netflix vs blockbuster case study ppt

Netflix vs Blockbuster – 3 Key Takeaways

It’s the ultimate example of technology disrupting a marketplace…

Or is it really the story of a leadership shakeup that toppled an empire?

Or is it a story about the extreme hatred people have for late fees?

The Netflix vs. Blockbuster saga has been told a dozen different ways, with a dozen different lenses applied.

And what I’ve come to realize (and this likely won’t come as a huge surprise)is that there’s no single explanation for why Netflix succeeded where Blockbuster failed.

As is the case with most things in life, it was a nuanced situation. There was a perfect storm of poor decisions and technological advances and other contributing factors that led to Netflix’s staggering growth…and Blockbuster’s equally staggering decline (when Blockbuster filed for bankruptcy in 2010, Netflix’s annual net income was $161 million .)

My goal with this post is to distill everything I’ve learned about these two companies down into a few actionable takeaways for marketers – sort of like this post on Zoom’s success story .

But first, for those who aren’t familiar with how the Blockbuster vs. Netflix story unfolded, here’s a short summary:

The Rise of Netflix (and the Fall of Blockbuster)

When Netflix launched in 1997, Blockbuster was the undisputed champion of the video rental industry.

Between 1985 and 1992, the brick-and-mortar rental chain grew from its first location (in Dallas, Texas) to more than 2,800 locations around the world.

Two years later, Viacom paid $8.4 billion to acquire Blockbuster .

So by the time Netflix showed up on the scene with its video rental-by-mail service, it appeared to be a classic case of David vs. Goliath.

In fact, in the year 2000 –perhaps realizing that it’d be easier to fight alongside Blockbuster than against them – Netflix co-founder and CEO Reed Hastings approached Blockbuster’s then CEO, John Antioco, with a merger proposal:

Hastings wanted $50 million for Netflix. And as part of the deal, the Netflix team would run Blockbuster’s online brand.

Of course, that deal never materialized. Partly because Blockbuster laughed in Netflix’s face when they met to discuss the deal.

“It was tiny, involuntary, and vanished almost immediately. But as soon as I saw it, I knew what was happening: John Antioco was struggling not to laugh,” Netflix’s Marc Randolph remembers of the encounter.

At the time, Antioco considered Netflix to be small potatoes, and would come to realize only too late that having an online platform would be the way of the future.

In 1999, Netflix received backing from Groupe Arnault, giving them a $30 million cash injection that helped launch its subscription-based service.

In 2004, Blockbuster did launch a Netflix-like online DVD rental platform , and even abandoned their unpopular (but lucrative) late fees for overdue rentals.

By 2006, subscribers for Blockbuster’s online services had grown to more than 2 million. (Meanwhile, in that same year, the number of Netflix subscribers reached 6.3 million.)

Then in 2007, Antioco left Blockbuster, late fees were reinstated, and Blockbuster’s online efforts were put on the back burner.

In 2008, Netflix signed a deal with Starz to stream around 1,000 blockbuster movies and shows on its service.

Blockbuster’s fate was all but sealed.

In 2010, Netflix was signing deals with names like Sony, Paramount, Lionsgate, and Disney to help them grab a 20% market share of North American viewing traffic. On July 1st of the same year, Blockbuster was de-listed from the New York Stock Exchange and filed for bankruptcy having incurred nearly $1 billion in losses.

Image Source

Netflix’s valuation at the time?

$24 million.

For comparison, today, Netflix is valued at around $203 billion – a 4,060% increase from its valuation back in 2000.

3 Takeaways from the Netflix vs. Blockbuster Battle

1. never forget what you’re really selling..

For years, Blockbuster dominated the video rental space. But at some point, they lost sight of what business they were really in.

Instead of focusing on delivering incredible (and affordable) entertainment to their customers – something Netflix definitely has down – Blockbuster put more stock in the model they were comfortable using.

And hey, who can blame them? Back before the internet became integrated into nearly every facet of our lives, it was hard to imagine brick-and-mortar Blockbuster stores disappearing.

Blockbuster initially succeeded because they did one core job better than anyone else: delivering entertainment to people’s homes.

But as we all know, technologies change. And instead of investing all of their efforts into finding a new way to deliver on their true purpose (more on that in the next section), Blockbuster’s innovation stagnated. That reality hit Netflix founder Marc Randolph when the business was pivoting from a Mail-order DVD service to online streaming.

He wrote in his book, That Will Never Work: The Birth of Netflix and the Amazing Life of an Idea :

“We’d finally figured out a way to make our original idea of DVDs by mail work, and here we were, looking ahead to a future without either DVDs or mail.”

The way Netflix overcame its challenges? Keep reading 👇

2. You need to be willing to adapt. (And half measures won’t cut it.)

1997 era Netflix–before the company embraced streaming

When you dig into the Netflix vs. Blockbuster story, it becomes clear that Blockbuster did (eventually) realize that the Netflix model was the future. And they did make changes to address it.

But in the end, it was too little, too late.

Blockbuster could never fully evolve into the modern business it needed to be in order to compete with Netflix. Once owning 9,000 stores in the US, Blockbuster now has a single brick-and-mortar presence – a lone store in Bend, Oregon .

Sandi Harding, the owner of the single remaining Blockbuster store in the world. Source .

As Forbes reported:

“The irony is that Blockbuster failed because its leadership had built a well-oiled operational machine. It was a very tight network that could execute with extreme efficiency, but poorly suited to let in new information.”

Technologies improve. Industries change. In order to grow, you need to keep a pulse on the ever-evolving needs and preferences of your customers so you can make changes to your model accordingly.

London-based Video Producer Andy Ash says this was Blockbuster’s downfall. The company was too busy making money in their video stores to imagine a time when people would no longer want or need them.

“In a bid to rescue their business, their answer at the time was to fight fire with fire. At one point they even opened up rental kiosks, a little bit like a vending machine, but all of these attempts were based on either outdated technology or outdated business models, whereas Netflix at the time, they did the opposite; they streamlined, they were able to see the future of video rentals and then innovate for that future.”

This applies to products and services as well as to marketing strategies. Believe it or not, marketing channels have a shelf life.

So even if you learn how to dominate a specific channel , you need to remember that all channels, no matter how popular they are today, could someday fade into oblivion…just like brick-and-mortar Blockbuster locations did.

The key to surviving, and thriving?

Embrace change.

Blockbuster didn’t. Even in 2008, the company’s CEO, Jim Keyes , was perplexed by (or refused to accept) Netflix’s appeal to customers:

“I’ve been frankly confused by this fascination that everybody has with Netflix…Netflix doesn’t really have or do anything that we can’t or don’t already do ourselves.”

As Square2Marketing’s Mike Lieberman explains :

“Blockbuster didn’t believe a month-to-month subscription service would ever actually work. And it certainly wasn’t planning on going digital. Even when the company was offered a buyout deal early on, it declined, believing that its previous business revenue model would work just as well in the new wave of movie watching as it had in the past.”

3. The customer-driven approach always wins.

Customer-driven sales & marketing from drift.

As we’ve already established, there were several factors that contributed to the company’s downfall, including not understanding what business they were really in – entertainment, not retail – and not being flexible enough to adapt.

But another key piece of the puzzle was Blockbuster’s unwillingness to put their customers first. The company’s revenue relied (massively) on charging late fees. As David Reiss explains:

“Blockbuster’s profit had to be sufficient to sustain their worldwide stores and staffing levels. As well as their pricing structure reflecting this, their profit also relied on something their customers hated – late fees. A significant portion of the revenue that Blockbuster needed to stay in business was a revenue stream that Netflix didn’t even charge for, as you could keep their movies as long as you wanted. Whereas Netflix developed a business model that simplified the video-renting process, making it more enjoyable for customers, Blockbuster only thought about maximizing their own returns.”

Forbes described Blockbuster’s reliance on penalizing its patrons in the form of a late fee as the company’s “Achilles heel.” When Blockbuster did finally address the issue, the cost of dropping late fees from their model amounted to a loss of $200 million.

“Any time you can get rid of the No. 1 customer dissatisfaction factor and in the process generate higher customer traffic, for me, as a retailer, that spells a good answer,” CEO John Antioco said of the move at the time.

Narrator: it didn’t work.

At the same time, the company cut its late-fee revenue stream, it was building out its online platform cost another $200 million. If you add up these two costs, Blockbuster paid $400 million in an effort to modernize and remain competitive with Netflix.

We’ll never know if this plan would have succeeded. Shortly after this modernization effort, Antioco was ousted by the board after the changes were made.

Blockbuster then returned to their company-driven ways…and went bankrupt a few years later.

Final Thought: Change Is Inevitable

When I was a kid, getting to pick my own movie at Blockbuster was a rite of passage.

Every weekend, my siblings and I would pile into my dad’s car and make two stops. First, we marched into Blockbuster. Then it was over to the supermarket next door for snacks, soda, and frozen pizza. It was our little ritual.

But these days, the idea of going to a brick-and-mortar store to rent a video seems kind of crazy.

With the rise of Netflix, home entertainment became just a few clicks away. It’s become its own kind of ritual – for over 182 million paying members .

So the next time you think to yourself, “The way we do things now will never change,” remember the Netflix vs. Blockbuster saga and how an entire industry can become upended in just a few years.

Editor’s Note: This article was published in July 2017 and has been updated to reflect new information.

Want to drive Netflix-level growth for your business? Start here .

Winning the Customer Journey Battle: Netflix vs Blockbuster Case Study

By Stratability Academy

Published: April 25, 2019

Last Update: May 4, 2020

TOPICS: Gameplans & Roadmaps , Operating Model , Service Design , Transformation

We know a brand has established a strong position in customers’ mind when its name becomes a verb, like Google, Uber, Skype. And one such brand that cannot be ignored in this digital age is Netflix. Netflix has come a long way, starting from an online DVD rental service to the world leader in the streaming industry. The company completely changed how people watched movies and, consequently, destroyed the throne of Blockbuster, once the giant brick and mortar video rental store in the U.S. Interestingly, in 2000, Blockbuster turned down the $50M offer to purchase Netflix, just to find itself decease under the reign of Netflix 10 years later. How did Netflix flip the table and nail the customer journey as of today? How did it master the art and science of digital transformation on its strategy journey?

Let’s explore what happened based on the pains and gains in the customer journey.

Blockbuster’s Customer J ourney

Before Netflix, the age of Blockbuster…

Back to the late 20th century, when Netflix was just a small start-up, Blockbuster dominated the video rental industry with over 9,000 stores around the globe. With the emergence of DVDs as the new video medium, Blockbuster managed to get exclusive deals with big Hollywood studios to rent new DVD releases after cinema showings ended. At that time, almost every household had a videocassette recorder (VCR) for the purpose of video watching, and Blockbuster rental stores were people’s frequent destination for movie selections.

Then, at one point, people realized they went to Blockbuster stores not because they enjoyed the experience but just because it was the only choice for them to watch new movie releases. With that being said, Blockbuster store visits were far from convenience. Imagine one Sunday afternoon, your kids were home and you wanted to watch a movie with them. Then you would probably spend the next few hours driving them to a nearby Blockbuster store, going through hundreds, if not thousands, of DVDs on the shelves without a catalog or any recommendations from store attendants, except for the new releases which were charged out at a premium, getting eyestrain from reading the titles, and arguing with your kids what to watch. By the time you got home, you realized you had not cleaned up the VCR machine’s video head after the last watch, so you do that first, before sitting down on the couch to play the DVD you brought home earlier. How much enjoyment was left then? But it was not the whole story. After some days of watching the movie, you were too caught up in your work and forgot to return the DVD on time, thus you had to pay the store an exceptionally high late fee. In fact, late fees comprised of a large pie of Blockbuster profits. It was an unpleasant experience that actually drove people away from the business.

Netflix’s Digital Transformation Customer Journey

Then Came Netflix – a Market Disruptor

As a former Blockbuster customer, Netflix CEO Reed Hastings thoroughly understood the issues with that customer journey, and he initially started Netflix as a mail-order DVD subscription service to eliminate the lengthy in-store visits and annoying late fees. To make up for the lack of physical customer interaction, Netflix offered lower prices (monthly subscription fees for unlimited rentals) and implemented efficient order-processing computer systems. After just a few years, from a small business, Netflix steadily grew its revenues and got Blockbuster on guard.

Nevertheless, it was when Netflix launched its video streaming service that saw the end of Blockbuster. Netflix, again, took a deep dive into the consumer journey and foresaw the future demands for instant-access entertainment at the convenience of Internet devices. With the new streaming service, Netflix customers could browse a detailed digital movie catalog and press play in a second with no need for a physical DVD. The streaming service of Netflix is so successful that it accounts for one-third of downstream Internet traffic during peak hours in the U.S.

In 2013, upon discovering the potential hype of binge-watching, Netflix started to produce in-house content, known at Netflix Originals, and released all the episodes at one time. Its first original series House of Cards still remains one of the best dramas on Netflix. Besides, Netflix took on customers’ desire for personalization and came up with the smart content recommendation system which was backed by machine learning. Each customer now has a customized experience on Netflix based on their personal habits and preferences. This is where Netflix built up its sticky service to get customers addicted and keep them coming back for more.

Netflix’s popularity can be exposed by impressive numbers: circa. 150M users, almost double the runner-up Amazon Prime; two-thirds of Netflix users share their accounts with others, increasing the actual viewers by 2.5 times; 10 hours spent on Netflix weekly by average U.S. users; 23 languages used and 57% of international users; etc… Considering the recent increase in the share of users outside the U.S., Netflix is drastically growing its international content in the library.

And it gets that the customer journey doesn’t stop changing either. Netflix has been extending the customer journey via cross-platform partnerships. It has teamed with telecommunications and media companies like Vodafone, BT, and Sky in the UK, who all offer Netflix as part of their mobile or cell phone packages, or TV packages, and you can now control your Netflix accounts with voice-activated home automation IoT apps like Amazon Alexa, and Google Home. All of these customer journey extensions are there to save customers time and to provide convenience, and continue to provide better customer experiences.

Hasting could not have applied all of these digital transformation changes to the Netflix business model so successfully without closely following and predicting the customer journey and even testing with customers via co-creation. For a service company like Netflix, customer experience is king, thus the importance of the customer journey mapping process when it comes to lifting a business or an organization to another level, and changing the ‘game’.

Digital Transformation success through the customer journey

Netflix’s success results from the continuous effort of understanding the customer journey and delivering value driven; customer co-created; and network connected services; three digital transformation approaches introduced in THE STRATEGY JOURNEY Framework . The customer journey mapping process and digital transformation approaches, go hand in hand with each other, which explains the failure of Blockbuster to digitally transform due to its customer experience blind spot.

So when it comes to innovation and defining any new service, don’t forget to ‘map the customer journey ‘ as Reed Hastings and Netflix did.

Stratability Academy

About the author

Stratability Academy is a provider of strategic management, innovation and digital transformation learning materials based on the THE STRATEGY JOURNEY Framework , and is the publisher of THE STRATEGY JOURNEY book (2019) by Julie Choo and Graham Christison.

The Impact of Co Creation in Modern Business

Culture & Careers , Data & AI , Gameplans & Roadmaps , Operating Model , Service Design , Transformation

4 steps to create a Winning Game Plan

Service Design

9 Steps to your Winning Customer Journey Strategy

SUGGESTED TOPICS
The Magazine
Newsletters
Managing Yourself
Managing Teams
Work-life Balance
The Big Idea
Data & Visuals
Reading Lists
Case Selections
HBR Learning
Topic Feeds
Account Settings
Email Preferences

Netflix’s Bold Disruptive Innovation

Adam Richardson

Every now and then, the business world presents us with a lab experiment that we can observe in realtime. Netflix’s announcement that it is splitting off its DVD-by-mail business from its streaming business is just such an experiment. The DVD business will now go by the name Qwikster, and the streaming business will stay under the Netflix brand. It is Clayton Christensen ‘s innovator’s dilemma incarnate, and Netflix is very publicly trying to solve it. Like its 60% price increase did earlier this year, this move is understandably causing consternation amongst some customers. It’s a bold move, one that will cost them in the near term, but Netflix I’m sure has done the calculus and is looking at the endgame 5-10 years out, not 5-10 months.

Adam Richardson is a creative director at the global innovation firm frog design and the author of Innovation X: Why a Company’s Toughest Problems Are Its Greatest Advantage . His background combines experience in product development, product strategy, and customer research.

Partner Center

Brought to you by:

Netflix Inc.: The Disruptor Faces Disruption

By: Chris F. Kemerer, Brian Kimball Dunn

Netflix Inc. (Netflix) had surpassed Blockbuster, the previous movie rental leader, before making the successful transition to digital delivery of video content. But despite Netflix's success, in…

Length: 12 page(s)
Publication Date: Nov 27, 2017
Discipline: Information Technology
Product #: W17722-PDF-ENG

What's included:

Teaching Note
Educator Copy

$4.95 per student

degree granting course

$8.95 per student

non-degree granting course

Get access to this material, plus much more with a free Educator Account:

Access to world-famous HBS cases
Up to 60% off materials for your students
Resources for teaching online
Tips and reviews from other Educators

Already registered? Sign in

Student Registration
Non-Academic Registration
Included Materials

Netflix Inc. (Netflix) had surpassed Blockbuster, the previous movie rental leader, before making the successful transition to digital delivery of video content. But despite Netflix's success, in 2017, numerous competitors, including both established, mainstream content producers and digital upstarts, were making it difficult for Netflix to recreate its earlier dominance. Critics pointed to Netflix's slowing acquisition of subscribers and accelerating debt levels. Netflix's chief executive officer was confronted with disruption from a variety of digital rivals. How should he respond? Should Netflix continue to try to be a content producer, competing with Hollywood's industry leaders? Should it form a partnership with other media companies to align everyone's incentives? Perhaps it could move into other media content areas outside of traditional entertainment. Further, there remained the question of how to treat its legacy DVD-by-mail business. As the incumbent firm, Netflix needed to respond to competitors and avoid a fate similar to that of Blockbuster.

Chris Kemerer is affiliated with University of Pittsburgh.

Learning Objectives

This case was written for undergraduate and post-graduate courses in information systems and technology strategy. It offers a vehicle for students to thoroughly explore Clayton Christensen's disruptive innovation concept. In particular, it offers the opportunity to see two disruption examples in one case. Through the case, students will understand both demand-side and supply-side disruption; analyze multi-objective management of a portfolio of both mature, cash-cow lines of business and emerging, less certain business delivery innovations; understand the economics of digital goods and platform businesses, including high-fixed-cost and low-marginal-cost production functions and the cross-side network effects inherent in platforms; and discuss new technology risk management, particularly with respect to rapidly changing and uncertain information technologies.

Nov 27, 2017

Discipline:

Information Technology

Ivey Publishing

W17722-PDF-ENG

We use cookies to understand how you use our site and to improve your experience, including personalizing content. Learn More . By continuing to use our site, you accept our use of cookies and revised Privacy Policy .

Harvard Business School →
Faculty & Research →
May 2007 (Revised April 2009)
HBS Case Collection
Format: Print
| Pages: 15

About The Author

Willy C. Shih

Related work.

August 2014
Faculty Research

Netflix in 2011

Netflix in 2011 By: Willy Shih and Stephen Kaufman

Digital Innovation and Transformation

Mba student perspectives.

Assignments
Assignment: Digital Winners & Losers

Blockbuster: It’s Failure and Lessons to Digital Transformers

Blockbuster, a wildly successful national movie-rental chain, filed for bankruptcy 6 years after achieving $6 billion dollars in revenue. Why did this happen and what lessons can we learn from it?

As a teenager growing up in America in the late 1990s/early 2000s, I was a frequent customer of Blockbuster – the largest movie rental retail chain with a strong brand and stores across the country. Its revenues impressively climbed to around $6 billion dollars in 2004 only to suffer a crashing descent into bankruptcy in 2010. [1] The reasons behind this failure reveal valuable lessons to future digital transformers and business leaders. I will first summarize the original business model in terms of value creation and value capture and then will offer an analysis of its failure with accompanying lessons.

Business Model

Value Creation

Blockbuster movie rental retail stores offered a wide selection of movies, but focused mainly on new releases. It’s 9,000 stores allowed customers to easily walk through aisles of movies advertised with their DVD cases in order to make a selection. [2] It built a strong brand with 100% recognition and attempted to offer a customer-friendly experience with movie popcorn, candy, and snacks also available for purchase. [3]

Pathways to a Just Digital Future

Value Capture

Blockbuster captured value by owning physical copies of movies that could be rented enough times to exceed the cost of purchasing. It cost from $2-$5 typically to rent a film, new releases commanding higher prices than old films. Each time a customer rented a movie, they agreed to a time and day for return. Late fees, which comprised an estimated 70% of profits, were added to a customer’s account if they did not meet the return deadline. [3]

Why it failed?

After synthesizing analyses on its unraveling, I think these things most contributed to the failure:

They were making a lot of money : While Netflix was just beginning its DVD-by-mail service and later its streaming/online service, Blockbuster was still earning billions of dollars in revenue using its current model. Additionally, the margins and markets for these new offerings did not appear as attractive as its established model. [3] Why even pay attention to these new ideas if the markets are small and the margins slim?
Changing competitive landscape: Blockbuster was challenged not only by the startup Netflix, but also eventually by powerful technology companies (Apple and Amazon) and cable companies with streaming and video-on-demand services. It struggled to compete against both, especially when it was late to the game (see number 4 below).
Operating model implications: Pursuing a new business model with either a DVD-by-mail or streaming/online service required the current operating model to change significantly as Blockbuster would need to shift from its brick-and-mortar approach with retail stores to an entirely new way of functioning that was unknown. This only further encouraged Blockbuster to continue focusing on where it was still earning profit.
Failure to recognize timing: Blockbuster actually responded to all of its perceived competitive threats with similar models, but it was too late. It eventually tried a DVD-by-mail service, rental kiosks similar to Redbox, and put up its own website for online streaming after acquiring a smaller player in the field. [4] While Blockbuster’s CEO from 2007-2011, Jim Keyes, recognized that his organization was behind the curve in DVD-by-mail and kiosk services, he thought that they were not late to the streaming/online service world, and confidently stated that Blockbuster could leverage its strong brand to win:

http://www.nbcnews.com/video/cnbc/35710480#35710480

In this industry, changes occur rapidly, and Blockbuster was left in the dust.

Lessons learned

Blockbuster’s demise offers many lessons. Here are some of the salient ones to me:

Currently unattractive opportunities can become very attractive opportunities in our changing world.
Current success is easily distracting and can blur vision when considering new opportunities or threats.
Transformation can happen very quickly, and if you miss it, it can be very unforgiving.
Brand strength and/or past successes are not enough to compete against new digital transformers.
It didn’t have to end this way – Blockbuster had a chance to purchase Netflix for $50 million [5] and could have identified the streaming/online trend much earlier.

[1] https://dealbook.nytimes.com/2010/09/23/blockbuster-files-for-bankruptcy/?_r=0

[2] http://www.ibtimes.com/sad-end-blockbuster-video-onetime-5-billion-company-being-liquidated-competition-1496962

[3] http://hbswk.hbs.edu/item/clayton-christensens-how-will-you-measure-your-life

[4] http://www.nytimes.com/2007/08/09/business/09movie.html

[5] http://www.businessinsider.com/blockbuster-ceo-passed-up-chance-to-buy-netflix-for-50-million-2015-7

Image sources:

https://www.linkedin.com/pulse/4-lessons-from-blockbuster-failure-david-reiss

http://go-digital.net/blog/wp-content/uploads/2011/02/netflix-vs-blockbuster-revenues.gif

http://mentalfloss.com/article/77285/11-secrets-former-blockbuster-employees

https://qz.com/144372/a-brief-illustrated-history-of-blockbuster-which-is-closing-the-last-of-its-us-stores/

Student comments on Blockbuster: It’s Failure and Lessons to Digital Transformers

Nicely summarized the battle between Blockbuster and Netflix Tyler! I agree to your assessment that in today’s dynamic digital age past success is no guarantee for future successes for established companies. Based on the Blockbuster-Netflix saga and other similar happenings in different industries what do you think can the big players do or adopt as a strategy to keep themselves from becoming irrelevant (since the new digital business model seems unlucrative to them in its infancy)?

May 2, 2019 User deleted this comment on May 8, 2019

CEO Reed Hastings on how Netflix beat Blockbuster

Share now on:.

https://www.marketplace.org/2020/09/08/ceo-reed-hastings-on-how-netflix-beat-blockbuster/ COPY THE LINK

Get the Podcast

Amazon Music

In early 2000, Netflix founders Reed Hastings and Marc Randolph offered to sell the company to Blockbuster for $50 million. Blockbuster turned them down. Eventually, Netflix triumphed over Blockbuster, popularized streaming, and forced the entertainment industry to adapt. Hastings credits much of this success to the company’s internal culture. For Hastings’ interview with “Marketplace’s” Kai Ryssdal, click here . The following is an excerpt from a new book Hastings co-wrote called “ No Rules Rules: Netflix and the Culture of Reinvention. ”

Reed Hastings: “Blockbuster is a thousand times our size,” I whispered to Marc Randolph as we stepped into a cavernous meeting room on the twenty-seventh floor of the Renaissance Tower in Dallas, Texas, early in 2000. These were the headquarters of Blockbuster, then a $6 billion giant that dominated the home entertainment business with almost nine thousand rental stores around the world.

The CEO of Blockbuster, John Antioco, who was reputed to be a skilled strategist aware that a ubiquitous, super-fast internet would upend the in- dustry, welcomed us graciously. Sporting a salt-and-pepper goatee and an expensive suit, he seemed completely relaxed.

By contrast, I was a nervous wreck. Marc and I had cofounded and now ran a tiny two-year-old start-up, which let people order DVDs on a website and receive them through the US Postal Service. We had one hundred employees and a mere three hundred thousand subscribers and were off to a rocky start. That year alone, our losses would total $57 million. Eager to make a deal, we’d worked for months just to get Antioco to respond to our calls.

We all sat down around a massive glass table, and after a few minutes of small talk, Marc and I made our pitch. We suggested that Blockbuster purchase Netflix, and then we would develop and run Blockbuster.com as their online video rental arm. Antioco listened carefully, nodded his head frequently, and then asked, “How much would Blockbuster need to pay for Netflix?” When he heard our response—$50 million—he flatly declined. Marc and I left, crestfallen.

That night, when I got into bed and closed my eyes, I had this image of all sixty thousand Blockbuster employees erupting in laughter at the ridiculousness of our proposal. Of course, Antioco wasn’t interested. Why would a powerhouse like Blockbuster, with millions of customers, massive revenues, a talented CEO, and a brand synonymous with home movies, be interested in a flailing wannabe like Netflix? What did we possibly have to offer that they couldn’t do more effectively themselves?

But, little by little, the world changed and our business stayed on its feet and grew. In 2002, two years after that meeting, we took Netflix public. De- spite our growth, Blockbuster was still a hundred times larger than we were ($5 billion versus $50 million). Moreover, Blockbuster was owned by Viacom, which at that time was the most valuable media company in the world. Yet, by 2010, Blockbuster had declared bankruptcy. By 2019, only a single Blockbuster video store remained, in Bend, Oregon. Blockbuster had been unable to adapt from DVD rental to streaming.

The year 2019 was also noteworthy for Netflix. Our film Roma was nominated for best picture and won three Oscars, a great achievement for the director Alfonso Cuarón, which underscored the transformation of Netflix into a full-fledged entertainment company. Long ago, we had pivoted from our DVD-by-mail business to become not just an internet streaming service, with over 167 million subscribers in 190 countries, but a major producer of our own TV shows and movies around the world. We had the privilege of working with some of the world’s most talented creators, including Shonda Rhimes, Joel and Ethan Coen, and Martin Scorsese. We had introduced a new way for people to watch and enjoy great stories, which, in its best moments, broke down barriers and enriched lives.

I am often asked, “How did this happen? Why could Netflix repeatedly adapt but Blockbuster could not?” That day we went to Dallas, Blockbuster held all the aces. They had the brand, the power, the resources, and the vi- sion. Blockbuster had us beat hands down.

It was not obvious at the time, even to me, but we had one thing that Blockbuster did not: a culture that valued people over process, emphasized innovation over efficiency, and had very few controls. Our culture, which focused on achieving top performance with talent density and leading employees with context, not control, has allowed us to continually grow and change as the world, and our members’ needs, have likewise morphed around us.

Netflix is different. We have a culture where No Rules Rules.

Excerpted from “No Rules Rules: Netflix and the Culture of Reinvention” by Reed Hastings and Erin Meyer, reprinted courtesy of Penguin Press.

Stories You Might Like

Netflix CEO Reed Hastings on culture, competition and what keeps him up at night

David Brancaccio reacts to “The Last Blockbuster”

Netflix tests feature to crack down on password sharing

Everybody’s watching: Netflix sees subscriber surge of 16 million with COVID-19 lockdowns

Netflix raises more debt. Is it sustainable?

Who donated to Georgia runoff campaigns?

There’s a lot happening in the world. Through it all, Marketplace is here for you.

You rely on Marketplace to break down the world’s events and tell you how it affects you in a fact-based, approachable way. We rely on your financial support to keep making that possible.

Your donation today powers the independent journalism that you rely on . For just $5/month, you can help sustain Marketplace so we can keep reporting on the things that matter to you.

Also Included in

Latest episodes from our shows.

The TikTok ban is poised to make the U.S.-China divide even starker

The WIC family food program is getting a refresh, but requirements are still tough to navigate

Why does the world want dollars? Because of high interest rates, thriving economy in U.S.

Recent college grads see rise in unemployment

insights and consulting for change

Change (31)
Communication (16)
Government (6)
Initiatives (2)
Leadership (19)
Measurement (11)
Organizational Behavior (13)
Organizational Culture (6)
Politics (10)
Reporting (8)
Strategy (29)
Strategy Map Design (7)
Strategy-Focused IT (12)
Tenacious Tortoise (6)
Workforce (7)
Atul Gawande audiences balanced scorecard Blockbuster British Petroleum BSC capacity for change Carolyn Aiken cascade case study cause and effect change agents channels charisma Charles M. Blow Chris Brogan Chrysler common sense company size competency competition conditions for change consulting contribution defensive dental floss discretionary spending DVD earthquake Economist enterprise activity expectations experienced facilitation facilitation Flaw of Averages focus group Frederick Herzberg fuel economy GM Government hare HBR health care health care spending hierarchy hunkering down hypotheses hypothesis indicator information capital information technology Iridium irrational IT IT Organization IT spending John Kotter Key West leadership leading indicators Lord Browne Malcolm Gladwell McKinsey messages motivation Motivation-Hygiene Theory Netflix New York Times New Yorker perception perspectives and themes precision public relations reality red yellow green Redbox regulated monopoly research design sabotage safety Sam L. Savage Scott Keller SFITO statistics strategy map survey teachable moment technology technology management Tenacious Blog tenacity Terry Gross time reporting Tom Peters Tom Wolfe value proposition vertical and horizontal Virginia Apgar vocabulary Wordpress

Blockbuster vs. Netflix: A Case of Technology-Driven Strategy

For a few years now, I’ve been doing a riff on Blockbuster and Netflix in some of my speaking engagements. It’s been a useful case for sharing many of my insights about strategic management and the role of technology in strategy (disclaimer: neither of these firms has been a client of mine, and my impressions have been formed only from publicly-available information).

The essence of the riff is this: Blockbuster built a very successful business model and then had its lunch eaten by Netflix. The key lessons we can learn from this case are:

Don’t underestimate the power of technology to change your competitive environment.
Constantly be looking for ways to challenge and reinvent your value proposition, or your competitors will do it for you.
Recognize and overcome the forces that will resist change in your own organization.

Let’s look at the history. Blockbuster opened its first store in Dallas in 1985. It grew rapidly through franchising, company-owned stores, and acquisition and consolidation of the thousands of independent “mom and pop” video rental retailers around the country. The value proposition was easy to see: convenient, economical, and reliable rental access to video and game entertainment, in a clean and family-safe (with no X-rated movies) environment. Viacom acquired Blockbuster in 1994 for $8.4 billion.

But Blockbuster’s fortunes have been on a long decline. Viacom floated shares in Blockbuster with plans for a full divestiture. The separation was completed in 2004, with Viacom taking a $1.3 billion charge for its trouble. Blockbuster stock, which traded above $29 a share in 2002, has recently been trading below $1.00 per share. Blockbuster’s market capitalization is less than $150 million , and trading was halted briefly in March 2009 on rumors of bankruptcy.

Billions of dollars in shareholder value lost. What happened? Netflix happened (although other, less significant forces contributed). Netflix was established in 1997 and has its headquarters in Los Gatos, California. Although it started with a conventional pay-per-rental model, it introduced its monthly subscription concept in 1999, and dropped pay-per rental soon after. Capitalizing on the shift from tape to disk media for video, Netflix’s business model exists entirely without a bricks and mortar retail presence.

The basic value proposition of Netflix has been to capture its customers’ DVD choices on its website (heavily driven by customized recommendations), and ship the chosen DVD to and from customers via U.S. Mail. Compared with bricks and mortar video rental stores, Netflix offers the convenience of website ordering and door to door service at the sacrifice of same-day service. In most cases, DVDs arrive in the mail the day after an order is initiated (either by request on the website or returning a previously rented DVD). Netflix’s success has certainly been due in part to reliable execution of its order capture and delivery processes. Netflix went public in 2002 selling over 5 million shares at a (split-adjusted) $7.50. After having incurred losses for a few years, it posted its first profit of $6.5 million on $272 million in revenue in 2003. Netflix recently traded around $40 per share, and has a market capitalization over $2.2 billion .

Don’t underestimate the power of technology to change your competitive environment

Netflix’s business strategy was entirely built on the basis of then-available technology. Environmental changes, such as higher penetration of internet access and broad availability of DVD players changed the landscape, and created opportunity. Of course, the technology was available to Blockbuster, which was certainly aware of environmental change. But Blockbuster was slow to respond.

Compared with Blockbuster’s retail video rental model, Netflix offered the value proposition of convenience, choice, essentially unlimited inventory, and of course low cost; all because the consumer interacts with Netflix using her computer, rather than having to physically visit a Blockbuster. Think about the layout of a typical Blockbuster store; nearly all the space is occupied by air. This air creates aisles that allows consumers to walk and see (often with some difficulty) the cover art and titles of perspective DVD rentals. The actual space necessary to store the DVDs is a small fraction of the space needed for an effective browsing environment. So Blockbuster incurs a huge overhead in real estate, as well as the relatively modest salaries of the clerks and store manager who probably aren’t offering you a lot of advice about what movie to see.

Although Blockbuster finally entered the online market in 2004, it hasn’t enjoyed the same success as Netflix. It was sued by Netflix in 2006 for patent infringement on the design of its online rental program (the case was settled with undisclosed terms). Recent measures of online traffic show that Netflix.com outdraws Blockbuster.com by a factor of about 5 to 1.

Constantly be looking for ways to challenge and reinvent your value proposition, or your competitors will do it for you

Despite competition from self-service rental kiosks from such firms as Redbox , Netflix seems unlikely to be overtaken soon by a competitor. Despite its current success, Netflix is in the process of reinventing itself. Netflix has added a “Watch Instantly” feature to its web site. At no additional cost, eligible subscribers are able to stream near-DVD quality movies and recorded television shows instantly over the internet. While the number of titles available now is limited, the inventory of Watch Instantly titles is growing rapidly. Netflix is now forming partnerships with electronics manufacturers to instantly stream movies directly to their devices. In May 2008 they released a set-top-box to stream Netflix’s Watch Instantly movies. While Blockbuster may have been competing with Netflix, Netflix today seems to be gearing up to compete with cable and satellite video distributors, as well as such studio-sponsored streaming sites as Hulu .

Recognize and overcome the forces that will resist change in your own organization

Without insider knowledge, we can only imagine what kinds of leadership meetings took place at Blockbuster when rentals began to decline in favor of Netflix and other competitors. What seems clear is that Blockbuster was unable to muster the courage and the tenacity to reinvent itself in the face of technology and environmental change. Netflix seems to be embracing the inevitability of change in its future.

Comments are closed.

ChatableApps

Netflix vs Blockbuster – A Comparative Analysis of Streaming Giants’ Success and Failures

Netflix vs blockbuster: the rise and fall of two entertainment giants.

When it comes to home entertainment, the names Netflix and Blockbuster are inseparable from the collective memory of millions of people worldwide. However, while Netflix has ascended to the pinnacle of the streaming industry, Blockbuster met its demise. In this blog post, we will delve into the intriguing story of these two giants and examine the factors that led to their contrasting destinies.

Rise of Netflix

Netflix’s Early Beginnings as a DVD Rental Service

Netflix initially emerged on the scene as a DVD rental-by-mail service in 1997, offering customers the convenience of renting movies without setting foot outside their homes. This innovative approach quickly gained traction, enabling the company to capture a significant share of the video rental market.

Transformation into a Streaming Service

Recognizing the growing potential of digital media, Netflix made a bold move in 2007 by introducing streaming as an alternative to physical DVD rentals. This shift marked a turning point for the company, setting the stage for its future dominance in the entertainment industry.

Successful Strategy Shifts and Innovations

Netflix’s success can be attributed to several strategic decisions and innovations that have kept it ahead of its competition.

Introduction of Original Content

One of the factors that contributed significantly to Netflix’s rise was its decision to produce original content. With popular shows like “House of Cards” and “Stranger Things,” the streaming giant assured its subscribers that it could deliver exclusive and high-quality content that couldn’t be found anywhere else.

Expansion into Global Markets

Netflix’s appetite for growth wasn’t confined to the domestic market. The company realized the immense potential in expanding internationally and successfully launched its streaming services in various countries, leveraging its already considerable brand recognition.

Embracing the Subscription Model

Building upon its rental-by-mail foundation, Netflix embraced a subscription model that allowed users to enjoy unlimited access to its vast collection of movies and TV shows for a monthly fee. This approach offered both convenience and affordability, forging a strong bond between the company and its subscribers.

User-friendly Interface and Personalization

Netflix revolutionized the user experience by developing a user-friendly interface that showcased personalized recommendations based on individual preferences and viewing history. By tailoring content suggestions to each user, Netflix succeeded in keeping viewers engaged and coming back for more.

Downfall of Blockbuster

Blockbuster’s Dominance in the Rental Market

Before the advent of digital media, Blockbuster was the undisputed king of the rental market. With its chain of physical stores spread across the nation, Blockbuster boasted a vast selection of movies and games that kept customers coming back.

Failure to Adapt to Changing Consumer Preferences

Underestimating the shift to digital media

Blockbuster’s greatest downfall was its inability to foresee the rapid adoption of digital media and streaming. As customers increasingly turned to Netflix and other streaming services, Blockbuster clung to its brick-and-mortar stores, failing to recognize the impending revolution that would reshape the industry.

Slow response to the emergence of streaming services

Even after digital media started gaining momentum, Blockbuster was slow to respond. Instead of developing or partnering with a streaming service, Blockbuster focused on its in-store experience, which eventually became a liability.

Missed Opportunities and Strategic Errors

Ignoring the Importance of Technology

Blockbuster’s reluctance to embrace technology was a significant factor in its downfall. While Netflix invested heavily in developing streaming technology and expanding its digital infrastructure, Blockbuster failed to recognize the potential of this new era and instead stuck to its traditional model.

Poor Decision-making Regarding Partnerships

Blockbuster also made critical missteps in its choice of partnerships. For example, it passed up on an opportunity to acquire Netflix in its early days, a decision that would come back to haunt the company as Netflix rose to prominence.

Comparison of Success Factors

Differentiation through Content Offerings

Netflix’s success can be partially attributed to its ability to offer exclusive original content, giving subscribers a unique and compelling reason to choose Netflix over other streaming services. Blockbuster, on the other hand, relied primarily on licensing existing content, failing to capture the attention and loyalty of its audience.

User Experience and Convenience

Netflix’s user-friendly interface and personalized recommendations provided a superior viewing experience, eliminating the hassle of browsing through physical copies and improving customer satisfaction. Blockbuster’s reliance on physical stores and limited browsing options paled in comparison and failed to address changing consumer expectations.

Pricing and Subscription Models

Netflix’s subscription model offered tremendous value for money, allowing customers to access unlimited content at a fixed monthly fee. In contrast, Blockbuster’s pay-per-transaction model became less appealing as streaming emerged as a more convenient and cost-effective solution.

Expansion into International Markets

While Netflix expanded its services to various countries, Blockbuster’s physical store presence limited its ability to penetrate global markets effectively. This international expansion allowed Netflix to tap into new audiences and diversify its revenue streams.

In the battle between Netflix and Blockbuster, it is evident that the former’s rise to success and the latter’s downfall hinged on factors such as adaptability, embracing technological advancements, and understanding consumer behavior. The story of these two entertainment giants serves as a valuable lesson for industry competitors, illustrating the importance of staying ahead of the curve and constantly evolving to meet the changing needs and preferences of consumers.

The future of streaming services remains promising, but not without its challenges. As the industry becomes increasingly competitive, companies will need to continue innovating and delivering exceptional content and experiences to stay relevant. Only by learning from past mistakes and understanding the evolving landscape can streaming services hope to thrive in an ever-evolving entertainment ecosystem.

The Ultimate Guide to Avoiding Blockbuster Late Fees – Tips and Tricks for a Stress-Free Movie Rental Experience
Is ‘London Bridge Is Falling Down’ Available on Netflix? Exploring the Classic Nursery Rhyme in Streaming
From Success to Obscurity – Unmasking the Reasons Why Blockbuster Failed
Exploring the Top Product Management Models – A Comprehensive Guide

Case Study: How Netflix Took Down Blockbuster

Blockbuster and Netflix are two big business within the domestic videocassette rent payment market place that skilled very much distinctive products. Netflix extremely multiplied its firm estimate even as Blockbuster dropped its leading market position and fallen into bankruptcy. Back to the late 20th century, whilst Netflix was just a small newly established business, Blockbuster ruled the video cassette rental business with over 9,000 shops all around the world. With the emergence of DVDs as the brand new video medium, Blockbuster be able to get special deals with massive Hollywood studios to rent new DVD releases after cinema showings ended. At that point in time, nearly every family had a videocassette recorder (VCR) for the reason of video watching, and Blockbuster rental shops were people’s familiar starting point for film selections. Technology and innovation performed a significant task inside the improvement of the apprehensive business. Today’s dynamic domain is completely centered on progression of technology and every area requires to carry out new intervention of technology to obtain success . The on-line video package providers companies are those who design a new to look at preferred programs. The business idea of Blockbuster change into related to serving the DVDs on a rental basis. Netflix become also using the equal idea however after a period of time, it changed to the online streaming video. This advertising approach of Netflix offers with the phases that Netflix used to promote its commercial enterprise businesses.

History of Blockbuster

Blockbuster turned into one in every of the biggest video companies all over in the globe. Blockbuster became the primary organization, which commenced to offer DVDs on condominium basis. David Cook set up the company in the year 1985. David in Dallas based the primary store of Blockbuster. The primary video market of Blockbuster turned into an extensive success on global horizontal. The retailer became opened with 8000 tapes which consist of 6500 titles. Afterward they had been opened three more but, the company face challenges 3.2 million dollars in 1986. Therefore Cook sold 1/3rd share beginning of 1987. The business was managing 133 stores in 1987. Within 1919, the full number of shops reached as much as 1000. During 2000, the Blockbuster is the pinnacle DVD carrier company. But, within the year 2006, Blockbuster disconnected from Viacom.

History of Netflix

In 1997 Netflix turned into established in California, founded by Reed Hasting. At the preliminary level of this blockbuster advertising method the videos were offered on a hire charge base by the organization. But, in 1999, the business changed into commencing the delivery of obtained videos via postal facility of the United State. After a few year of its setting up order, in 2009, the business had a large and improved database system. In 2009, business was began delivering DVD such as distinctive titles. It can be referred that the business nearly contained a focus of 4.5 million customers. Within the same year, company had completed an affiliation with a digital company named as consumer electronics. This partnership made easy to get entry to the internet on specific appliances. In 2010, Blockbuster business turned into bankrupt. As in line with the facts collected, after this affiliation, people can easily get entry to internet over iPad, computer, mobile phone, laptop, and exclusive net devices. But, currently the company has 23 million contributors from different international location those make use of Netflix subscription.

How Netflix beat Blockbuster

A year after establish in 1998 Netflix gain control the marketplace of video industry through advertising and marketing strategy as well as their special offers attract more consumer than any other video industry. As a result it impact other entertainment business without doubt. In case that there is to some extent obstruct during the delivery sort out of DVD throughout mail or via post than the company do not charge for late fee and it became well turned-out change. On the other hand, before the setting up of this establishment, Blockbuster existed the growing enterprise in this business. Blockbuster company apply same “No late Fee” strategy as Netflix but unfortunately it did not work for this company and blockbuster challenged a massive forfeiture as well as the marketplace cost of its shares decline. Now Blockbuster Company is currently identified for instance bankrupt industry in the video business. Afterwards Netflix give emphasis to more on marketing strategy to go to next level and extended DVD business. There are several brands of competitors from another province who contested with Netflix. Aside from, Netflix has its distinctive line of attack to attain achievement and advance in the industry. The simple technique used by the organization for the fulfilment of organization objectives. The maximum critical part is associated with the market place expansion idea of DVD products. Aside from that customer relationship is the major strength and strategy for this organization to achieve their mission and vision. Every organization has two aspects of success, one is present commercial enterprise and another is organization consumer. The essential aspects is that company always selects current business. Aside from that, in the time of Antioco’s stage, Blockbuster made double revenue by implementing of low cost strategy “reducing late charges”. But this footstep draws attention lots of consumers to finance further in the Blockbuster Business. After the Examination, it turn into clear-cut that the forfeiture from reducing changed into 200 million dollars while; on-line campaign motion total yet again 200 million dollars. After this action, 5 years later Blockbuster Business was announced bankrupt. Netflix uses following strategy where Blockbuster never think of changes. These are;

Technological Advances

Ever since 2000, the initiating of latest technology and computer electronics commodities has unexpectedly elevated customer possibilities to view cinemas. Now days it is fairly well-known to watch movies on airplanes, in cars, hotel rooms, in homes or almost every places through a laptop PC or smartphone appliance like an apple iPhone, iPad, or iPad touch. Most important in year 2012 it was clear-cut that the 134 million US families with excessive speed internet facility and internet related Blu-ray , video games, TVs, computers, tablets, or smartphones had been swiftly transferring from manual hiring DVDs to watching cinemas and TV programs streamed over the net. Customer can watch these films and Television programs via an extensive type of distribution networks and sources. The trend of the upcoming marketplace for hiring movies and TV contents is undisputable in streaming movie industry and Television programs to internet- associated televisions, PCs and smart phone devices. Streaming has the gain of accepting household adherents to reserve and instantaneously watch the movies and Television shows they desired to watch, hiring a streamed show possibly will be performed both by way using the service of Netflix, Blockbuster online, Amazon instant video, Apple’s iTunes and different streaming video vendors or through the usage if a television distant to assign arrangements with a cable satellite TV for pc, or fiber optics issuer to instantaneously look at a movie from a listing of numerous hundred choices. The numeral of families which have a DVD player or video recorder has become more intense, so they may simply make a recording TV shows and movies after which pay off them at their suitability. Netflix changed into expected that the DVD systems, at the side of excessive- clarity replacement designs one of these Blu-ray, will be the car for watching content material in the home-based for the expected future. Modern innovations in video-streaming technology have been swiftly enhancing the possibilities that video application would become the leading movie rental network in the next few years.

Low cost strategic is one of the most powerful strategic position for the movie rental industry. Blockbuster organization was making money by implement overdue price to its clients. The value of operational cost of this business movement is a smaller amount of cost that the price of market stores. Aside that the value of adjustments is likewise not as much of than the market things. For the fulfilment of achievement and advance Netflix advertising and marketing method, organization uses specific modern strategies and technologies. The business has start-off the idea of delivery the DVDs at the consumer’s location and subscription fee is comparatively subsequent the low-cost idea which was not carefully thought by Blockbuster. In USA everyday uses, on regular, almost 5 hours each day seeing video contents. And that may become pricey, rent out a movie can prevent a big expanse of cash while competed to actually go to a movie which can charge as extremely as $16 a ticket. When think about Netflix’s business standard, rate supports mail transport over in-store rental. Some plan via the mail cost $7.99/month limitless vs. the in-store $4/rental. Kiosk Rental acquisition market proportion with $1 nightly rental price. Video on call for is anticipated to maintain to lower in price as competition rises. When Netflix released its subscription version, it flashed significant attention between clients trying to find reasonably-priced movie rentals. A delivered bonus is that disc are brought directly to their doors ways, eliminating trips to a store and late fees. Netflix is the biggest on-line streaming video provider with over 23 million subscribers. Consumer pay a flat monthly fees of $7.99 for unrestricted log on to movies and Television indicate, presently ad- unrestricted. The provider is accessible on Nintendo Wii, Microsoft’s Xbox 360, Sony PS3 consoles, Blu-ray disc players, Internet-connected TVs, and many other Internet-supported video players.

Customer Relationship

Netflix advertising and marketing approach is associated to the subscription of the channel. This strategy of the organization is performed a crucial part within the improvement of the company. Concurrently, this strategy also consist of the delivery procedure of distribution DVDs via mail and streaming of videos. The subsequent crucial stage is connected to the method of consumer closeness . The phrase consumer intimacy allocates with the participation of consumers for business growth drive. This advertising idea primarily appreciated by the Netflix organization because it turned into aimed to get honest source consumer and right, way to applied most excellent sources for the success of organization objective and achieve the need of its clients. Aside, from this, the significance of these method is associated with offer the top facilities to the clients. The purpose in arrears the recognition of the Netflix organization is the advertising and marketing method of this business enterprise, the strategies put together the Netflix business finest on-line video issuer within the world. Further than, the importance is absolute to its clients. The principle goal of the Netflix business is to supply the high-quality customer service and respects in comparison to Blockbuster. The intention behind the leading quality of the Netflix business enterprise is an effective execution of these business strategies . But, these techniques might capable the Netflix business to stand marketplace opposition.

Netflix Innovation

The phrase innovation co-operated an essential function in the productive implementation of industry action. It is able be distinguished that innovation may be considered as a heart for the organization . The character of innovation utilized by the Netflix organization is disruptive . The Netflix business enterprise is operating this characteristics from its first environment. On the other hand, this organization brought the idea of undertaking the demand of DVD turning in thru the mail without a late fee. Other than this the handy of watching movies and TV programs at home-based at a low rate. The Netflix organization usually attempts to offer cost friendly deals to its clients. It be possibly will be identified to all that the Netflix Corporation is an entertaining network site. But, the dream of the Netflix organization is aimed to be the top supplier of entertaining movies all over the world. Aside that, the vision of the corporation is associated with the verdict of the global target market with the assist to the content inventors all over the globe. However, the Netflix business aimed to deliver the quality and high-priced DVDs to its clients by treating free of charge and rapid distribution method. There are distinctive models associated with the innovation of Netflix. The current monthly subscription of Netflix is 12.99 dollar per month. As peer the sources it have turn into clear-cut that Netflix is famous in their live programs simply accessible to the subscribers or clients of the Netflix organization. One of the exceptional and maximum famous programs of Netflix is Black Mirror show. Form this examines of these sources; it turn into clear-cut that the Netflix company is one of the top organization that manage its business movement after thinking the needs of its clients.

Case Study on Business Strategies: Kodak's Transition to Digital
Corporate Branding Case Study: 'Power of Dreams' Campaign by Honda
Case Study of Dell: Driving for Industry Leadership
Case Study: The Rise and Fall of Nintendo Wii
Case Study: Why Woolworths Failed as a Business?
Case Study: Lifecycle of Video Game Consoles
Case Study of Dyson: Competitive Advantage through Innovation
Case Study: Marketing Strategies of IBM
Case Study: "Intel Inside" Campaign by Intel
Case Study: The Rise and Fall of Enron

Blockbuster vs. Netflix case study

Speaking of large modern multimedia companies, it is necessary to allocate Netflix as one of the largest suppliers of films and serials in the world. Its audience in 2014 reached the mark of 50 million users. Many leading publications call Netflix the most successful distributor of streaming multi media in history.

Searching for a Niche

The company was founded in 1997 by Reed Hastings and Mark Randolph.

They noticed in the video distribution market a free niche associated with the inconvenience of existing salons and services. Thinking about this, the future founders of Netflix set about creating a more convenient method for renting movies and TV shows. The model of the work was built in such a way that a person could rent a movie without going to the store or office. Everything was easy to make out with the help of mail and bank payments. The cost of one week was $4.

Thus, Netflix case study Harvard can be made from the position of searching for an unoccupied place and developing a new model of service, which would be more convenient to customers.

Blockbuster vs. Netflix

There were several major competitors on the market, among which was the Blockbuster network with annual revenues of up to $ 5 billion. They have not worked online yet, but they could start and easily destroy a start-up business.

Hastings understood that in such conditions it is necessary to act quickly. To attract the audience to the site, the founders began to create special promotions for users. In the first year of work, a trip to Los Angeles was donated to a random customer, and those who rented more than two disks received a discount of 30%. Blockbuster vs. Netflix case study shows how to bypass the main competitor in the short term and grow own audience simultaneously.

In the same way, one more problem of the company in the first year of existence was solved – a low percentage of DVD users. As a result, the company went the favorite way of providing bonuses to clients. For this, an agreement was concluded with the Japanese company Toshiba : every buyer of its players in the US received a free rental of three disks. So the company increased not only the number of DVD users but also its own audience.

This unique business can also be learned. It represents a mutually beneficial bilateral deal, each side of which only wins.

Delivery Innovations

At the beginning of its history, the company had to face several problems that could destroy it. One of them was the delivery of disks intact and secure with the help of mail. All the mail was sorted by special machines, working with a huge number of letters, and after this sorting, the disk would be damaged. Therefore, Netflix was faced with the necessity to develop a solution on how to save its product.

The development of a unique envelope began, and about 150 versions of different materials were created. They stopped on a version of the thick paper with a special partition, which protected the disk from damage. This solution shows how a company may act in conditions that cannot be changed but only adopted.

Following IT Trends

Based on the feedback from customers, the scheme of the service was gradually changed. Instead of a weekly lease, a one-month lease was introduced, while the company continued to offer its customers a variety of discounts. Everyone can take 4 DVDs for only $15.

95 for a month.Gradually, a new service option is gaining momentum – an online subscription developed in 1999. Initially, its cost was $ 19.95 per month for four drives, while there were no time limits and the user could take the discs for at least a year. For new customers, there was a trial subscription for six days.

This Netflix case study solution can be researched from the perspective of an adaptation of the business to changing conditions, following trends, the correct definition of the needs of consumers and the formation of a demanded proposal, combining all this with pleasant bonuses and opportunities to test the service.In 2007, Netflix began to distribute streaming video, which turned it into one of the largest companies in the world. The transition to the new model was due to the fact that Hastings understood: DVD is not the only way to distribute content, and with the advent of cloud services, most of the information has been stored on the Internet. There was a new niche that his company could fill. The founders of the company second time caught the current trend and were able to infiltrate into a virtually empty niche.

Quick Links

Terms and Conditions

Testimonials

Our Services

Case Study Writing Service

Case Studies For Sale

Our Company

Welcome to the world of case studies that can bring you high grades! Here, at ACaseStudy.com, we deliver professionally written papers, and the best grades for you from your professors are guaranteed!

[email protected] 804-506-0782 350 5th Ave, New York, NY 10118, USA

Hi! I'm Anna

Would you like to get a custom case study? How about receiving a customized one?

Haven't Found The Case Study You Want?

For Only $13.90/page

Academia.edu no longer supports Internet Explorer.

To browse Academia.edu and the wider internet faster and more securely, please take a few seconds to upgrade your browser .

Enter the email address you signed up with and we'll email you a reset link.

We're Hiring!
Help Center

STRATEGY AND CASE ANALYSIS (BLOCKBUSTER VS NETFLIX) Name of student Institution Course Date

2020, P. Maina

This case analysis will examine the US home video retail market from the perspective of two companies, Blockbuster, and Netflix. The former collapsed in 2010 while Netflix is the dominant operator in the market. The study will provide insight into the strategies and application of theoretical concepts adopted by both companies. The report will compare the organizational culture of both companies to analyze the failure of one company and the success of the other. It will also explore the strategic positioning of Blockbuster and Netflix and the strategic choices that the companies pursued until the present. An examination of those choices will expose how Netflix gained a competitive advantage over a rival that was highly profitable and with a substantial physical footprint in the video rental market. The analysis provides insight into the right thing that Netflix did while at the same time, looking into its current challenges. The company's future relies on addressing its current challenges and co-opting emerging technologies, just as it did with Blockbuster. The stakes currently are higher because Netflix is competing with companies with proven innovation record.

Related Papers

Jessica Izquierdo-Castillo

This is an English versión of the Paper originally published in Spanish in El Profesional de la información, v. 24, n. 6. http://www.elprofesionaldelainformacion.com/contenidos/2015/nov/14.pdf To cite this article, please use: Izquierdo-Castillo, Jessica (2015). El nuevo negocio mediático liderado por Netflix: estudio del modelo y proyección en el mercado español. El profesional de la información, v. 24, n. 6, pp. 819-826. http://dx. Abstract: New actors, who link their activity to content distribution, lead the business of online media content. These actors operate adapted to the demands of converging media context, and they propose business models oriented through user benefit. Among them, Netflix notably highlights for the leadership he has in its home market, the United States, and its international expansion. This paper presents in detail the Netflix business model with a case study that focuses on three key areas: the catalogue and monetization's formula, policy relationships with key audiences (users and content and internet providers) and its internationalization strategy. From the results, a discussion on the projection of this model in the Spanish media market is opened.

Mohamad Allahham

Shahzad Ansari

Research summary: Firms introducing disruptive innovations into multisided ecosystems confront the disruptor's dilemma: gaining the support of the very incumbents they disrupt. Through a longitudinal study of TiVo, a company that pioneered the Digital Video Recorder, we examine how these firms may address this dilemma. Our analysis reveals how TiVo navigated coopetitive tensions by continually adjusting its strategy, its technology platform, and its relational positioning within the evolving U.S. television industry ecosystem. We theorize how (1) disruption may affect not just specific incumbents, but also the entire ecosystem; (2) coopetition is not just dyadic, but also multilateral and intertemporal, and (3) strategy is both a deliberative and emergent process involving continual adjustments, as the disruptor attempts to balance coopetitive tensions over time. Managerial summary: New entrants confront a dilemma when they introduce a disruptive innovation into an existing business ecosystem, viz., how can they gain the support of the incumbents that their innovation disrupts? Confronting this " disruptor's dilemma " , the disruptor must consider several issues: How might it pitch its innovation to attract end customers and yet reduce the threat of disruption perceived by ecosystem incumbents? How can the innovation be modified to fit into legacy systems while transforming them? Based on an in-depth analysis of TiVo and its entrepreneurial journey, we explore the strategies disruptors can deploy to address these issues.

Summit Osur

When Netflix launched in April 1998, Internet video was in its infancy. Eighteen years later, Netflix has developed into the first truly global Internet TV network. Many books have been written about the five broadcast networks – NBC, CBS, ABC, Fox, and the CW – and many about the major cable networks – HBO, CNN, MTV, Nickelodeon, just to name a few – and this is the fitting time to undertake a detailed analysis of how Netflix, as the preeminent Internet TV networks, has come to be. This book, then, combines historical, industrial, and textual analysis to investigate, contextualize, and historicize Netflix's development as an Internet TV network. The book is split into four chapters. The first explores the ways in which Netflix's development during its early years a DVD-by-mail company – 1998-2007, a period I am calling "Netflix as Rental Company" – lay the foundations for the company's future iterations and successes. During this period, Netflix adapted DVD di...

Silvia Elaluf-Calderwood

The battle for the growing markets of internet TV is far from ended. In this post, Silvia Elaluf-Calderwood analyses the overview and current situation of one of the key players–Netflix–and offers conclusions based on their strategy of expansion in the European market. “Internet TV is replacing linear TV. Apps are replacing channels, remote controls are disappearing, and screens are proliferating. As Internet TV grows from millions to billions, Netflix is leading the way around the world.” Neflix, 2013

Dr. Kristopher Alexander

Entertainment value has been a focus for media providers, along with high reward. Focus on profit, however, often leads traditional providers to lose sight of social and cultural responsibilities. The hierarchical structure of media is changing with the emergence of new digital media, void of regulatory control. This “democratization of media” has produced viable and profitable business models, while providing arguably the most potential for bringing about social and cultural change in a new age: a ‘digital age’. This paper explores the ‘digital age’ while discussing the challenges facing profit-oriented providers of media, examining the literature and assessments of these providers. I will show how one particular company, Nintendo™, has successfully transitioned from traditional media into the present. Finally, I will discuss how the National Film Board of Canada, a not-for-profit organization, can re-emerge as a leading media provider by finding its place in this ‘digital age’.

Television & New Media

Michael L Wayne , Matt Sienkiewicz

Using the media industry studies approach, this article examines the acquisition strategies and licensing practices employed by three recently launched niche Jewish/ Israeli subscription video on-demand (SVOD) services. Drawing on qualitative interviews with executives and publicly available materials, this analysis argues that these services acquire film and television titles through a combination of traditional and innovative licensing arrangements intended to maximize access to Jewish-themed or Israeli-produced content unwanted by better funded platforms. The findings reveal the ways in which access to specific kinds of content is dependent on executives' ability to leverage preexisting industry-specific professional relationships as they attempt to maximize the value created from limited economic resources. As such, this article offers insights by contextualizing licensing practices being employed by niche SVODs across film and television industries while also highlighting the limitations of using the mainstream/niche binary to understand streaming distribution.

Aaron linox

Media, Culture & Society

Michael L Wayne

Branding has been described as the defining industrial practice of television's recent past. This article examines publicly available industry documents, trade press coverage, and executive interviews to understand the place of traditional television network branding in streaming video on-demand (SVOD) portals as represented by Amazon and Netflix. Focusing on materials relating to licensed rather than original content and the role of such content within the U.S. domestic SVOD market, two distinct approaches emerge. For Amazon, the brand identities of some television networks act as valuable lures that draw customers into its Prime membership program. For Netflix, linear television networks are competitors and their brand identities are seen as impediments that reduce Netflix's own brand equity. Nonetheless, for advertiser-supported cable networks, the benefits of network branded content on SVODs remains unclear. Ultimately, Amazon's efforts to build a streaming service alongside network brand identities and Netflix's efforts to build its own brand at the expense of such identities demonstrates the need to think about contemporary television branding as an ongoing negotiation between established and emerging practices.

RELATED PAPERS

Du social hors la loi

Yann Guillaud

Value in Health

Konrad Schargel

Joseph Varon

Main references around the study of environmental culture. An approach to conceptual analysis

Revista Santiago ISSN 2227-6513

Acta VETERINARIA Indonesiana

Yuda Fibrianto

ACS Medicinal Chemistry Letters

Francesca Perut

Preventive Medicine

Coralia Vázquez-Otero

Infectious diseases of poverty

Michele Colombo

Journal of Applied Econometrics

Journal of Environmental Chemical Engineering

Karifa BAYO

Journal of Molecular Neuroscience

Terry Moody

Cancer research

Mary Jordan

Dissertationes Archaeologicae, 3 (10)

Adrián Melykó

Molecular Biology of the Cell

Gail Hershatter

New Zealand journal of forestry science

Mark Kimberley

SEKIYA Hiroo

Journal of Signal Processing

British Journal of Social Work

Liat Lerner-geva

Mathematical Problems in Engineering

Halil Karahan

The Journal of Social Encounters

Farhia Abdi

Véronique PERRET

Journal of the American Society for Horticultural Science

Andre Berville

Cadernos Brasileiros de Saúde Mental/Brazilian Journal of Mental Health

adriana maria brandão penzim

To read this content please select one of the options below:

Please note you do not have access to teaching notes, netflix leading with data: the emergence of data-driven video.

Publication date: 20 January 2017

Teaching notes

By 2009 Netflix had all but trounced its traditional bricks-and-mortar competitors in the video rental industry. Since its founding in the late 1990s, the company had changed the face of the industry and threatened the existence of such entrenched giants as Blockbuster, in large part because of its easy-to-understand subscription model, policy of no late fees, and use of analytics to leverage customer data to provide a superior customer experience and grow its e-commerce media platform. Netflix's investment in data collection, IT systems, and advanced analytics such as proprietary data mining techniques and algorithms for customer and product matching played a crucial role in both its strategy and success. However, the explosive growth of the digital media market presents a serious challenge for Netflix's business going forward. How will its analytics, customer data, and customer interaction models play a role in the future of the digital media space? Will it be able to stand up to competition from more seasoned players in the digital market, such as Amazon and Apple? What position must Netflix take in order to successfully compete in this digital arena?

To examine the benefits and risks of investment in analytical technology as a means for mining customer data for business insights. Students will develop a strategy position for Netflix's investment in technology and its digital media business. Students must also consider how new corporate partnerships and changes to the customer channel model will allow the company to prosper in the highly competitive digital space.

Blockbuster
Data Mining
Strategic Advantage
Reed Hastings

Walker, R. , Jeffery, M. , So, L. , Sriram, S. , Nathanson, J. , Ferreira, J. and Feldmeier, J. (2017), "Netflix Leading with Data: The Emergence of Data-Driven Video", . https://doi.org/10.1108/case.kellogg.2016.000232

Kellogg School of Management

You do not currently have access to these teaching notes. Teaching notes are available for teaching faculty at subscribing institutions. Teaching notes accompany case studies with suggested learning objectives, classroom methods and potential assignment questions. They support dynamic classroom discussion to help develop student's analytical skills.

We’re listening — tell us what you think, something didn’t work….

Report bugs here

All feedback is valuable

Please share your general feedback

Join us on our journey

Platform update page.

Visit emeraldpublishing.com/platformupdate to discover the latest news and updates

Questions & More Information

Answers to the most commonly asked questions here

IMAGES

Netflix vs. Blockbuster Case Study
Netflix vs. Blockbuster Case Study
NETFLIX VS BLOCKBUSTER by Montse Ruiz on Prezi Next
Case Study: Netflix Blockbuster will
Netflix vs. Blockbuster Case Study
Winning the Customer Journey Battle: Netflix vs Blockbuster Case Study

VIDEO

Netflix vs Blockbuster Fight who win #netflix #netflixindia #netflixseries #blockbuster #casestudy
Netflix Case Study
Caso BLOCKBUSTER perdio contra NETFLIX y quebro Historia / GDE Marketing
Netflix vs blockbuster #netflix #blockbuster #games
2008: Blockbuster vs. Netflix #alessandrobenetton #uncaffèconalessandro #netflix #blockbuster
KPRC 2 News Today at 10AM on Monday, October 16, 2023

COMMENTS

Netflix vs. Blockbuster Case Study
Call US-88OO1O2216 Call Girls In Mahipalpur Female Escort Service. Investment in The Coconut Industry by Nancy Cheruiyot. Japan IT Week 2024 Brochure by 47Billion (English) Independent Call Girls Andheri Nightlaila 9967584737. Netflix vs. Blockbuster Case Study - Download as a PDF or view online for free.
Netflix vs Blockbuster
Whereas Netflix developed a business model that simplified the video-renting process, making it more enjoyable for customers, Blockbuster only thought about maximizing their own returns.". Forbesdescribed Blockbuster's reliance on penalizing its patrons in the form of a late fee as the company's "Achilles heel.".
Netflix
Netflix - Case Study. Its a case study of netflix , from history to present. 1. Case Study: Development of Netflix How Netflix started as a small DVD rental service, and changed its course to become the most successful online streaming platform we know today. Based on the article "Netflix in 2011" by Harvard Business Review.
Winning the Customer Journey Battle: Netflix vs Blockbuster Case Study
Winning the Customer Journey Battle: Netflix vs Blockbuster Case Study. We know a brand has established a strong position in customers' mind when its name becomes a verb, like Google, Uber, Skype. And one such brand that cannot be ignored in this digital age is Netflix. Netflix has come a long way, starting from an online DVD rental service ...
Netflix vs. Blockbuster
The story of Netflix vs. Blockbuster is a fascinating case study that highlights the impact of technological innovation, market strategy, and adaptability in the competitive entertainment industry ...
Netflix vs Blockbuster by on Prezi
Blockbuster focusing on personalising their service. Netflix do have a sustainable competitive advantage over Blockbuster because they have substantially lower costs for themselves and customers. Offer a wider variety, with more information and focus on differentiating themselves purely online in a growing market.
Netflix's Bold Disruptive Innovation
Netflix's announcement that it is splitting off its DVD-by-mail business from its streaming business is just such an experiment. The DVD business will now go by the name Qwikster, and the ...
Netflix Inc.: The Disruptor Faces Disruption
Netflix Inc. (Netflix) had surpassed Blockbuster, the previous movie rental leader, before making the successful transition to digital delivery of video content. But despite Netflix's success, in 2017, numerous competitors, including both established, mainstream content producers and digital upstarts, were making it difficult for Netflix to recreate its earlier dominance. Critics pointed to ...
A Case Study of Netflix Vs Blockbuster
A case study of Netflix vs Blockbuster - Free download as Powerpoint Presentation (.ppt / .pptx), PDF File (.pdf), Text File (.txt) or view presentation slides online.
Netflix
Blockbuster, the nation's largest retail video rental firm, was initially slow to respond, but ultimately rolled out a hybrid retail/online response in the form of Blockbuster Online. Aggressive pricing pulled in subscribers, but at a price to both it and Netflix. ... "Netflix." Harvard Business School Case 607-138, May 2007. (Revised April ...
Blockbuster: It's Failure and Lessons to Digital Transformers
Changing competitive landscape: Blockbuster was challenged not only by the startup Netflix, but also eventually by powerful technology companies (Apple and Amazon) and cable companies with streaming and video-on-demand services. It struggled to compete against both, especially when it was late to the game (see number 4 below).
CEO Reed Hastings on how Netflix beat Blockbuster
Stitcher. RSS. In early 2000, Netflix founders Reed Hastings and Marc Randolph offered to sell the company to Blockbuster for $50 million. Blockbuster turned them down. Eventually, Netflix ...
Blockbuster vs Netflix: Innovate to survive
Apr 28, 2021. Before Netflix, Blockbuster used to lead the entertainment market by renting movies and games. In the beginning, Blockbuster rented the films with late fees. And Netflix was a rental ...
Blockbuster vs. Netflix: A Case of Technology-Driven Strategy
But Blockbuster's fortunes have been on a long decline. Viacom floated shares in Blockbuster with plans for a full divestiture. The separation was completed in 2004, with Viacom taking a $1.3 billion charge for its trouble. Blockbuster stock, which traded above $29 a share in 2002, has recently been trading below $1.00 per share.
Netflix vs Blockbuster
In contrast, Blockbuster's pay-per-transaction model became less appealing as streaming emerged as a more convenient and cost-effective solution. Expansion into International Markets. While Netflix expanded its services to various countries, Blockbuster's physical store presence limited its ability to penetrate global markets effectively.
How one company disrupted the whole industry
case of Netflix and Blockbuster be used for the edification of the digital disruption to other companies and industries. The paradoxical reality of disruption in the case of the video is that ...
Disruptive Innovation in The Video Streaming Industry: the Case of Netflix
THE CASE OF NETFLIX ... Netflix vs Blockbuster (Cloud Technology Partner, 2017) ... This study proceeds from this broad vantage point by examining survey-based indicators of active SNS use and ...
Case Study: Netflix vs. Blockbuster
Case Study: Netflix vs. Blockbuster. There are many relevant, and certainly constructive, case studies that shed light on the challenges faced in digital transformation and the pitfalls in underestimating its importance to how we do business and engage customers. One of the more famous stories of digital disruption and the battle for market ...
Case Study: How Netflix Took Down Blockbuster
Blockbuster and Netflix are two big business within the domestic videocassette rent payment market place that skilled very much distinctive products. Netflix extremely multiplied its firm estimate even as Blockbuster dropped its leading market position and fallen into bankruptcy. Back to the late 20th century, whilst Netflix was just a small ...
Blockbuster vs. Netflix case study
Blockbuster vs. Netflix case study shows how to bypass the main competitor in the short term and grow own audience simultaneously. In the same way, one more problem of the company in the first year of existence was solved - a low percentage of DVD users. As a result, the company went the favorite way of providing bonuses to clients.
(DOC) STRATEGY AND CASE ANALYSIS (BLOCKBUSTER VS NETFLIX) Name of
STRATEGY AND CASE ANALYSIS (BLOCKBUSTER VS NETFLIX) Name of student Institution Course Date Executive Summary This case analysis will examine the US home video retail market from the perspective of two companies, Blockbuster, and Netflix. The former collapsed in 2010 while Netflix is the dominant operator in the market.
Blockbuster Presentation
5 likes • 13,208 views. AI-enhanced description. R. ryancdwyer. Blockbuster began as a single video rental store in 1985 and grew to become the dominant video rental chain through acquisitions of other local chains. It was acquired by Viacom in 1994 for $8.4 billion. Increased competition from Netflix, cable video-on-demand, and other online ...
Netflix Leading with Data: The Emergence of Data-Driven Video
By 2009 Netflix had all but trounced its traditional bricks-and-mortar competitors in the video rental industry. Since its founding in the late 1990s, the company had changed the face of the industry and threatened the existence of such entrenched giants as Blockbuster, in large part because of its easy-to-understand subscription model, policy of no late fees, and use of analytics to leverage ...