Netflix over Blockbuster: How Netflix Beat Blockbuster and Remains Dominant

This paper provides an analysis of how Netflix beat Blockbuster and remains the dominant provider of online video streaming. It includes a brief history of both companies, an analysis of Netflix's success, and a discussion of its future. The paper also covers Netflix's pricing strategies and innovations.

Running head: NETFLIX OVER BLOCKBUSTER
Netflix over Blockbuster
Name of the Student:
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Table of Contents
1. Introduction..................................................................................................................................2
2. Institutional Background.............................................................................................................2
2.1. A brief history of Blockbuster..............................................................................................2
2.2. A brief history of Netflix......................................................................................................3
3. How Netflix beat Blockbuster.....................................................................................................4
3.1. Changing technology............................................................................................................4
3.2. Retail outlets versus operating online (200).........................................................................5
3.3. Pricing strategies...................................................................................................................6
3.4. Netflix’s innovations............................................................................................................6
4. Will Netflix remain the dominant provider of online video streaming?.....................................7
4.1. Netflix stumbles: The demise of Qwikster...........................................................................7
4.2. Netflix rebuilds: The rise of original content.......................................................................8
4.3. The future of Netflix.............................................................................................................9
5. Conclusion.................................................................................................................................10
References:....................................................................................................................................12

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1. Introduction
For many years, the television was distributed by the broadcast wave, one of the
revolutionary technologies which sends wireless signal over a huge swath of countries. The
movie retail companies are the ones considered to rent Blu-Ray discs, video games and DVDs
that are usable at the home-based electronic equipments (Hurni and Cooper 2015). There are
many companies that have participated in this lucrative business and two among them are Netflix
and Blockbuster. Both the companies are at present the leaders in the industry of retail movie and
this is why they are also the major rivals of each other within the industry. This paper is focused
on critically provide an in-depth analysis of Netflix with a focus on the Strategy in action and the
strategic choice. It will provide a brief history of both the companies. The paper would further
elaborate on analysing the reasons behind Netflix’s success towards beating the Blockbuster and
how it would remain the dominant provider of the online video steaming in the coming years.
2. Institutional Background
2.1. A brief history of Blockbuster
Blockbuster LLC was formerly known as Blockbuster Entertainment, Inc and
Blockbuster Video. It was founded in the year 1982 by David Cook (Chopra and Veeraiyan
2017). It was founded with an aim to supply computer software services to the oil and gas
industry of Texas. At first, it used to provide its service of video game rental and home movie in
the American region alone through means of DVD by mail, video on demand, streaming, cinema
theatre and video rental shops. The first store of Blockbuster was opened in the year 1985 in
Texas (Dana 2017). The company has become globally known throughout the nineties. In the
year 2004, the company was at its peak and it then employed around 8500 workers worldwide,

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comprising of 58,500 people from the United States and has more than 9,094 stores all total with
4,500 based in United States. However, the company has also experienced a demise in the after
the emergence of Netflix’s mail order service, the video on demand services and the Redbox’s
automated kioks. These were the major factors that have aided to the eventual demise of
Blockbuster. From the year 2003 to 2005, it has lose about 75 percent of its total market values
as because of the increase in competition from the companies Redbox and Netfllix (Wasko
2017). The company began to lose its significant revenue in the year 2008 and in the year 2010,
Blockbuster was filed for the case of bamkruptcy protection. In 2011, the remaining stores of it,
i.e., 1700 stores were sold by it to Dish Network, the well-known satellite television provider.
Although, Blockbuster has mostly retired in the current years, Dish has still remained and
maintained a small number of franchise agreements of Blockbuster that allows some of the
prevailing stores open in certain markets.
2.2. A brief history of Netflix
At present, Netflix is considered to be the largest online entertainment subscription
service in the world (Sherman and Waterman 2016). It is an entertainment company of America
which provides video on demand, DVD through mail and streaming media. It was founded by
Marc Randolph and Reed Hastings in the year 1997 in Scotts Valley of California. The company
is headquartered in Los Gatos of California. In the year 2013, the company has expanded into
television and film production along with online distribution as well. The initial business model
of the company comprised of rental and DVD sales. In the year 2007, the company expanded its
business by introducing streaming media along with retaining the Blu-Ray and DVD rental
service. It expanded globally with its streaming that it made available in Canada at the very first
in the year 2010 and since then it continued growing its streaming services from there itself.

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Furthermore, in the year 2010, Netflix entered into the industry of content-production while
debuting its very first series called the ‘Lilyhammer’. By 2016, the services of the company
started operating in more than 190 nations except Crimes, Syria, Mainland China and North
Korea (Notteboom and Yang 2017). It released a total of approximately 126 original films during
this year which was more than any other cable channel in the world. According to the data of
2018, the company has 125 million of subscribers in the entire world inclusive of 56.71 million
of subscribers in the United States alone (Edwards 2016). At present it has its offices in many
places including India, Japan, South Korea and Brazil. Hence, it is to state that, with very small
period of time, Netflix has grown tremendously since its emergence and it has now developed
into one of the largest companies of 21st century. Both the movie titles and the revenues of the
company have increased significantly over the last five years.
3. How Netflix beat Blockbuster
3.1. Changing technology
Digitalisation has affected each and every company in the recent years. It has forced
every company to digitally transform themselves and Netflix is one of the best examples of
evolution of company (Leeflang et al. 2014). With the passage of time, technology has changed
tremendously and Netflix as an entertainment service provider has evolved and has always
adapted itself with the changing nature of the market. When customers started demanding to get
access via internet, the company has developed an innovative game plan in order to cover that
demand of its subscribers. In the year 206, it had introduced its first online service and when the
market of DVDs began to shrink, Netflix continued to grow with a fast pace. The widespread use
of WEB 2.0 and internet have greatly changed the habits of the people, particularly the television

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networks were drastically affected due to this change (Xiang, Magnini and Fesenmaier 2015).
However, Netflix kept on increasing gradually its online library in order to satisfy its customers,
especially the online subscribers through providing them much better services. In the year 2008,
the company has also reached to an agreement with the Startz Entertainment and in 2010 it
collaborated with MGM, Lions Gate Entertainment and Paramount Pictures that have helped it to
grow even further (Meehan 2016). The company has contrasted a very successful business model
with its rental service but with the passage of time, they have anticipated the changes in
consumer behaviour and in the changed business model. At the height of content marketing
Netflix and social media, once again evolved and started in order to produce its own shows and
movies (Zhao 2016). At present, the company is digital disruption and it is a level that can be
managed to reach only by a few companies.
3.2. Retail outlets versus operating online
The second part of the technology strategy of Netflix was to elude the burden of the retail
outlets through operating online. It has become one of the virtual organisations with only few
offices and warehouse that has no retail stores and any sales employees. Small staffs operate on
what Hastings calls their “Freedom and Responsibility Culture” (Halal 2015) Instead of the sick
days, fixed work hours and authorized vacations, people work when they choose as long as their
job gets done. Both the compensation and titles are up to the individuals. The company has also
developed its on-demand offering for its subscribers comprising of the converters which allow
the streaming of the shows straight to the television. On the other hand, Blockbuster was an
upstart since its emergence in 1985. Eventually it became the biggest video rental company in
the entire world. Although it was swelling in terms of size, the company began to detach its
customers with strong late fees along with unimaginative warehouse style of stores. The

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company has also ignored the e-commerce and was sticked to its old retail strategy. One of the
cardinal sins of Blockbuster was to maintain its commitment to a wide range of retail network
while knowing well that it was no longer desired by the movie renters.
3.3. Pricing strategies
One of the new pricing strategies of Netflix is that it has split its pricing model into two
different options. First is to continue with its former model where the subscribers would get
unlimited streaming with the service of DVD-rentals and also has added new option to it like- it
would give them unlimited movie streaming without any option of DVD rental as well. The
option of unlimited streaming only is preferred by the company for delivering television movies
and shows costs 7.99 dollars per month. Apparently, the unlimited streaming with DVD rental
options costs between the price ranges of 9.99 dollars to 41.99 dollars per month (Khana 2017).
However, this option depends on the total number of rented DVDs. The old pricing strategy of
Netflix used to start from 9.99 dollars per month. Hence, the new model represents a decrease of
2 dollars on a monthly basis.
3.4. Netflix’s innovations
Netflix enables all its subscribers to stream the content on the basis of on-demand from
any part of the world and at any time as long as they have appropriate device and internet
connection to do the same. It is very convenient because of the fact that here, the customers do
not need any access to television to get access to the library of Netflix and to consume their
content.
With the same, at present Netflix thrives on developing and producing their own original
content that is an endeavour which began in the year 2013 along with globally acclaimed series
of “House of Cards” (Cross 2016). It is something that is ultimately allowing the company to

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have its own place and voice in the entertainment industry as content creator rather than just a
mere licensing machine. With the same, the company also releases its original content all at once
which is further making its entire season of series that is available for subscribing to binge-watch
it at the company’s very own pace rather than having to wait for weeks for a new episodes as it
occurs on the traditional television. With the same, the company has also added a new feature to
its portfolio which was long been waited for. It is that of the ability to stream the content offline.
The subscribers are now able to download their favourite episodes or movies that they would
want to watch later when they do not have any access to internet. It is one of the most significant
changes to mention as because of the fact that it gave the subscribers of the company the power
to use the services of Netflix regardless of the accessibility to internet. The company also offers
its services and products at very affordable and reasonable price. Customers can also choose
their plan based on their needs and wants and that they consider to best fit their requirements.
Overall, the average subscription price for Netflix is about 10 dollars.
4. Will Netflix remain the dominant provider of online video streaming?
4.1. Netflix stumbles: The demise of Qwikster
In the year 2011, Netflix announced about the demise of Qwister. Although the increased
price was still present in places but there was not more separate websites, services and accounts
for streaming the DVDs and movies since then. Instead of that, the company added more number
of new movies to its movie catalogue along with thousands of television episodes. It was indeed
a good move as if Qwikster was not demised; it would have now become a primary name
identity liability as well as a branding nightmare for the company. This is because, creating a
divisional identity and spinoffs of the divestures and operations, everything needs very delicate

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understanding of the concept of corporate nomenclature. It is really very easy to find name
quicker than to disrupt the perceptions of human and influence their nature side of the name
usability. However, Quikster did not work for many reasons like that of the name change, the
hike in price, the website split and the assumptions of the company and the people that the mail
orders were being put on backburner to focus on something which was not there yet (Hallinan
and Striphas 2016). It was assumed that Qwikster would force the users of Netflix with DVD
subscriptions and streaming for creating a separate account for managing both of them but the
websites would not be combined in any way that would mean different bills, separate
preferences, separate ratings for the Qwikster and Netflix, instead of being possessed by the
same company. Hence, it is to state that the major reason behind the fail of Qickster was its
name. The new users of it might not recognise Netflix and Quikster are owned by same a same
company which would lead the subscribers to choose a different mailing service. It would further
led Netflix to lose its millions of potential customers.
4.2. Netflix rebuilds: The rise of original content
Content marketing has dominated our lives with the passage of time. Personal
advertisements are no longer any scene from the Minority Report movie. Every day more and
more companies are gradually focusing on the content marketing and now it is considered to be
the future of the marketing. There has been a growing importance of original content by the year
2017. It was gaining a great momentum among the customers as a primary reason for paying for
the streaming video. It was more of a priority among the streaming enthusiasts. Therefore,
Netflix decided to create its own content. Instead of beginning from the scratch, it bought
licenses of the cancelled television shows such as Arrested Development. However, when comes
to the question of content marketing, people disliked the concept of copy paste contents as they

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need something original and unique and this is what Netflix did. Netflix started producing very
unique television shows and further brought different perspective for genre like that of the
superhero TV shows that were widely available on the traditional television networks. Gradually,
the company started producing some of the most popular series like Jessica, Narcos, Daredevil
and Jones (Strott 2015). All these are the original Netflix and the company also started to
continue this original strategy of theirs and gained love. The company also produced an original
movie named- Beasts of No Nation is a huge success. It is considered to be the very first global
television network that is at present, present at 190 different countries as of the statistics of 2016.
4.3. The future of Netflix
It is to mention that Netflix would probably experience immense growth in the coming years
and the primary reason for this is their amazing business model.
 Cost- Generally, the subscribing of the different SVOD services s still comes out with
very less expensive as compared to signing of an agreement for the basic cable. It is to
state that according to the recent survey of 2016, every fourth household in United States
has the subscription to Netflix and this is because of the fact that the company gives
quality service with very affordable prices.
 Convenience- The subscribers do not have to watch the television as it is dictated by the
traditional schedules of the broadcasters (Jenner 2017). In fact, presently, the time
shifting is both encourages and possible and this is enabling the viewers to choose
anything they want to watch either a complete season in a single sitting or any single
episode.

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 Content- There is many SVOD viewers who cite the depth and breadth of the content that
is offered by these services as a major reason for switching away from the traditional
cable television.
The fundamental aspect of business of Netflix is to pay attention to the preferences of their
customers. It allows all its customers for creating their own list, choosing the series and films
based on their own individual tastes while the Netflix site itself suggests further options
depending on the previous choices. For example, watching a Batman movie would lead the site
to recommend more options of superhero based movies and series and the user reviews would
further help in dictating what the Netflix suggests. Tracking the preferences of the subscribers
and their choices helps in encouraging more personal experience that would further reinforce the
brand-loyalty and helps the subscribers in feeling more important and valued (Tao and Xu 2018).
Hence, it is to sate that the experiment of Netflix as a global subscriber funded TV portal might
be the upcoming chapter of the history of television.
5. Conclusion
From the above analysis, it is to state that Netflix is far more than just steps ahead of the
company- Blockbuster. In just a decade, the company has grown tremendously from a mere
video service provider with 7 million United States’ subscribers to the one that reaches 93
million people around the world. No cable provider has ever been potentially reached such a
truly global audience like that has Netflix with such a short period of time. From the viewer’s
point of view, it is bound to take place different and diverse preferences towards a particular
service. It highly depends upon the needs of the service members. Netflix is successful in
fulfilling the needs of all its customers and it creates its value through differentiating itself in

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between their competitors, particularly the Blockbuster. The outstanding systems of it make itself
accounted the most of the market share in the retail movie industry. It has engaged in partnership
with other different countries and has developed VOD system as well in order to increase the
amount of subscribers of it. The company has also introduced a wide range of flexible services
that differ in both content and price. However, the company is not satisfied with its current
succeed and it is still working hard to develop its technologies to give better experience to all its
subscribers.

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