
Siegel, B., 2017. The Netflix Effect: Technology and Entertainment in the 21st Century.
Sorescu, A., 2017. Data‐Driven Business Model Innovation. Journal of Product Innovation
Management, 34(5), pp.691-696.