Netflix

Identify key issues, problems and opportunities facing Nettles. It may be helpful to consider the fact that the Nettles business model evolved through many strategy revisions. What caused them to make each shift? Were the shifts driven from the top or bottom? Is this easier for a small or large company? The key issue that was facing Nettles early on was the selective market of people that were into the DVD market. Most were still with VS. market at this time and it gave them a small problem during start-up.

But, with that changing market they new that consumers will soon turn to DVD’s and leave behind their old technology of VS.. They also faced the problem of most Blockbuster being a 10 minute drive from at least 70% of U. S. Populated homes. This makes their whole sales pitch of people not having to leave their homes to rent movies even harder due to the number of available Blockbusters. With Nettles no late fee policy this made it easier for them to get more sales because Blockbuster charged late fees.

Also, they came across the problem of half the movies they shipped were the new releases. This made under stocking when customers wanted them and overstocking when the movie was not new anymore. They fixed this problem by making the recommended movies for consumers because this expanded their horizons on other movies other then the new ones. They also had a distribution problem because they only had one distribution center. All these shifts were driven from the top. With the growing customers and profits they have learned what consumers wanted.

They held surveys to find out what movie a customer wants and the movie recommendation system helped expand the nonuser’s movie choices. They even got special packages and were tied into the USPS for their delivery services that got perfected over time. This Is easier for them as they became a large company and made deals and expanded with the profit and knowledge they had about customers from their surveys. (B) How did disruptive versus incremental innovations play out in the Nettles versus Blockbuster story? Is VOID disruptive or incremental? What roll does diffusion of innovation and adopter categories play?

Timing of entry? Disruptive Innovation played a role In the beginning and start-up for Nettles. When they first opened and should to the DVD population this was disruptive. From then on they made incremental innovations along the way from the video recommendations to the shipping services. These were smaller steps done from learning from customers and growing in popularity. Also, their growing profits made innovation easier and affordable for the company. VOID Is disruptive Innovation because It Is a totally new marketing approach by the company.

VOID was not a spin off of there DVD rental service It was a totally new approach for the company to take. This would require for the company to have different marketing for VOID and a new concept of nothing through the mean, instead it’s all online. Diffusion of innovation came along when Nettles went into the VOID services. They were one of the innovators of this but shortly after they had many companies patting v I Nils mace It very competitive Ana Nora to De cutlets Decease other companies only did VOID and Nettles was not known for that service.

Also, the time of entry for the other business was good because Nettles was not that successful introducing it to the market that when the competitors advertised they got more business then Nettles. (C) Using only the information provided in the case, evaluate alternative approaches to the current problem (VOID), and ??? VOID had the problem of not being able to provide high quality video to the customer as do the cable companies. This problem is hard to fix because it will have to mean changing around Nettles servers to higher quality servers to stream movies n high-definition.

Another problem they had was people can not play the movies on their TV but, instead only on their laptops or desktops. The only was customers can play the movies on their TV’s is if they buy either a ERG, S-Video, or HIDE cable so they can project the movie from the laptop to the TV. But, with this means that customers will have to go out and make a purchase to Just watch online movies on the TV. The solution to this problem would be is Nettles provided the cable needed to watch the movies from the computer to the TV for a low rental fee.

As long as they have a Nettles VOID account they can pay a one time rental fee for a cable as long as they stay with the company. (D) Select the best alternative. Your choice should be supported by sound arguments and be realistic given the firm’s resources. I feel that the best alternative for Nettles is to keep their rental services and also have the VOID services. I feel that both are very profitable services they can provide to customers. They have such a large customer base that they can pick up on shifts in the market.

Nettles has been proven o make both incremental and disruptive innovation to help their company grow. Even my Android phone has Nettles on it that allows me to stream videos directly to my phone anywhere there is Wi-If. If the market turns to more VOID then Nettles will make that shift and turn their company into a VOID company. But, if it doesn’t they still have their rental services for profit. Their rental services cost the most to up- keep because of all the workers and distributed facilities they need to keep up with the demand. VOID has a lot less running fees. They can greatly cut down on employees and facilities.

Cheaters are dirtbags. Just when you thought you had something special together, they slip between the sheets and do it without you. Then they lie about it to your face.

Listen bae, it is what you think. He has eyes for the ladies of Game of Thrones and he’s binge-watching them without you. Again.

How dare your one and only stream without you? If you want to make your love last more than one season, there’s just one thing to do: Put a ring on it, and fast. Take it to the next level with a streaming commitment ring, like the British ice cream company Cornetto dreamed up in its latest cheeky YouTube clip, an ad for its new (and mostly empty) website, .

Related: 

If only you could put a Cornetto ring on it. Too bad the streaming adultery-stoppers are reportedly still only in concept mode, though reports that Cornetto is scheming to get into bed with a bunch of video streaming apps.

As the ad says, streaming cheating is “the worst kind of cheating.” Obviously, though maybe not as gross as re-watching a show with your partner and faking your reactions. That’s just uncalled for.

The clever concept involves a pair of shiny black NFC chip-equipped rings. They’re “linked to a video streaming platform that can only be activated when the rings are together.” When the rings — and you and your everything — are apart, the shows you share won’t play.  

Shortly before their 25th anniversary, Blockbuster files for bankruptcy protection with a Chapter 11 petition. The failing company couldn’t compete in today’s market against Netflix, Redbox, Apple, and other internet-based businesses that provided mail-order rentals or digital streaming. Their business model needed to be revamped to stay competitive. This paper will take a look at where the problem was, the measures taken to correct the problem, and how Blockbuster can come back and be competitive.

Blockbuster, Inc. started business in 1985 in Dallas, Texas by David Cook. The company rented video cassettes, and later DVDs and video games, to customers for viewing at home. Mr. Cook was a computer programmer and used this to his advantage. While other video stores had no idea what they had still in stock, Mr. Cook had reports that showed him which movies were being rented most so he could optimize the video selection. He also wanted a family environment and had a no-porn policy. (Gandel, 2010). In 1987, Wayne Huizenga bought the business from Mr.

Cook, and the company went into an expansion mode, opening stores nationwide and eventually overseas by the mid 1990s. (History. com, n. d. ). Mr. Huizenga knew that one day technology was going to put them out of business. He hired consultants to help work on a creative plan on different ways to deliver movies. The consultants even went as far as recommending Mr. Huizenga buy a cable company. Instead of doing that, Mr. Huizenga sold the company to Viacom in 1994 and got out of the business while the company was still worth something. (Gandel, 2010). Under Viacom, the company was losing money.

They brought in different CEOs and tried once again to focus on movie rentals. (Gandel, 2010). That helped and currently, Blockbuster has over 3,500 stores and over 25,000 employees. These stores are considered “brick and mortar”. They are physical buildings that franchise owners must buy or rent, stock with supplies, and hire people to work and run the stores. There are overhead costs that internet-based businesses don’t have. This is one reason why Blockbuster has been losing money these past few years. Blockbuster was the leader in video rentals for over 15 years.

That was the thing to do; go to the movie store, rent a movie, pop popcorn, and enjoy a good movie from home. Unfortunately, Blockbuster didn’t keep up with technology and didn’t take the competition seriously enough and soon enough to change. When change happens in an organization, managers need to develop strategies that benefit the entire organization. The effects of organizational development are to improve the organization’s ability to handle its internal and external relationships. Organizational development is intended to change the beliefs, attitudes, values, and structure of an organization.

Blockbuster needed to concentrate not only on its customers, but also on their competition. Instead they ignored both and kept everything status quo. Instead of changing their strategy before the competition got their foot in the door, Blockbuster sat on the sidelines. Management said the business models were different and that Blockbuster could co-exist with the other companies. (Carr, 2010). Blockbuster was just too slow to embrace change and flow with today’s environment that consisted of convenience and digital delivery.

People try to cram too much into their days. The convenience of having movies, television shows that got missed because of soccer practice or a late meeting, and even video games at your fingertips is too appealing. People today just don’t want to drive to the video store after working all day, driving the kids to activities, doing homework, making dinner, and cleaning up. They want the movie or television show to be just a click away. With the busy schedules, they don’t want to forget to drop the movie back off at the store and have to deal with late fees.

If Blockbuster had stayed up on trends and realized what was happening with technology, they may have been able to keep the customers that were lost and also gain new ones. Instead someone else took advantage of this and stole business right out of the video giant’s hands. Netflix became the biggest competitor to Blockbuster, even though Blockbuster didn’t seem to notice. Netflix created a video rental mail-order service through their website. This was a monthly subscription service that allowed customers to receive a movie in the mail, watch it at their leisure, and return it when they were finished; all with no late fees.

When the movie was received back to the Netflix warehouse, a new movie was sent from the customer’s favorites list. The customer only had to go as far as the mailbox to receive and return a movie. Netflix also initiated the streaming video and television shows through the internet to your television, computer, or gaming system. The selection wasn’t as big as the actual DVD mail-order system, but it was faster and more convenient for some customers who “wanted it now”. This was all offered to the customer in a low monthly fee. Some subscription services even allowed for unlimited rentals per month.

Another competitor, in the form of kiosks, offered movies for $1. 00 a night, and these kiosks were conveniently located in grocery and drug stores. Pick a movie and drop it off the next time you were shopping. No late fees or membership necessary. Why not rent a movie after you checked out from the grocery store with dinner already in the cart? What a great way to save time, money, and spend quality time at home with the family. Redbox, backed by Coinstar, is the main competitor of movie rental kiosks. They have over 24,000 conveniently located kiosks.

Redbox not only is in grocery stores and drug stores, but expanded into fast-food restaurants. (Newman, 2010). Due to these new technology inventions, Blockbuster stores were seeing less foot traffic at the brick and mortar stores. People were looking for convenience while trying to save money in today’s economy. This should have been a clear sign for Blockbuster’s management to make a change. Blockbuster did downsize by closing some of the existing brick and mortar stores, but continued to do business as usual. They needed to conduct an organizational diagnosis to find out not only what needed to be changed, but also why.

The diagnosis is a chance for management to strategize where the company is now, what the skills set is, and where do they see the company going in the future. It consists of data collection which may include questionnaires, interviews and observations. (Spector, 2010). These shifts in external realities usually need a new pattern of behavior which Blockbuster didn’t seem to possess. It appeared as if the CEOs didn’t want to change their strategy or they really didn’t notice what was happening in the world of technology. It’s hard to say at this point.

Blockbuster’s management needed to focus on a strategic renewal which would alter the current strategy with the intent of gaining an advantage over the competition. (Spector, 2010). It took Blockbuster over six years to enter the mail-order movie rental business. With the financial support and connections Blockbuster had, it shouldn’t have taken them that long. By the time Blockbuster entered into the “streaming” environment, Netflix already had over three million customers. (Gandel, 2010). Could Blockbuster’s big name compete with that? It depends on how they structure their business model.

Blockbusters business model appeared too narrow – video rental. They left the door wide open for competitors to come in and create a new market. Blockbuster held on too long to their retail strategy even though trends were showing that consumers were not following. Netflix had a slow start, but no one was competing with them. It took Netflix a little time to work out some of the kinks, but Blockbuster wasn’t there to challenge them. (Newman, 2010). In the author’s viewpoint, Blockbuster almost set themselves up for failure by not taking advantage of changing their business model to keep up with technology.

In this company analysis, it wasn’t a matter of employees resisting a change because management wasn’t proposing a change. Sometimes companies struggle to implement a cultural change only to meet resistance from employees. Usually the resistance happens for a few reasons; forcing the change from the top down, not communicating with employees, and not offering essential training for the change, to name a few. This wasn’t the case with Blockbuster. They needed an organizational redesign to respond to the changing environment of technology.

Behind the scenes this may have been happening, but it never materialized into a functioning strategic plan. Blockbuster had bombarded their customers with late fees, tried to go in the direction of mail-order rental service (Blockbuster Total Access), and even put up kiosks. Unfortunately, they got into the game a little too late. The competition already had a handle on the market and customers were easing into the convenience of online streaming, kiosks at the grocery store, and mail-order delivery. There wasn’t the need to drive down to the corner video store to look through the new releases or older movies.

Also, they could view online reviews instead of relying on the opinions of one Blockbuster employee. Blockbuster was sinking and the company wasn’t able to tread water fast enough to keep them afloat. The losses were huge every year and the amount of money they had invested into failed operations was getting them nowhere. The inevitable was happening. In September 2010, Blockbuster filed for Chapter 11 Bankruptcy protection. The goal was to reorganize the company instead of liquidating assets. That is a good strategy if you can implement a good business model to be and stay competitive.

It has been speculated that after bankruptcy, the company will look much different. Hopefully, because their debt will be reduced and a new business model will be put into place, Blockbuster will be able to start over. In April 2011, Dish Network won the auction that bought most of Blockbuster assets out of bankruptcy. It paid an estimated $320 million and the goal is to compete directly with Netflix’s streaming features. With Blockbusters name in Hollywood, Dish feels that they will be able to offer better, quality service to its customers over Netflix.

Dish is negotiating with Starz movie channels to provide a great line-up of movies to its customers. (Sherman, 2011). Another option that is coming out of this reorganization is continuing with the Blockbuster Total Access mail-order program. One perk that makes them different from Netflix is the option to take the disc back to a physical store for an exchange rather than wait on the postal service. (Falcone, 2011). This may appeal to some customers who want a membership or subscription-based fee structure, but also want the gratification of watching movies on their own schedule and not having to wait for a new one to come in the mail.

The plan is to downsize the number of physical stores still open which would result in a number of layoffs. At this time, some 3,000 stores will continue to stay open until a plan can be implemented. Blockbuster has already closed approximately 1,000 stores over the last couple of years. (Anderson, 2011). The closing of additional stores will be more in line with the changing environment. To save some of the existing brick and mortar stores, Blockbuster should consider a different environment that would appeal to a wider range of customers. Some ideas of this could include the following:  Create a relaxed environment similar to Starbucks. Customers can come in and look for videos online while having a cup of coffee, tea, or a snack. There could be a living room type environment that is cozy and comfortable with couches, coffee tables, and table lamps. They should also have access to movie, game, and music reviews to help with their selection. . Provide Blockbuster kiosks in a wider range of locations. Compete with Redbox and Netflix on a wider level. Blockbuster’s name allows them to obtain new releases faster than Netflix and Redbox.

Blockbuster can use this to their advantage at these strategically placed kiosks. Know the demographics in the area. Some areas of towns are more able to afford internet and subscription fees. Maybe it’s time to shut down the brick and mortar stores and cut its losses in those areas. Concentrate on areas that may not have access to internet or can’t afford monthly fees. These areas of town may rely on physical stores and closing those locations would be a bad business move.  If the physical store is going to stay open, cut down on the size.

If the owner owns the building, think of creative ways to fill the other area that would complement the Blockbuster store. Make it more appealing for customers to actually visit the video store rather than sit at home streaming the same movie. Make it an experience for the customer. If the owner leases, consider modifying the lease or look into subleasing the extra area. Look into changing CEO or upper management. Dish Network needs to ask why management let technology get so far away from them, and how did they miss out on the opportunity to keep their existing customers and provide more for them.

Was management so afraid of technology that they didn’t pursue it even though they were watching the losses year after year? Unless Dish Network creates a niche that Netflix, Redbox, and the other internet-based businesses can’t compete with, the purchase of Blockbuster may have been for nothing. The Blockbuster name and their Hollywood connections will help, but Dish Network needs to get moving fast on a strategic plan. The more time that goes by without having streaming capabilities and quality service under the Blockbuster name, more customers will stay with or revert to one of the other services.

For Blockbuster to make a comeback they will need to invest in marketing campaigns, technologies to keep pace with competition, and a plan to stay competitive. This time Blockbuster can’t afford to enter a market and not keep up with the environment. Management needs to constantly watch trends and stay up on technology. They should be flexible and creative in this ever-changing world. Just because a business model was successful doesn’t mean it will always be successful. Blockbuster learned this the hard way.

References

1. Anderson, M. (2010, September 23). Blockbuster files for bankruptcy. Debt, changing media habits topple Blockbuster. Yahoo! Finance. Retrieved from http://finance. yahoo. com/news/ Debt-changing-media-habits-apf-1049608580. html? x=0.
2. Carr, A. (2010, August 27). Blockbusted: A Netflix Knock-Out, Bad Metaphors on the Path to the Movie Monster’s Bankruptcy. Fast Company. Retrieved from http://www. fastcompany. com/1685375/blockbuster-plans-for-bankruptcy-a-look-at-ceo-jim-keyes-best-denials.
3. Falcone, J. P. (2011, September 2). Netflix vs. Blockbuster: What’s the Best Service for Streaming and DVDs? Cnet News. Retrieved from http://news. cnet. com/8301-17938_105-20093587-1/netflix-vs-blockbuster-whats-the-best-service-for-streaming-and-dvds.
4. Gandel, S. (2010, October 17). How Blockbuster Failed at Failing. Time Magazine Business. Retrieved from http://www. time. com/time/magazine/article/0,9171,2022624-1,00. html. History. com. Oct 19, 1985: First Blockbuster store opens. (n. d. ).
5. This Day in History. Retrieved September 16, 2011, from A;E Television Networks website: http://www. history. com/ this-day-in-history/first-blockbuster-store-opens. Newman, R. (2010, September 23).
6. How Netflix (and Blockbuster) killed Blockbuster. U. S. News ; World Report, Money. Retrieved from http://money. usnews. com/money/blogs/ flowchart/2010/09/23/how-netflix-and-blockbuster-killed-blockbuster. Sherman, A. (2011, September 2).
7. Dish Said to Stream Blockbuster Films to Challenge Netflix. Bloomberg. Retrieved from http://www. bloomberg. com/news/2011-09-02/dish-said-to-plan-blockbuster-rival-to-netflix. html Spector, B. (2010). Implementing Organizational Change:  Theory Into Practice (2nd ed. ). Upper Saddle River: NJ: Pearson Prentice Hall.

Does Netflix have deep enough pockets to outbid its rivals for broad access to the studios’ TV and movie content? Can it convince the studios that it is not a direct competitor? Netflix has managed to evolve with the ever-changing technology industry in such a way that their ability to keep up with the changes in the market, gives Netflix the competitive advantage to stay ahead of the competition such as Walmart and Amazon.com. Today’s market is moved by technology where Netflix offers its subscribers the ability to utilize their online movie service virtually on any device from cell phones, tablets, IPods, computers, Blu ray disc players, to game consoles like Xbox 360, PS3 and Nintendo Wii.

With the convenience of not having to set foot outside the comfort of their home, a wide variety of movie titles to choose from and with approximately 15 billion subscribers paying a monthly service fee ranging from $8.99 to $47.99, Netflix has the business model and numbers to revolutionize the movie rental business while continuing to provide better services than the competition. Netflix reported revenues of 3.61 billion in 2012, numbers that definitely give them deep enough pockets to outbid its rivals for broad access to studio TV and movie content. Netflix can convince studios just by demonstrating how their 2009 partnership with Vizio & LG as well as the one with Google TV in 2010 can be of more profit to both companies than competing against each other.

How much time should Hastings and his executive team devote directly to hiring? Should he and his executive team be directly involved, or is this something that he should delegate? The time I would devote to hiring may vary depending on each individual situation but most definitely I would plan ahead and have a system set up in order to ensure the most effective process in assessing each individual considered for hiring. The hiring process is something that should be delegated and done through human resource which in turn will ensure a thorough background check on possible candidates in hopes of selecting efficiently.

What could be provided in way of pay, perks and company culture that will attract, inspire and motivate top talent to achieve organizational goals? I would consider offering a more relaxed and enjoyable environment where my employees would feel they have control of their time rather than feel they have someone watching over their every move. This would lead them to have a sense of trust coming from top management. Set up a system where every employee has the opportunity to share their own ideas empowering them towards a common goal. Some other ideas might be offering onsite daycare for those employees with children, reward the employee of the week with a store gift card, or discounts at local restaurants in the area to be used during lunch break. These things can serve as a motivation towards achieving organizational goals.

OUTILNE OF THER PAPER

Introduction

The paper starts with an introduction of Netflix and Blockbuster and takes an aerial view of their operations. Then the paper talks about the methodology of the compilation of this report along with the different sections that will be covered in the paper. This is around one page.

THE BUSINESS

In this section the paper discusses about the business that both companies are in, that is movie rental stores and also online DVD rental services. The paper will discuss how both companies compete with each other, their strategic business model and the pricing methodology in this section.

Critical Issues in the Industry

This part of the paper will discuss the different issues that both the companies face and will go into a much deeper detail with respect to how each of the two companies is effected by the general industry environment. In other words, the report will answer the question regarding which of the companies is effected the most by these issues and what has each company done so far in order to over come these problems.

Key success factors

This part of the paper we will discuss a part of the SWOT analysis of both the companies which talk about the Strengths and Opportunities that the companies are already seeking and also in the coming future. For example Netflix has a database of over 55000 titles and etc.

Future Innovation Process

In this part of the paper, the paper will discuss in what areas are the two companies trying to innovate and restructure their business operations to make their management more inefficient, attract more customers, increase profits and at the same time safeguard their patent and copy rights.

The paper will end with a conclusion taking up a stand for the company that the writer feels to be more attractive of the two. The conclusion will give a summary of the benefits of the better company by bolstering the argument with examples and references to the comparisons made in different parts of the paper.

Executive Summary

This paper basically compares Netflix and Blockbuster over a number of factors that include the services, customer relations, products and pricing etc. Both the companies are in the online rental business and operating in conditions of fierce competition and a lot many opportunities yet to be explored in the middle of threats that are always there. The competitive environment of the industry is also discussed in quite detail pointing out that price war is not just a characteristic of both the companies but is also one of the issues that both the companies face. Factors that lead to success, failure, opportunities and threats are also discussed in the paper by comparing both of the companies side by side.  In the conclusion part the writer chooses Blockbuster over Netflix because according to him the company has more potential in future from both investment and service point of view.

INTRODUCTION

This paper will basically compare two companies that are in the same business line and are perfect competitors to each other. The paper will analyze these industries on a couple of factors that are given in the outline of this paper in the beginning.  The material that was extracted from different resources for the compilation of this paper was mainly through news articles and text books that were especially written on the topic of this report. Also, a survey ways conducted in order to get the real time opinion of the consumers and subscribers of these companies in order to have first hand experience from those who actually interact with these companies on daily or weekly basis. This was done to ensure that the judgment and the derivations of this report are not solely based on theoretical and aerial analysis of these companies, but through this methodology the paper tries to include one very important factor that is the consumer preferences.

In order to answer why the paper chooses specifically these two companies is that these companies are in perfect competition with each other and their success solely depends on the way they interact with their consumers. There are no other inefficiencies and invisible factors that might affect the performance of these companies and it is on their own management, skills and the use of technology that may lead to the level of best ranked rental websites.

A brief introduction about the business is such that long gone are those days when viewers had to take out time to first plan to go to a movie rental shop, take out their cars, spend time on road and then reach a store to see whether there are any new movies and also whether if they are available as well or not. These companies are basically websites which provide rental and online sale facilities to viewers in order to save their time going out and also to provide them all the information that they might need when deciding to watch a movie. From upcoming movies, latest movies launched available movies up to exciting deals and offers, these websites try to attract their customers by facilitating them as much as they can. Consumers can have movies in their e-mails, stream or even get them by post on DVDs for both rental and purchase purposes with a two days time. However, the most important question that comes in the minds of the consumers every time they log on to both of these websites is that they get confused about what site to choose and which one of them suites their preferences, likes and dislikes? This paper will basically answer all the questions that consumers need in order to find the best one of the two and also will provide them with an opinion at the end of the paper in the conclusion section.

The most important factor of competition in most of the industries is the difference in price, however, in this industry, time of delivery and other customer centered facilities that these companies provide are also equally important then the mostly common price wars. This is because, awareness among consumers to watch original movies via legal channels is increasing, thus apparently they do not have much problems while paying for these movies however, watching them on time and as soon as they get released does matter for consumers of this industry today. Also the over head charges that these websites charge consumers for late submissions, lost movies and other mistakes on the part of the consumers also accounts a lot for them because this actually raises the cost of monthly rentals to a great extent.

Apart from Movie DVDs, these websites also provide opportunity for consumers to watch their favorite television serials and soaps which they might have missed on television due to some reason along with games that gamers can get their hands on as soon as they are released.

Competitive Environment of Both the Companies

The competitive environment of both the companies is very fierce and there is a race going between both the companies to attract every other potential customer that might wish to use their services. The first thing that these websites have to come with is the easy, descriptive, attractive an interactive user display that they provide online on their websites. This is the most important factor for consumers because whenever we go to a barber shop, the first thing that we see is that is the shop actually looking good from the outside or is it just a normal sub standard shop and eventually having sub standard hair cutting facilities(Philip, 2008). Thus, these companies also have to leave a good lasting impression on their visitors in order to convince them to take a tour of their website. Moreover, there is a real price war going between the industries. Both of them are trying o reduce their costs to attract teenagers and families in order to provide with them with the best deals at attractive rates. For new customers, they do not actually know about the delivery status and competency of both the companies, that is they do not know much about who delivers faster, however the only thing that they can attract their customers is through attractive rates and then attractive facilities that are supposed to be enough to convince the users that their subscription is really worth it. All those consumers who are already customers of both the websites and are taking their services for quite a long time are more concerned about the delivery time that each of the companies takes rather than the price itself. They actually see calculate the utility that they derive from the service rather than only relying on the price that they have to pay. For example if I have Block Buster’s subscription, and I have ordered 3 movies for the weekend on Thursday, and I am also paying less, if the movies do not turn up in time, then what Is the point of getting them on Monday and then keeping them for the next weekend with all those late return and late submission costs accumulating behind the scene. Even if there is no late charge or fee, still the movies cannot be brought into any use because I don’t have time in my week days to sit and watch three full length movies. Moreover, customer services that we will talk about later down the paper are also very important to give me an experience that I might not get on the other website. Getting subscription of the other website is not that difficult at all which actually increases the level of competition involved between the two. If I am not satisfied from a particular website on a certain criteria then it is not that difficult or time consuming for me to switch to the other website. With this we can see how competitive is the industry environment in which the two companies are operating. A company can lose its subscribers at any point where they show a little inefficiency or wherever they do not take care of the preferences of their consumers (Arrington, 2008). Moreover if one company introduces a certain service, subsequently the other launches the same as well and tries to launch it in a much better way this time to win the heart of the customers an also retaining the existing customers from switching.  As both of these companies are operating via their own official websites thus, information about new product, services, blogs, and charts are available to each other all the time an there is maximum access to information for both of them.

Coming on to the critical issues, we see that there are a number of problems that both the companies have to face while competing in conditions of fierce competition. First of all we see that both of the companies have managed to acquire a large consumer to which they have to interact or serve on daily basis. The rental process is not that easy just as it seems like because first the companies have to be the first to upload all the latest movies and DVDs in order to be the first one to provide the service. In this regard, a company for which this is an issue that they are not the first one to upload, simultaneously, the other company buckets this factor as its strength to be the first one. For example, when surveyed, a large percentage of users of these websites were of the view that Netflix is able to upload the latest titles much quicker the Blockbuster which is still showing the older titles in the new arrivals. Therefore those users who prefer to get hold of copies as soon as the DVD is released, they mostly rely on Netflix rather than Blockbuster. Moreover, another issue that comes in this rental business is the geographic of the company from which it distributes the copies and posts to its users. Again here we see that Netflix is much reachable to their user as compared to Blockbuster which takes extra time to deliver the DVDs to the customers. This way, those customers who tend to order their products late prefer Netflix over Blockbuster because of that as discussed earlier that there is no use of a DVD title which is delivered late. Moreover, collection and receiving of rented DVDs on time is another problem for these companies because of the fact that they have to stock them back to rent them further and also restrict their use by the user. Many users accidently turn up with their copies late and thus create stock problems for these companies and both of the companies are affected by this particular factor in question. Moreover, it is almost impossible for customers to actually restrict the use of these copies to a single user and also restrict them to be copied. People do tend to pass them on to friends and family for further viewing which creates a potential loss of customers for these companies as those who watch them free of charge can be their potential customers as well. Also, reproduction of copies and DVDs through disc writers is also a problem for both of the companies because again they are unable to restrict the copying of the copies that they send their customers and cannot check whether they are being copied for further viewing or passing on or not (Netflix, 2008). Although there are laws in place in order to control copying of original material, however there are always loop wholes which are often violated by irresponsible citizens.

One of the much debated issues that both the companies have in common is that if one decreases prices, the there one has to decrease prices to. Previously when Blockbuster was renting at $30 per month, Netflix came up with a much cheaper offer of about $20 per month which has now come down to $15 dollars. Operating In the conditions of perfect competition, we can see that somehow Blockbuster had to reduce its profits as well and cut down its costs to almost $17 these days that makes a difference around $13 per month per customer.

Although Netflix uses the mailing method mostly to serve its customers, however, Netflix is being criticized by major production companies that this is creating the problem of unauthorized viewing to a larger extent because the passing on of copies cannot be restricted. Thus production companies are more comfortable with Blockbuster these days which allows direct downloads to customers so that as soon as the files is viewed, it cannot be transferred to other mediums for further viewing. Moreover as soon as the time for the rentals is over, the file itself becomes expired and does not remain as usable again.

Moreover, as we have seen that Block Buster also has physical stores as well, thus it is always reachable to those who are not connected to the internet and wish to get a copy of their title quickly by visiting the physical stores themselves. Whereas when we look at Netflix, they only provide services through their online store and do not actually have a physical chain of stores in service, thus not able to cater to those customers which are not connected to the internet. This does create issues for Netflix because operating in such a competitive environment, Netflix needs to cater all those customers which are accessible to Blockbuster.

Also as we have already discussed before, that both the companies have increased their customer base to a very large extent beyond their capacity, thus none of the two companies are able to serve their customers in one business day. Thus when customers get disappointed from their services by not getting a proper reply, they tend to switch over to other companies such as Intelflix and iTunes store for ordering. This is not just a onetime loss, but, once a company loses its confidence in the eyes of its customer, it is very difficult for it regain that confidence again because a bad impression lasts longer then a good one.

Coming to the part where we will discuss the upcoming threats and opportunities for each of the company we will discuss the scenario of both the companies separately but first of all we shall look into how these companies can overcome their basic common problems. First of all this is the time for opportunity for these companies to make a cartel among themselves in order to set a price floor at least. This is due to the fact that these companies do tend to lose out a lot just because one of them reduces the cost of service to attract more customers and the other company which already has the higher price has to reduce its costs as well in order to compete. This reason is one of the major reasons why especially Netflix is operating in negative net income level. Moreover, both of the companies should join hands in technological perspective in order to overcome the problem of passing over of DVDs and titles so that that there is minimum chance left for any sort of copyright violation in the industry (Rosenbloom, 2004).

Coming on to block buster we see that although it is operating on both physical and online strategic locations, still, it does need to work over its online services because as we can see in the figures below we can see clear difference in the user interface of both the websites. Netflix’s website is more appealing, more interactive and has a user friendly interface as compared to block blockbusters. As soon as one logs on the website one can automatically see that yes this website really is meant for family entertainment and quality leisure time. Moreover, blockbuster can also expand its services globally in order to increase its customer base and sale out more titles at strategic locations by opening physical outlets and stores which can also serve as the distribution centers for online customer. Same approach can also be adopted for onshore operations because blockbuster does lacks in its delivery services in farther regions and does lose out customers who are hoping to get quicker services. Also, removal of late fees and late charges are also another recommendation for blockbuster in order to reduce the exit of those customers who are fed up of paying such charges almost every week or even every alternative week. Coming on to the threats, Netflix has potential brand loyal customers because it was the pioneer in online DVD rentals, thus these loyalists do market for Netflix in friends and family. Moreover, Netflix’s technological innovations like CineMatch is catering to consumer needs, preferences and tastes quite successfully which is one of the most important factors to success in such fierce competition.

Lastly, Netflix has a number of opportunities ahead of it as we can see that it has pioneered in the industry in technological advancement, yet there are many more initiatives that can lead it to the top level. First of all it can also open retail and rental stores across the country in order to cater to those who do not use internet or who prefer to get a copy themselves rather than waiting. Moreover, catering to children, teenagers and gamers, Netflix can come up with products like games and software as well just like blockbuster is already providing in the market. Moreover, one important service that Netflix has not yet catered to is the downloading service which is very important for a company today because high speed internet facilities are available almost everywhere and it is a great opportunity to reduce the cost spent on DVDs that are distributed physically. Coming on to the threats, we see that DVDs will soon become outdated in this era of technological advancements and thus Netflix will need to have a major restructuring because all of its data and services depend on physical DVDs that it rents to customers. What if Customers in the future stop asking for DVDs and rather ask for direct downloading or other medium which does not needs any physical material. Moreover, increasing competition from giants like Wal-mart and Disney who can potentially offer the same/similar service for less money to the consumer could mean the end of Netflix as it already is experiencing financial problems.

Personally, I would go for Blockbuster if I go to buy products of similar nature or even if I have to invest in the company simply because Blockbuster has so far explored a number of on shore opportunities and it just needs a little bit of sugar coating in its operations in order to become the market leader. The finances of the company also tell us about the bright future of the company as even in this competitive environment, the company has managed to have a positive net income unlike Netflix which is in the negative side of the picture (Laudon, 2007). Also being a gamer myself, Blockbuster offers games on DVDs and downloads as well which I can easily manage due to the fast internet services I have in my region.

References

1. “Netflix (2008).” Netflix DVD Rental. Netflix
2. Arrington, M (2008). “Netflix, I Was Just Kidding About Breaking Up With You”.
3. Laudon, K. C., & Laudon, J. P. (2007). Management information systems. Prentice Hall.
4. Phillip, T (2008). “Netflix, Open Up or Die…” Engadget Weblogs, Inc.
5. Rosenbloom, B (2004). Marketing Channels: A Management View. Mason: Thomson South-TechCrunch, Inc.

Downturn, decline, depression are some of the terms used to define current economic recession prevailing in the world these days. Every industry is being suffered by the financial slum that has invaded the profitability of many companies. Most of them are out of strategies to avoid this disastrous phase. The nasty effect of this gloomy economy is directly effecting on people’s purchasing power. Netflix Established in 1997, Netflix has not just survived but also overcome the depressing on going phases of decreasing profit. It is constantly reaching higher on prosperity graph that is very rare to view currently.

Netflix is the largest online movie rental service existing on internet. It has catered more then 10 million subscribers. Marketing Strategies The biggest USP (Unique Selling Point) of Netflix is being internet rental service provider. With low monthly price one can rent movie or TV episodes DVD’s from internet instead of going to a movie shop. These movies are delivered to customer’s house with in one working day without any extra shipping charges. Customers can keep these rented movies as long as they want without any late charges.

They have a wide range of variety consisting of a library with more then 12,000 movies and programs. Netflix has not restricted it’s self into internet rental service but also provides the facility of streaming online movies and games via internet. It has also combined hands with leading consumer electronics companies to offer a range of devices for movies and TV episodes streaming. They have successful partnerships with companies like Blu-ray players (LG), broadband-enabled TVs (LG and Vizio) and Roku settop boxes to offer devices for streaming videos.

Their recent successful marketing strategy was to combine with Microsoft to provide the facility of viewing movies and TV episode through Xbox 360vidoe game and entertainment on their television. Microsoft Xbox has already a wide range of customers. This has turned out to be a profitable business for both the companies by increasing their market penetration and market share. It is also taking advantage of expanding broadband market to deliver improved streaming service over internet. They will soon phase out the shipping procedure and promote more on the streaming end.

This will save their annual shipping cost. Netflix at the time of recession cut down on their advertisement cost in the previous quarter, which did not make any effect on their revenue. As compared with Blockbuster where customers go out to rent a movie or TV series, one can easily download it through internet and preserve it for as long as they want. With payment of minimal monthly amount a person can spent this recession period entertaining itself through movies. In 2007, the company made $66. 6 million on $1. 21 billion in revenue.

It increase it’s earning in the year 2008 by making $83 million in profit on $1. 36 billion in revenue in 2008 (Stammers, Robert, 2009, March). The company anticipates finishing first quarter of the year 2009 with 10. 1-10. 3 million subscribers, posting sales of $387-393 million, above consent. It also predicts to make 10. 6-11. 3 million subscribers by the end of year 2009, making sales revenue of $1. 58-1. 635 billion, above consensus (Frommer, Dan. 2009, January). With more value addition and smart positioning, Netflix has catered masses and continuing to do so in this recession drag.

Convenience and innovation are two important pillars of their marketing strategy. People can’t deprive themselves during any conditions and keeping this in mind they are making their facilities more available and affordable. Works Cited Frommer, Dan. 2009, January 26. Netflix Q4 Massive, Guidance Strong (NFLX). http://www. businessinsider. com/2009/1/netflix-earnings-analysis Stammers, Robert. 2009, February 25. Netflix Thrives Despite The Recession . Accessed on March 19, 2009. http://www. forbes. com/2009/02/25/netflix-microsoft-blockbuster-personal-finance-investing-ideas_movie_rentals. html

Nineteen’s rental-by-mail model and Redbird’s $1 DVD kiosks have clearly won, but so have the online video distribution models that Nettling, Hull, Youths and there have pioneered. In a word, Blockbuster is the past; Nettling, Redbook and online video are the future. No amount of pre-arranged rationalization will fix a fundamentally broken business model. The History of Blockbuster Inc. Beginnings David and Sandy Cook started the company now known as Blockbuster Inc. , in 1982, Just when the VS. started make headway in American homes. It was originally known as Cook Data Services.

David, a former software engineer, had what at the time were revolutionary Ideas on how to make the rental business more cost- effective and efficient. In 1 985, the first Blockbuster Video store opened up in Dallas, Texas, to serve as a competitor to the many local video stores that dotted the country.

Innovation

The Blockbuster store had a larger selection, at 8,000 tapes, than these family-owned video shops. It also had computerized Inventory and the tapes were left out on store shelves, which made the checking-out process much faster.

Other video stores required customers to sign out each tape individually and then wait for the clerk to get the tape out of a back room. The Blockbuster model also allowed customers to keep movies out for three nights Instead of one, made stores family- roundly by refusing to stock adult films and stayed open until midnight every night of the week, even Sundays. Ooh Expansion The Cooks’ model was so successful that they had three more stores open by 1986. That’s when they decided to rename their company Blockbuster Entertainment Corporation. The Cooks left the company In 1987, putting Investor Wayne Whizzing In control.

He favored aggressive expansion, which led to 15 corporate stores and 20 six regional offices in its push to operate from coast to coast.

Takeovers

One move of Blockbuster’s that ultimately led to some backlash was its reactive of buying up local video chains. These chains included Major Video, Inc. ; Oklahoma Entertainment, Inc. ; Vector Video, Inc. And several others. By the early sass, industry experts began to wonder if the chain was beginning to overestimate the market. In response, it turned to overseas operations, opening up in the U. K. It now has major operations in Europe, South America, Australia and Japan. 0 The Fall In the late sass and early sass, Blockbuster started to get some real competition from the burgeoning online rental market as DVD’s started to replace tapes. Its major competitor was Nettling, launched in 1999. DVD’s were inexpensive to ship and not as fragile as tapes, plus they were much less expensive to purchase for renting out. Fewer people headed to the stores since they could rent movies at home over the Web. Though the company went public in 1999, it began reporting significant losses. 00 Changes In 2004 the company launched its own online rental service, Blockbuster Online, to try to gain back some of its market share.

The system of charging late fees by the night was replaced with a new model that let customers buy their rented DVD’s after a certain time period instead.

At some level, Blockbuster’s demise was caused by the Internet, which made it easier to download movies and to rent DVD’s than to rent VS. tapes. But Nettling (INFLUX) faced the same threat from video streaming, and it has handled that transition masterfully. Why the difference? Nettling harnessed technology to create a service that customers like better than their competitors’ offerings. Blockbuster was deal-bait. Blockbuster’s bankruptcy will keep some of its stores open and transfer control from Fiasco’s (VIA. B) Sumner Redstone to corporate raiding veteran Carl ICANN.

So if you rent from one of Blockbuster’s 3,000 company-operated stores; 400 franchise stores, DVD-by-mail, or rental kiosks you can continue to do so, according to the Dallas Morning News. Not only that, but your rewards programs, coupons and gift cards will continue to be honored. ICANN has obtained the financing to keep all this running, helping persuade 80% of possession financing that will allow it to pay suppliers and employees. The new deal cuts its $980 million in debt to about $100 million as the Dallas Morning News reports.

Blockbuster: Doing Deals, but Lagging on Innovation Blockbuster has an interesting history that features repeated episodes of deal- makers using it to make a quick buck rather than focusing on beating the competition. According to Dustsheet. Com, Blockbuster was founded in 1985 by a Dallas oilman with a passion for databases. He sold a third of the company for $18 lion to Wayne Whizzing, a guy with a record of consolidating fragmented industries like waste management. By 1989, Whizzing had acquired many Blockbuster rivals and got into some trouble for questionable accounting.

At the same time, growth was slowing and new ways for people to see movies pay-per-view and cable programming were getting more mainstream. By 1993, Blockbuster had 3,400 stores and decided that the growth market was in music. So it proposed a merger with Victim, which ended with the latter paying $8. 4 billion to acquire Blockbuster, according to Dustsheet. Com.. Blockbuster struggled with cash flow after Fiasco’s disappointing August 1999 offering of 18% of its shares to the public, but its deeper struggle was that it was consistently late to the new technology party.

Its responses to Amazon’s (AMAZON) DVD service; Interfiles mail rental service, and Constraints (CAST) kiosk service all came years too late. In 2004, ICANN who had acquired Blockbuster rival Hollywood Video bought 9. 9 million shares of Blockbuster to push through a merger between the two. That merger failed, and ICANN sold Hollywood Video to Movie Gallery in January 2005 but he still owned his stake in Blockbuster. With today’s bankruptcy filing, ICANN has finally gotten his wish to take over Blockbuster, but it seems like a pyrrhic victory.

While it’s still the largest U. S. Video rental company with 47 million customers, Blockbuster has lost market share to Nineteen’s DVD by-mail business and Redbird’s DVD rental kiosks, according to the Dallas Morning News. Nettling has “15 million by- mail customers to Blockbuster’s 2. 6 million. Redbook has more than 20,000 kiosks to Blockbuster’s 7,000. ” Nettling: Customer-Focused Innovation Leads to Growth Nettling, by contrast, has been thriving even though its traditional model of renting DVD’s through the mail is threatened by video streaming.

As I wrote in a March 26 article on Dalliance, Nettling started with a simple, but brilliant idea: Charge people a reasonable flat fee, and mail DVD’s to them as often as they want. Later, Nettling took its delivery process one step further: It started allowing people to view streaming Nineteen’s corporate mindset has been key to its ability to adapt as people started gravitating toward online video streaming. It’s method is to put new technology at the service of customers while keeping a close eye on changing delivery costs and the competition.

Nettling expects that over the next several years, following the Postal Service’s proposed 7% rate hike for DVD mailers, its annual costs to shipping DVD’s will climb from $600 million to $700 million. As these charges rise and it becomes more expensive for consumers to rent DVD’s by mail, Nettling plans increasingly to focus on online streaming and making more titles available for download. Awhile the company has grown quickly, Nettling is concerned about the competition both old- style movie viewing options and the DVD-rental kiosks.

As far as the consumers go, Nettling thinks that busy people see downloading a movie through Nettling as a less expensive at $8. 99 per month for unlimited rentals and more time efficient way to see a movie than making a trip too movie theater. 10th upshot of all those differences in corporate philosophy is that Nettling is prospering while Blockbuster is bankrupt. The contrast highlights why customer-focused innovation trumps deal- doing as a way to grow a business. That our economic system has become so focused on the latter rather than the former helps explain why we’re having so much trouble creating enough Jobs to employ the 8. Million people who have been tossed out of work since December 2007. America should take a lesson from Nettling. Nettling versus Blockbuster Nettling vs.. Blockbuster: which one is better? That depends on you. Summary: Nettling has more movie choices, is faster with delivery, has twice as many shipping centers and costs less. Nettling also ships out a new DVD the day they get your return, so turn-around time is shorter than Blockbusters. Nettling offers free online movies so any place you have High Speed access is now a movie theater. Online movies are Nineteen’s trump card; 6,000 stores is Blockbuster’s card.

Simple rule: if you don’t want to pay late fees or wait in a store line, and want to watch ivies online for free, pick Nettling; if you pass by a Blockbuster store everyday or can walk to one, pick Blockbuster. Free Trial at Nettling: Sign Up Here – – – Free Blockbuster Trial: Sign Up Here Movie Choice: Selection + Availability Nettling has 100,000 movies titles, Blockbuster 80,000. Nettling has a deeper inventory of Classic, Independent, Foreign, and Documentaries then Blockbuster, but Blockbuster seems to stock more copies of the Mega-hits or blockbusters.

Blockbuster has 6,000 stores (Nettling has O) but not all stores participate with the online promotions and watch anytime for free. Advantage: Nettling Speed of Delivery: Turn Around Time + Shipping Centers 95% of the US can get a DVD from Nettling in one Mailing day; Nettling ships you a DVD the day they get it so there is no “lost time”. Nettling is fast. Blockbuster is slow to process returns and mail out a new DVD, saying it takes 1-3 days to get you a DVD- Nettling sites says 1 day. Our experience backs this up. The reason? Nettling is faster because they have more shipping centers.

Nettling claims to have 100 shipping centers, but in reality only 47 Mail DVD’s out, the others Just receive DVD’s. Blockbuster has only 23 shipping centers. If you live close to a Blockbuster shipping center it may even up the delivery time but Blockbuster is still much slower with movie processing and turn around time. Advantage: Nettling Price Comparison Nineteen’s 3 DVD-at-a-time plan costs $16. 99 flat, Blockbuster’s 3 DVD-at-a-time plan costs a whopping $34. 99 plus tax with unlimited in store exchanges, $19. 99 plus tax with 5 in store exchanges a month, and $15. 9 plus tax with no in store exchanges. Adding the tax and the “lost movie days” resulting from Blockbuster’s slower shipping and turn around time makes Nettling not only cheaper but allows you to watch more movies in the same time period. In December 07, Blockbuster raised heir prices significantly (from $2 to $10 per plan), so Just a few months ago price was in Blockbuster’s favor, but no more. Advantage: Nettling Online Movies: Nettling 17,000, Blockbuster O All Nettling memberships above $4. 99 come with unlimited and free online movies.

Nineteen’s trump card will only get better as Nettling is constantly adding more online movies. Blockbuster does not offer online movies. Watching movies online with Nettling is easy, Just download Nineteen’s program and in 30 seconds you can watch a movie or a TV show. Traveling with your laptop, for business or pleasure, is a lot more fun with Nettling. Advantage: Nettling Local Stores: Blockbuster 6,000, Nettling O Blockbuster has 6,000 stores so chances are one is in your area. If you pass by a Blockbuster on your daily commute then Blockbuster has some perks. Broken DVD? Just pop in and replace it.

But remember, every DVD you get from the store you have to return to the store – and late fees apply to store DVD’s. If your local store is a franchise they might not participate with the online program. In store DVD turn around can take a few days as it seems to take a day or two for the return credit to show up. The big hassle is you still have to go to the store, the whole point of Nettling s NOT going to a store. Advantage: Blockbuster Customer Service It is hard to compare the customer service between the two companies as the scale is so different: Nettling has 9 million members, Blockbuster 43 million.

Nettling has smart people on the phone, truly one of the best customer service experiences around. Blockbuster’s customer service is more corporate, getting a live person on the phone is hard work, as they seem to prefer to communicate with you by ‘form’ email. But you can drive down to a Blockbuster store and talk with a manager and try and make your problem the manager’s problem. Just make sure it is not a franchised Blockbuster as they do not play by the same rules and might not care about your online problems. Advantage: Nettling CIO – Action! Adventure! Thrills!

Spills! The high-stakes drama of fixing the money- losing Blockbuster movie rental company has it all, except a happy ending yet. Can the duo of CEO Jim Keyes and CIO Keith Morrow, together again after a highly successful run at 7-Eleven, remake Blockbuster? MORE ON CIO. COM Who’s Mining the Store Blockbuster Deal to Put Movies on Many Digital Devices How Blockbuster is Updating Its IT Infrastructure This storied CEO-CIO team wants to translate the technology-enabled retail ideas hey developed to sell snacks and Slurped to rented entertainment-on land and online.

That is, using IT to make sure the right amount of the right product is available at the right time. “You can do it anywhere,” Morrow says. “The lifestyle on a sandwich or doughnut is measured in hours and days. The lifestyle of a new movie or game title is not very much longer. ” At 7-Eleven, legend has it, the most loyal customers visited an average of twice a day, such as for morning coffee and a snack for the commute home. But Blockbuster patrons are deserting to competitors including Nettling and video-on-demand. Under Keyes’ leadership, 7-Eleven cultivated customer loyalty by giving local managers control over their merchandise.

With near real-time access to customer activity and inventory data, a manager could see that, for instance, he couldn’t keep bear claws on hand for two days running-?and he could change his bakery order for day three. The insight to use IT to fine-tune local inventory came from Morrow, but Keyes supported it-?pushed for it even. “Jims a believer in trying things to see how they work,” Morrow says. Similar to this Article Their partnership played a large part in turning 7-Eleven into the United States’ arrest convenience store chain, with sales of $12. 2 billion at the time Keyes left in 2005.

By reprising their roles at Blockbuster, which has posted $4. 8 billion in losses since 2000, Keyes and Morrow are betting that, even in this economy, they can turn the company around. The pair is nearly two years into a three-tier transformation to stabilize Blockbuster’s core rental-store business, diversify sales and build an online distribution system to handle growing demand for downloaded and streaming media. Keyes expects to show a profit this year, but Wall Street remains doubtful bout the future: Blockbuster’s $258 million market valuation is a fraction of Nineteen’s $2. Billion. Even with IT and business in lockstep, that skepticism portends a nail- biter. Stars in Their Eyes At its founding in 1985, Blockbuster ruled video rentals. Its blue-and-yellow signage stood for VS. tapes, and later DVD’s, to rent for a few days then pay a late-fee when As the century turned, Blockbuster’s business began to slide. Profits steadily drained away as physical and then online competition grew. It didn’t help that customers couldn’t get popular movies at Blockbuster stores up to 75 percent of the time, according to the company’s own fugues. Losses mounted.

When billionaire investor Carl ICANN Joined the board in 2005 as a significant shareholder, he went after CEO John Antioch publicly. That same year, on the other side of Dallas, Jim Keyes retired from 7-Eleven, where he’d been for 21 years. During his last six, as CEO, he had hired Morrow. In 2007, Antioch stepped down at Blockbuster, which wooed Keyes for the job. Sitting in shirt sleeves in his 21st floor office recently, Keyes recalled that period, when he had to contemplate unerring. He liked the challenges he saw in movie rentals, he says. But he wanted a trusted CIO-his trusted CIO-with him.

Similar to this Article “Retail is so dependent on technology,” he says, leaning forward. “l met with Keith before I accepted the Job. ” He took it in July 2007. Two months later, Morrow Joined him. Now Keyes and Morrow face some of the same obstacles many executives do. They have to attract and retain new customers, capitalize on competitor weaknesses and predict the direction and pace of change in a volatile market. But they also have to deal with the ugly backstops. On arrival, Job number one for the team was to figure out how better to run its 4,005 U. S. Many-owned stores. Blockbuster also franchises 850 stores. ) Yes, the world is whiffed, Keyes acknowledges, but he contends that there’s life yet in Blockbuster’s physical stores-?not only in traditional rentals, which still account for 85 percent of the $26 billion industry, but also as a way to seed the ground for new-style consumers. Blockbuster very much wants the 18-year-old college kid to click on Blockbuster. Com to download Spider-Man and Spider-Man 2 to his laptop for the flight to spring break. And the company doesn’t want to ignore the 47-year-old mom who drives to its storefront at a strip mall to rent

High School Musical for that night’s sleepover. But Blockbuster also wants to cultivate new kinds of customers, such as people who bring a portable video player to a kiosk to download digital content. Or someone who will stop at a vending machine at the train station to pick up a disc or a download. “What we want to provide is convenient entertainment everywhere,” Keyes says. While Blockbuster expands the idea of what a video rental store is and does, its field of competitors has also grown, says Bobby Italians, a senior analyst at Forrester Research.

Beyond battling Nettling, it must also compete with giants such as Apple’s Tunes store, Amazon’s digital downloads and discs, as well as cable and broadband companies offering video on demand and sites such as Hull, which offers free ad- supported video streams. Meanwhile, Wall-Mart and Target entice budget shoppers to buy super-cheap DVD’s and electronics. And getting ready for their close-ups are still relatively unknown players such as Redbook, plunking down movie vending machines in the lobbies of grocery stores. “Blockbuster has to transform its business, but so does Nettling and all the others.

We don’t know which method of entertainment with a multiplication strategy for movie viewing. Yet even if Blockbuster keeps pace on the Web and with kiosks as digital demand grows, it will still have to determine what to do with its physical stores, says Carla Caseload, an analyst at Comparing. “New Blockbuster management is doing a good Job building [other forms of] retail through its stores so the business is less reliant on rental. This takes time and initially hurts margins,” Caseload says. Real estate leases also drag Blockbuster finances. Blockbuster has closed about 250 U. S. Tortes since 2006 but is obligated to pay about $2 billion in operating leases for its remaining stores, according to its latest annual report. Similar to this Article You have to work with what you’ve got, Morrow notes. So Blockbuster’s current plan is to turn its stores into “destinations” where people can get not Just videos but the consumer electronics gear to play them on. Blue-ray DVD players, digital picture frames, e-book readers, portable AMP players, major game consoles, flat-screen TV’s-? Blockbuster now sells all of these products from Sony, Nintendo, Arches, Samsung and several other electronics makers.

Rolling out across the country are stores- within-a-store to let curious customers try these gadgets while sipping a cold drink, dated in a cushy gaming chair. This strategy to blanket retail and online outlets to sell consumer hardware next to rent-or-buy video software opens “fresh” terrain for the industry, says Italians. Nettling, for example, has no physical stores and Best Buy doesn’t offer media rentals. And another major electronics competitor, Circuit City, is liquidating (Blockbuster tried last year to buy Circuit City but could not reach an agreement with the company). There’s no reason not to offer a wider array of products, beyond popcorn, when you have all this foot traffic,” Italians says. “It’s not crazy. It is a modern electronics store. ” What Morrow and his IT staff must do to enable this hopeful pioneering involves tactical as well as strategic projects to get customers to Blockbuster locations. For example, the IT staff had to set up new databases to track digital rights for movies delivered on disc and online. Movie companies negotiate different viewing windows for streamed, downloaded and DVD content.

For example, you might be able to check out The Dark Knight on DVD for five nights. If you download it on demand, once you hit play, you have Just 24 hours to view it. You can also buy the digital copy ND keep it forever. Parameters differ for renting a movie on an phone, PC or gaming machine such as a Palpitation. Blockbuster subscribes to a Web service that updates its Oracle-based digital rights management database. “We’ve got to get that right at all times,” Morrow says. But diversifying sales means more than branching out into new product lines.

It also involves coaxing a different kind of customer to look at Blockbuster. Similar to this Article Who Gets the Girl? There’s a scene in All Quiet on the Western Front where soldiers vie for the boots and other valuables of a dying comrade. The corporate corollary is grabbing the customers of a rival heading to bankruptcy. But you can’t do that without good data. Explained how technology helps with the time-honored retail practice of capitalizing on casualties. Before Morrow arrived, Blockbuster kept an Oracle database with information about its competitors’ stores.

But the system wasn’t updated much and needed new analysis tools, he says, “to help us with store profitability and finding where the best opportunities are. ” At 7-Eleven, for example, sales and inventory data was updated frequently throughout the day to keep store employees in the know bout which merchandise moved and which got dusty. Now at Blockbuster, financial and real estate analysts add data to the system regularly-?including anything public and conformable about locations and sales statistics-?to compare with the performance of Blockbuster’s own stores and to Jump on opportunities to grab market share.

For example, Movie Gallery, which owns Hollywood Video and is Blockbuster’s nearest competitor in video rental stores, entered Chapter 1 1 bankruptcy protection in 2007. The court required it to release the addresses of the locations targeted to close. Blockbuster analysts were able to take that information and fill in anything missing from their Oracle records. Then they ran queries using Oracle business intelligence and ASS statistical analysis tools to figure out whether to lease vacant Movie Gallery spots and where to do local marketing to lure customers to nearby Blockbuster stores.

Movie Gallery emerged from Chapter 11 last May, about 560 stores smaller. Morrow declines to cite specifics about the financial gain from such moves, but he carefully lays down his fork and says, “We absolutely made that a priority. It’s a pretty important tactic, to go after the revenue of closing stores. Of course, no one thinks scavenging will be enough to lift Blockbuster’s financial results. A happy ending means Blockbuster-?to borrow from another movie genre-?has to get the girl.

Not lovable Meg Ryan in any of her numerous chick flicks, but that ravishing beauty known as a loyal customer. Similar to this Article The Once and Future Patron Blockbuster is striving to attract customers from various demographics to its stores and ease them gently into new technology. If people can relax in a cool, low-pressure environment to learn how to load movies onto portable AMP players, do the hula pop on Nineteen’s WI and watch a feature film through kooky computer eye glasses, they’ll be grateful. They’ll see what else you offer. They’ll come back in person and on the Web.

When they someday spot the Blockbuster name on a kiosk at the supermarket or a vending machine at the mall, they’ll walk right up and swipe a credit card. Blockbuster will have diversified its sales and been sustained into the future. That’s the theory, anyway, that pushed the redesign last year of about a dozen stores in Nevada and Dallas to house new “Rock the Block” shops: stores-within-the- store that display gear for shoppers to touch and try. These internal shops are dedicated either to gaming consoles and accessories, consumer video equipment or a kids’ play area to relieve tense parents trying to browse.

In Dallas, Jeff Gloom, Blockbuster’s senior director of operations strategic development, walks among clean white counters arranged in a circle to show off electronics at the center of a “Not like a Best Buy, where it’s all crowded. ” Gloom sweeps his arm above the gear. “These are all products you can load content onto. ” For example, there’s an Arches portable media player ($100) and docking station ($70) to use the player on a home TV, such as a Sony Home Theater ($250) sitting nearby. In time for Christmas, Blockbuster released a set-top box it built with rewire; $99 gets you the device and 25 downloaded rentals. These products might not be familiar to some customers, so they can experiment here. See what it’s all about,” he says. “Whole families come to hang out on a Friday night. ” The Rock the Block shops have increased the average time customers spend in the store as well as their average purchases, according to Gloom, although the company declined to provide specifics. The new merchandise is changing how Blockbuster employees and customers interact, says Lauren Garrett, who manages this location. “l have my people talk to customers about the products, make them feel comfortable,” she explains.

Similar to this Article One effective conversation, she says, is to teach people that a ASS game machine can play Blue-ray discs. “l had to get customers to understand that last year. Now they’re customers of games and movie titles. ” Which stores get which concepts and electronics will depend on local demographics, sales trends and what competition is around-?variables that will be tracked and analyzed by store managers as Blockbuster expands access to those central Oracle databases and reporting tools.

Having store managers rather than a central merchandising department decide the merchandise mix at individual stores usually means better product availability, Morrow says. Inventory had been a problem at Blockbuster. Two years ago in-stock availability of hot new movie releases was Just 20 percent chained. By late last year, it had climbed to 74 percent, according to Keyes. What was the miracle cure? A homegrown application measures various inputs comprising customer demand-? such as sales history-?and a custom algorithm fugues where to spread inventory cross the company’s 40 distribution centers.

That’s part of the IT strategy Keyes and Morrow brought from 7-Eleven. “We’re using technology to create a pull system so stores can decide how many copies of a movie they want,” Morrow explains. “Like how 7-Elevens ordered sandwiches. ” At that Blockbuster store in Dallas, Garrett and her team will be able to repair to a Windows desktop in the back room to run numbers and form hypotheses using historical data plus their localized knowledge. If there’s a college nearby holding Batman parties the day The Dark Knight is released, it’s best to stock up.