Netflix vs Blockbuster:

Which will Win Out?

Karthik.chilamantula@gm
 APPROACH

Intro of IS & A Case study of Conclusion

Organization Netflix vs Blockbuster
Setting the Stage

Introduction of
Information
Systems in
Organization
Strategic Objectives of IS
The basic Strategic Objectives of IS are,
 New Products , Services and Business
Models.
 Customer & Supplier Intimacy.
 Improved Decision Making.
 Competitive Advantage.
 Survival.
A Case Study of
Intro of Blockbuster
 Blockbuster entered video rental
business in 1985.
 Within 20 years opened 9,100 stores in
25 countries.
 Each store designed with an automated
point of sale system.
 Data from this transferred to
Blockbuster’s Corporate Computer
Center.
Intro of Blockbuster contd..
 By 2004 it possessed 40% share of
the U.S video rental market.

 Estimated business growth from

$7billion to $9 billion per year.

 Revenue generated from video sales

around $16 billion.
What is the threat for Blockbuster?
Blockbuster faced a threat from “Netflix”

The emergence literally lead to a war

between Blockbuster and Netflix in
the market.
 Intro of “Netflix”
 Emergence of Netflix in 1998
which concentrated more on
customer convenience.
 Eliminated physical store &
used Internet and Postal
services for interaction with
customers.
 For a monthly rent of $19.95
provided customers access of
thousands of movies
Process employed by
 What Blockbuster did then?
It added
 An online rental service;
 Movie pass ,a monthly
subscription service for in
store customers;
 Game pass, a subscription
service for video games;
 The infamous “ No More
Late Fees” program.
 With a capital expenditure
of $100 million restructured
business by introducing
latest Information Systems.

 Set the price for three

movies at a time at a
monthly subscription of
$19.99 which is less than
Netflix.
Strategies of Blockbuster
 Used 30 Distribution centers and
4500 stores to serve United States
where as Netflix used 35 Distribution
centers.

 Introduced coupon offers for in store

customers to integrate store & Online
systems.
 Impact of the new strategy
 The service acquired one million
subscribers and company hoped
to double the number in next
7months.
 Netflix surpassed 3million
subscribers and on its way to
4million subscribers.
 Blockbuster reduced three
movie plan to $14.99 per
month vs $17.99at Netflix.
Price Comparison
Blockbuster Netflix
New set of challenges for
 15 million cable subscribers use video
on Demand technology to watch
movies.
 Internet emerged as a channel for
movie distribution in April 2006.
 Website Movie link used as a tool to
sell movies online via download.
 Six movie studios like MGM, Sony
Pictures, Warner Brothers reached
an agreement with Website movie
link.
 Movie link set the price at $20-$30
for new movies and $10 for older
movies.
 Amazon.com an online movie store
started selling new movies DVDs for
less than $15.00
Problems in the new set of methods
 Downloaded movies are convenient to
watch only on computers.
 Movie format could not be burned to
DVDs.
 Long time for downloading.
(90 minutes to download 1GB with high
speed broad band)
Consequences of this Situation:
 Blue ocean strategy became Red
ocean.
 Netflix kept online downloading plan
as future option only.
 Blockbuster thought to maintain
cutting edge of technology.
Conclusion
 Firms must identify the need and
necessity of upcoming Technologies
and keep them updated.
 Use IS to create more convenience to
customer.
 Though the installation of IS may cost
more but will gain profits for the firm
in future.