100 k

Total Downloads

1.82 m

Views

Downlaod PDF

Blockbuster And Netflix

Introduction

The evolution of the internet from the 1990s to 2000s gave rise to the new markets of entertainment (Dias and Navarro, 2018). Giant organisations like Apple captured the market by distributing online music at a lower price. At the same time, video rental stores were also in demand due to the rapid emergence of the internet. Two giants Movie Gallery and Blockbuster, which were driven by the rental stores, started to compete in the streaming and mailing platform. However, both the giants mainly Blockbuster failed to maintain their market position and their financial performance started to decline in no time. Hence Blockbuster had to face bankruptcy due to financial crises. The accusation of Netflix for a mere $50 by the blockbuster extensively damaged the organisation (Tang and Veelenturf, 2019). This study has depicted the reasons that are responsible for the downfall of Blockbuster and the factors that have contributed to the success of Netflix.

Background of the Study

In 1985, Blockbuster emerged as the leading store in Texas. The organisation was established by a computer programmer David Cook. David Cook used his expertise and developed inventory management to analyse consumer demand. The stores were maintained according to the demand of the consumers of the neighbourhood; this strategy significantly worked for Blockbuster, and the organisation grew rapidly in Texas. Lately, the organisation was managed by Wayne Huizenga who had the vision that Blockbuster would become the national appeal of the people because the products of the company were unique (Hogeland et al., 2018). The one year, under the guidance of Wayne Huizenga, Blockbuster owned 11 franchises and eight stores (Chopra and Veeraiyan, 2017). The absence of Wayne Huizenga’s guidance majorly affected Blockbuster and the organisation encountered the biggest loss in 1996 when Blockbuster lost half of its value. After the loss, Blockbuster was rebranded in 1996 by changing the retail stores as Blockbuster instead of Blockbuster videos. It was lately headed by Jim Antioco as a CEO in 1997. Blockbuster had encountered a series of mistakes during the leadership of Antioco, which caused a loss of $984 million in 2004 when the company generated $5.9 billion in revenue (Venkatesan and Shively, 2017). However, 2004 was the prominent year when the competitors of blockbuster started to emerge. The competition between Netflix and Blockbuster was neck to neck at that time. However, the ineffective strategies of Blockbuster played a major role in promoting Netflix. The efficiency of Blockbuster’s strategies can be observed from the fact that Netflix was not charging a late fee on its customers whereas Blockbuster was charging the monthly fee as well as the late fee which acted as a major turnoff for the customers. Moreover, blockbuster was focused on acquiring a leading position in the gaming industry instead of video rental stores which developed an opportunity for its rival to secure the higher position. Hence the ineffective strategies of Blockbuster became a reason for its decline.

Problem Statement

According to the annual report of blockbuster 2001, the annual revenue of the company was 22.3 billion; however, it was not maintained due to inefficient strategies, the problem raised from 2004 under the leadership of Antioco (Hogeland et al., 2018). The downfall of blockbuster created huge opportunities for its rivals, among which Netflix was found to be the most prominent competitor which took over the market position of Blockbuster. Hence, it is essential to identify the key strategies that caused a failure to Blockbuster. In this regard, the researcher has conducted secondary research to analyse the strategies responsible for the failure of Blockbuster.

Research Question

The research question that needs to be answered is;

  • How the negligence of Blockbuster succeeded Netflix?

Research Aims and Objectives

The aim of this study is to analyse the strategies of Blockbuster that have caused the decline of the organisation and how Netflix became a leading brand. In this regard, the following objectives will be carried out to achieve the aim of the study:

  • To analyse the ineffective strategies of Blockbuster.
  • To examine the factors involved in the success of Netflix.

Research Significance

This study will be helpful for organisations which are facing major problems in maintaining their market position. In addition to this, it will also demonstrate the factors that significantly contribute to the success of an organisation. This study can be used as a framework to avoid failure in the strategies. Moreover, this research will be effective in constructing strategies to become a market leader. 

Literature Review

In order to develop the insight of the topic literature review has been developed. The main purpose of the literature review is to summarise and discuss the relevant and specialised qualitative literature. It provides insights into the topic to help the researcher in gaining valid and authentic results. Moreover, the literature review has analysed the gap that has been previously left uncaptured. The literature review summarises prior research to increase the credibility of the results that are based on the literature.

Impact of Ineffective Strategies

According to Kholopane and Sobiyi (2017), “the customer is the king” this slogan should be followed in order to acquire success for an organisation. In the case of Blockbuster, the organisation failed to satisfy its customers because the company was entirely focused on generating profits. Venkatesan and Shively (2017), has stated that Blockbuster was charging a comparatively higher price from their customers, whereas, their deadly competitors like Netflix were using a subscription fee to attract the customers whom they were looking to target. Initially, this strategy of charging late fee worked for Blockbuster in generating profits, but it adversely affected the brand in the long term. According to Hill and Alexander (2017), to maintain loyalty, the organisations must ensure that their core focus is on achieving the satisfaction level of their customers. As a result of this, the customers of Blockbuster switched to Netflix because Netflix was found to be charging a subscription fee only. The strategies of Blockbuster has been recognised as a failure because they were built to attain high profits, neglecting the preferences of the customers. These organisations had established strategies to promote streaming and video-on-demand services which attracted the customer base of Blockbuster. According to the Fink (2019), Blockbuster had been using its basic brick-and-mortar approach even after the emergence of its rivals. The brick-motor approach increased the profit margins of Blockbuster for a short term period; however, it became a major reason in the failure of its success. McIntyre and Srinivasan (2017), have proposed that by evolving the technologies, the organisations are required to change their strategies to grow. The organisational strategies are the foundation of the success of the company; hence inefficiency in the strategies can lead to the decline of the company. As evident from the failure of Blockbuster, the organisation did not change its basic model, which generated profits for a short period. Blockbuster neglected the fact that burdening the customers would impact its direct sales. Blockbuster had failed to recognise the change in the buying behaviour of its customers. The emergence of technology has changed the preference of the customers from email DVD to online services and streaming.

Strategies for Maintaining the Customers

Kumar (2016), has proposed the strategies for maintaining the value of customers. In this study, Kumar examined the metrics which are responsible for creating the value of the customers. He added that the focus of the video rental stores on subscription services could boost up the growth of the business. The performance of the firm is associated with the customer value; therefore, the organisations focusing on reducing the profit margins to enhance the customer value can be effective in its growth. In this regard, Netflix has also been found to be focused on lowering its temporary profits to generate long term profits for the future. Therefore, Netflix adopted created customer value by removing the late fee in order to attract new customers. Besides, it has been examined that the organisation must build up its strategic position within the market by building a good relationship with their existing and new customers. According to Keegan (2017), Netflix has been found to be focused on creating customer value by satisfying the demands of the customers at relatively lower prices than Blockbuster. Different innovative methods and strategies have been used by Netflix, which significantly contributed to its success. Since its establishment, Netflix is contributing to satisfying customer’s demand for this purpose, Netflix adopted the unique strategy of delivering the DVDs at the customer’s residence.

Moreover, the organisation kept the subscription cost low as compared to its competitors to acquire a competitive edge in the industry. Netflix is the organisation that is concerned about its customer’s preferences; therefore, the company delivers DVDs at the homes in order to create a genuine customer base (Hiller, 2017). Voigt et al. (2017), has also supported the marketing and pricing strategies of Netflix by stating that the subscription packages of Netflix are according to the customer’s preferences in order to grow the business. 

Cta 1 How “Dissertation Proposal” Can Help You!

Our top dissertation writing experts are waiting 24/7 to assist you with your university project, from critical literature reviews to a complete masters dissertation.

Find Out More

Methodology

To identify the ineffectiveness of strategies of Blockbuster, and the factors responsible for the success of Netflix, the data is collected by using the qualitative research method. The reason behind qualitative research method is that it developed the insight that is required to examine the research problem. Moreover, no statistical techniques have been used for the analysis, and the information has been collected from the research papers that have already been published in recent past years from 2016 to 2020.

Research Philosophy

This study is qualitative research; therefore, the research philosophy used for it is Interpretivism. The reason for using Interpretivism is that it provides insights to the researcher based on the previous literature. According to Ryan (2018), Interpretivism allows the researchers to analyse the different perspectives of humans to attain authentic data for the study. In addition to this, the objective of using Interpretivism in this study is that it makes the data authentic. The data collected through Interpretivism is research-based, instead of the assumptions of the researcher. The Interpretivism research philosophy has enabled the researcher to interpret sustainable outcomes by analysing real-world information.

Research Approach

The approach used for this study is “Inductive”. The inductive research approach is used because it allows the researcher to acquire answers from theories of previous literature (Graneheim et al., 2017). The inductive research approach is en effective strategy in collecting data as it uses the logical path to extract authentic data for the study.

Research Strategy

The data for this study is collected through secondary data collection method. For this purpose, the researcher used reliable sources to formulate constructive literature review. It has helped to attain valid results (Johnston, 2017). The secondary data of the qualitative researcher is found to be effective in identifying the ineffective strategies that have adversely affected Blockbuster. Moreover, secondary data will help to examine the factors that enhanced the success of Netflix. The secondary data has provided an insight into the successful management strategies of Netflix that have positively contributed to maintaining market stability of the organisation.

Data Collection Methods

The data has been extracted from already existing literature by extracting relevant data through authentic platforms such as Google Scholar, EBSCO and Academia. The keywords for the search is “decline of Blockbuster”, “impact of ineffective strategies”, “Factors of Netflix’s success.”

The inclusion criteria have been maintained to obtain authentic data. It consists of selecting the articles published from 2016 to 2020. Articles that are published in the English language are preferred.  Due to exclusion criteria articles that were published before 2016 were excluded from the research.

Research Ethics

The data for the study is collected by following the ethical manner. Moreover, the researcher has used sources of secondary data that are credible and reliable. Besides, the literature review that has been used by the researcher consisted of various published articles, journals and books are properly cited and referenced to follow the research ethics (Quinlan et al., 2019). This step is followed to avoid any legal dispute as the data is extracted from pre-existing data of other authors. Additionally, the identity of the participants is kept confidential to make them comfortable in giving honest responses. The researcher conveyed the objective of the research to the participants before the interview in order to gather data with their complete concern. The questions asked during the interview were ethical to maintain the research ethics.

Discussion and Analysis

The study of Habersang et al. (2019) indicates the reasons that are effective in the failure of an organisation. The aim of this research is to identify the gap between the industry and the success of an organisation and to examine the factors that play a devastating role in the overall development of the organisations. For this purpose, Habersang et al. (2019) conducted qualitative research by extracting relevant data from articles, published journals, and case studies. According to the analysis of the study, inefficient leadership can be a major factor in the decline of an organisation. As observed in the case of Blockbuster, under the leadership of Hastings, the organisation grew clinically, but the change in leadership structure caused a major effect on the success of Blockbuster as evident from its annual reports, Antioco was not able to manage the organisation, and he continued to follow the basic model of the organisation. The change in the industry requires a change in the model, but Antioco did not consider the consequences of using the old model as the organisation was majorly focused on generating high profits. As a result of the failed leadership of Antioco, Blockbuster eventually bankrupted in 2010. The change in the industry created a major gap between the success and objectives of Blockbuster. The “Strategy Choice Theory” has also supported the idea of Habersang et al., (2019) by stating that the misalignment of the top management decisions and the environmental demand can lead to the decline of the organisation. However, it has been analysed that Blockbuster did not consider to change in the environment and was found to be using the old basic model of the organisation which affected its growth. From the results of Habersang et al., (2019) it has been analysed that the leadership was one of the major reason for the failure of Blockbuster. 

The study of Davis and Higgins, (2013), has demonstrated the impact of using an outdated business model by the practical example of Blockbuster. The aim of this study is to analyse the consequences of not modifying the business. In order to collect the data, Davis and Higgins (2013) have used the qualitative approach as it allows the researcher to collect extensive data that make the results valid and to get the ingots of the employed respondents accordingly. The data was obtained from the secondary sources such as article, journals, websites and annual reports. The study illustrated that Blockbuster was a video rental store which was mainly focused on generating profits of the organisation neglecting the preferences of the customers. The business model of Blockbuster was not friendly to the digital world as the organisation did not realise the consequences of neglecting the technological advancement in the industry. The business revenue model was being followed by the organisation, which adversely affects the market stability of the company. According to the model, Blockbuster has charged a late fee on the customers for returning the movie after the due date. It acted as a major turning point for the customers, and they switched to other stores who were offering unique services such as Netflix. Netflix has been found to be a proactive digital organisation, which took advantage of the business revenue model of Blockbuster and offered online streaming to the customers. According to Aversa (2019), Blockbuster was focusing on the gaming industry, whereas the emerging organisations which were technically advanced such as Apple, Amazon and Netflix took advantage of the situation. The results of the study depicted that the mistake of the organisation for not applying the digital change in its business model became a reason for the fall of the giant organisation.

On the other hand, according to Rayna and Striukova, (2016), the 360 business model is significantly an effective model in creating innovation in business strategies. Rayna and Striukova, (2016), conducted a qualitative study to gather data for an appropriate business model. Besides, the researchers have used literature to obtain the relevant data for the study. The study proposed that the success factors of an organisation fall in its business model. However, the framework of the business model should focus on customer value and innovation. It has stated that the 360 business model is the most effective because it focuses on all the success factors that enhance the growth of an organisation. As a result of this, Netflix is also using 360 Business model due to which it has created unique strategies such as delivering the DVDs to the residence of the customers. However, after the development of digital services, Netflix changed its strategy of delivering the DVDs at home and started to offer online streaming. The online streaming attracted a major customer group as the customers were allowed to use the services according to their preferences. In addition to this, the low subscription prices increased the loyalty of the customers due to which the members of Netflix increased from 4.2 million in 2005 to 148 million paid members in 2019 around the globe. Hence it has been analysed from the results of the study that 360 business model was the key factor in the success of Netflix. According to Aversa (2019), Blockbuster was focusing on the gaming industry, whereas the emerging organisations which were technically advanced such as Apple, Amazon and Netflix took advantage of the situation.

The analysis of the researches depicts that Blockbuster was the market leader in the beginning; however, it declined due to its inefficient strategies. Blockbuster was focused on the revenue-based model, which allows the organisations to generate profits neglecting all other factors. The negligence of customers’ satisfaction majorly affected the success of Blockbuster and its revenue. It has been that at the initial phase the model had worked for Blockbuster as it was generating high profits of the organisation, but the dissatisfaction of the customers shifted the customer base of Blockbuster towards Netflix. Netflix was focused on creating value for the customers for which it kept the subscription prices low. The 360 business model which created customer value significantly worked for Netflix. As a result, Netflix is successful, and Blockbuster has declined after encountering bankruptcy in 2010.

Recommendations

Blockbuster has faced decline due to its ineffective strategies, particularly in its business model. Therefore, it is highly recommended that Blockbuster should adopt digital technologies in its operation strategies; it would increase the quality of its product. In this regard, it is suggested that Blockbuster should allow its customers to download movies on modern devices like TiVo. In addition to this, the number of movies provided by Blockbuster is very little. Therefore, it is recommended that Blockbuster should increase the number of movies to come back into the industry. Moreover, the access is limited to the location of the client due to which the customers cannot access the movies of Blockbuster from any point of the world. In this regard, it is suggested that Blockbuster should provide unlimited access to its customers so they can consume the subscription services from any point in the world.

In the case of Netflix, it is recommended that it should allow the third party to sell its content directly to the subscribers by controlling the prices juts like YouTube. The content from the third party will develop creative content for the members of Netflix. This strategy will not only entertain the customers and to maintain their loyalty, but it will also improve their overall revenues for Netflix. Moreover, Netflix should become a holistic destination for its customers by expanding its offering. Following the suggested recommendations can enhance the market stability of Netflix.

Cta 2 How “Dissertation Proposal” Can Help You!

Our top dissertation writing experts are waiting 24/7 to assist you with your university project, from critical literature reviews to a complete masters dissertation.

Find Out More

Conclusion

The research has concluded that Blockbuster was a giant in the industry, but lately, it encountered a failure due to its ineffective strategies. Blockbuster had encountered a series of mistakes during the leadership of Antioco, which caused a loss of $984 million in 2004 when the company generated $5.9 billion in revenue. However, 2004 was the prominent year when the competitors of blockbuster started to emerge. The competition between Netflix and Blockbuster was neck to neck at that time. However, the ineffective strategies of Blockbuster played a major role in promoting Netflix. The downfall of blockbuster created huge opportunities for its rivals, among which Netflix was found to be the most prominent competitor which took over the market position of Blockbuster. According to the business model of Blockbuster, it has charged a late fee from the customers for returning the movie after the due date. It acted as a major turnoff for the customers and they switched to other stores who were offering unique services such as Netflix. However, after the development of digital services, Netflix changed its strategy of delivering the DVDs home and started to offer online streaming. The online streaming attracted a major customer group as the customers were allowed to use the services according to their preferences. Hence it has been analysed from the results of the study that 360’ business model was the key factor in the success of Netflix. To conclude, Netflix took advantage of the inefficient business model of Blockbuster and created unique strategies by creating value for its customers which prominently enhanced its success.


References

Aversa, P., Hervas-Drane, A. and Evenou, M., 2019. Business model responses to digital piracy. California Management Review, 61(2), pp.30-58.

Chopra, S. and Veeraiyan, M., 2017. Movie rental business: Blockbuster, netflix, and redbox. Kellogg School of Management Cases.

Davis, T. and Higgins, J., 2013. A blockbuster failure: how an outdated business model destroyed a giant.

Dias, M. and Navarro, R., 2018. Is Netflix Dominating Brazil. International Journal of Business and Management Review, 6(1), pp.19-32.

Fink, A., 2019. Conducting research literature reviews: From the internet to paper. Sage publications.

Graneheim, U.H., Lindgren, B.M. and Lundman, B., 2017. Methodological challenges in qualitative content analysis: A discussion paper. Nurse education today, 56, pp.29-34.

Habersang, S., Küberling‐Jost, J., Reihlen, M. and Seckler, C., 2019. A process perspective on organizational failure: A qualitative meta‐analysis. Journal of Management Studies, 56(1), pp.19-56.

Hill, N. and Alexander, J., 2017. The handbook of customer satisfaction and loyalty measurement. Routledge.

Hiller, R.S., 2017. Profitably bundling information goods: Evidence from the evolving video library of Netflix. Journal of Media Economics, 30(2), pp.65-81.

Hogeland, W., Freeman, J.B., Monteiro, L.D., Harris, L.M., Allgor, C., O'Malley, M., Waldstreicher, D., Pasley, J.L., Schocket, A.M., Wollman, E.L. and Herrera, B.E., 2018. Historians on Hamilton: How a Blockbuster Musical is Restaging America's Past. Rutgers University Press.

Jenner, M., 2016. Is this TVIV? On Netflix, TVIII and binge-watching. New media & society, 18(2), pp.257-273.

Johnston, M.P., 2017. Secondary data analysis: A method of which the time has come. Qualitative and quantitative methods in libraries, 3(3), pp.619-626.

Keegan, W.J., 2017. Global marketing management. Pearson India.

Kholopane, P. and Sobiyi, K., 2017, December. In lean manufacturing, if the customer is a king, then the frontline worker is a “knight”: A case study. In 2017 IEEE International Conference on Industrial Engineering and Engineering Management (IEEM) (pp. 603-607). IEEE.

Kumar, V., 2016. Introduction: Is customer satisfaction (ir) relevant as a metric?. Journal of Marketing, 80(5), pp.108-109.

McIntyre, D.P. and Srinivasan, A., 2017. Networks, platforms, and strategy: Emerging views and next steps. Strategic Management Journal, 38(1), pp.141-160.

Quinlan, C., Babin, B., Carr, J. and Griffin, M., 2019. Business research methods. South Western Cengage.

Rayna, T. and Striukova, L., 2016. 360° Business Model Innovation: Toward an Integrated View of Business Model Innovation: An integrated, value-based view of a business model can provide insight into potential areas for business model innovation. Research-Technology Management, 59(3), pp.21-28.

Ryan, G., 2018. Introduction to positivism, interpretivism and critical theory. Nurse researcher, 25(4), pp.41-49.

Tang, C.S. and Veelenturf, L.P., 2019. The strategic role of logistics in the industry 4.0 era. Transportation Research Part E: Logistics and Transportation Review, 129, pp.1-11.

Venkatesan, R. and Shively, D., 2017. Netflix, Inc.: The Customer Strikes Back. Darden Business Publishing Cases.

Voigt, K.I., Buliga, O. and Michl, K., 2017. Entertainment on demand: The case of Netflix. In Business Model Pioneers (pp. 127-141). Springer, Cham.

Wayne, M.L., 2018. Netflix, Amazon, and branded television content in subscription video-on-demand portals. Media, Culture & Society, 40(5), pp.725-741.

Cta 3 How “Dissertation Proposal” Can Help You!

Our top dissertation writing experts are waiting 24/7 to assist you with your university project, from critical literature reviews to a complete masters dissertation.

Find Out More

Ace Your Grades
Without Overspending

Why pay more for the same quality? Choose our cheap assignment writing services today and witness the difference yourself. Click now to get started!

  • 24/7 Customer Support
  • Team of Academic Experts
  • Guaranteed Results