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Netflix

Netflix

1. Blockbuster was able to create a strong position in the traditional video rental industry due to a couple of factors. It was initially based on the idea that “movie rentals were largely impulse decisions.” With this being the case, the assumption was that consumers would want the newest releases. In order to cater to this, Blockbuster grew quickly in order to expand geographically and to increase share in existing markets. The size of Blockbuster became its major source of advantage. By being the biggest player it could build a film library with enough copies to serve the public so that they would be able to find what they wanted. Even though the rise of DVD’s made it cheaper to obtain a library, revenue sharing made it mostly irrelevant. Blockbuster’s size and clout allowed it to secure more favorable terms that other stores, especially independents, could not match. The costs, though less for everyone, was even less for Blockbuster. The big chains, like Blockbuster, could now guarantee that a new movie was in stock because it could afford to purchase enough copies of a title. This pushed out competitors and left Blockbuster in the lead position. Although this mainly contributed in pushing out the independents. Also, the notion that Blockbuster could guarantee that new movies were going to be in stock was it source of differentiation. There was no reason to venture to another store if Blockbuster was assured to have it. Thus, by having low costs, pricing competitively because of those costs, and having a large library, Blockbuster was able to outperform its rivals. Since some of these items are also true of Hollywood Video, it is no surprise that that store is also still around. Though Blockbuster’s beginning size and clout allowed it to retain the lead position.
2. Netflix changed the rules of the game by changing how things were done. It wasn’t a physical store. It wasn’t beholden the inventories of particular stores. And, it...