The Rise and Fall of Blockbuster

On the horizon, Blockbusters number of competitors should steadily increase from new emerging technologies. If Blockbuster extends into the realm of VOD, Legal Movie Downloads, or Digital Video Recorders (DVR), it must realize there are existing and powerful players in these markets already. This new technology is shaping the market for many deals or partnerships. They will face fierce competition, but in the future, Blockbuster must not find it self on the outside looking in.

The movie rental industry is a living industry; there are constant changes with advances in technology, rights management, and the slow, but steady, move away from physical Media. Companies such as Netflix, Hulu, RedBox, and Blockbuster are being forced to look at new business models and try to keep up with these changes.

Numerous failures in planning and monitoring market changes negatively affected profits and decreased customer loyalty. Blockbuster sought utilization of section 11 bankruptcy to significantly decrease the businesses debt. The bankruptcy and acquisition by Dish network provided the opportunity to invigorate a better business solution for moving forward. Blockbuster’s

Based on the Form 10-K (2010), Blockbuster stated that: “Our level of indebtedness may make it more difficult for us to pay our debts as they become due and more necessary for us to divert our cash flow from operations to debt service payments” (p. 22). At the end of 2009, their long-term debt went up to 855.9 million of dollars (Form 10-K, p.40). One of the factors that negatively affected Blockbuster’s income and cash flow due to their debt obligation was the payment due date. It made even more difficult for Blockbuster to pay off the debts when the company faced economic downturns. The decrease in revenue made Blockbuster’s obligation and interest higher. Due to this fact, the company had a limited fund to contribute their strategy and operation. While their revenue decreased and debt increased, Blockbuster gradually lost their ability to remain the war price as low as others. The company ended up going bankrupt.

The third issue affecting Netflix is the age of movies that they offer to their customers. Netflix cannot deliver the newest movie titles online because they are not offered through VOD for at least a month after they come out on DVD. This is a huge disadvantage to their customers that exclusively use Netflix’s online service. This is the only advantage that Blockbuster still has over Netflix, because if someone wants to see a movie the day that it comes out on video then

If researched you find that the internal political struggles within the Blockbuster organization ultimately lead to its downfall. Power struggles that stemmed from the change in ownership as David Cook sold controlling his share of Blockbuster to Wayne Huizenga, John Melk, and

Currently the competitive forces in the movie rental marketplace are not very strong. There are not very many players seeking to gain share in the market. The only competitors that come to mind when thinking of the movie rental marketplace are Netflix, Blockbuster and Red box. The evolution of technology has allowed many people to stream movies from online at no charge, for most and without any required subscription. Places like Blockbuster and Movie Stop are not as vivid as they have been in previous years due to the market shifting

Blockbuster could make advertising deals with the movie studios where they would advertise upcoming movies in all of their stores. Advertising is very expensive and it is getting harder than ever to find advertising that can find their target market. Because of all the different means available of getting information potential audiences are spread out over a vast area. Advertising within Blockbuster stores would provide the movie studios with an advertising option that they know is going to find people that like to watch movies. This would also help create a buzz about their upcoming movies because of all the people that have a chance to see previews or ads promoting these movies well before their release dates. Many people that rent movies would go to the theatre instead if there was for upcoming movies by movie type. This means that they would be able to put ads for each type of movie in the related section of the video store to further focus on their targeted markets.

“Never be without a movie”, a slogan that used to be successful for many years. Blockbuster was the definition of “entertainment” itself at this time: Not only the company offered to rent or purchase movies but also it completed the customer experience with horizontal diversification: food, beverages, games etc. It followed the strategy of several business models: Brick and mortar shops, cross merchandising, and also rent rather than buy. Its value creation came from several partnerships with movie / video producers, and supplier of foods supplies. The initial strategy standard was to pay a minimum wage to employees, in order to reduce expenses, but also focus on advertising, promoting the company, developing the store locations etc. The main

Blockbuster is the largest movie rental retailer. With its opening in 1985, Blockbuster has pursued an ambiguous program of growth and expansion. Currently, Blockbuster owns and operates over 9,000 stores both domestically and internationally. In addition, Blockbuster franchises about a quarter of its stores. It is important to note that Blockbuster is undergoing a managerial struggle at the present time. The current CEO, John Antioco, and a major shareholder, Carl Icahn, are disputing Blockbuster’s strategy. Mr. Antioco has threatened to resign if Mr. Icahn succeeds at attaining a position on the Board of Directors1. Mr. Antioco believes that Blockbuster needs to develop new strategy to respond to the current market

Have you or someone you know ever been replaced or laid-off from a job due to a downsizing? With technology becoming ever popular in today’s world chances are your answer to that question is YES. If you, yourself, have not been replaced there is a very high possibility that someone you have become acquainted with over the years has been. In this age of rapidly advancing technology, humans just simply are not needed to complete certain jobs as they have been in the past. Of course, there are still jobs available that a machine just simply cannot do but most jobs have since succumbed to modern technology and

The competitive forces in the movie rental industry are quite strong, as I will explain through the five forces model. There are a vast amount of substitutes for watching a movie. You can go to a play, sporting event, concert, out the lake/beach, go for a run, watch regular television, go shopping; I could go on and on. Also, torrenting or pirating movies is growing increasingly popular. Buyers have a strong presence in this industry mainly because they are picky about how much they will pay to rent or stream a movie. With the amount of substitutes and their pickiness, they make this

untouchable and we were all doomed to a lifetime of late fees and limited movie

Even though it grew mainly due to the strategies and innovative ideas it developed in this industry, the fact that there was an absence of substantial competition also helped propel its success.

Blockbuster was sold in 1994 to Viacom (Carl Icahn), and in 1999 the company went public and raised $465 million in an initial public offering that capitalized on the company's name even as investors worried about the threat from cable television. Its revenue increased 17% in 1998 to $3.89 billion, but investors worried its rental business was being threatened by new technology that allowed consumers to watch movies delivered through the cable to their home television sets.