Blockbuster vs. Netflix: A Bullet Point Analysis

I was putting together discussion points for my e-business class this evening on why Blockbuster is filing for bankruptcy, and what has done them in. Blockbuster as a "click and mortar" business vs. Netflix' online business (and some competition from Cable TV and other distribution systems as well.) Thought I'd share those thoughts here:

Netflix:
- Convenience. Efficiency of the Netflix model. DVDs come quick and easy. (no need to go to store. Reaches all geographic regions. Keep as long as want).
- Statistical modeling on back end with efficient distribution systems/operations.
- No need for retail/physical plant
- Easy to understand and use pricing plans with flexibility. Convenience.
- High availability of all kinds of movies (long tail)
- Continual improvement and drive to keep pricing to low as possible with efficiency, algorithms, etc. (holding to theory that Web efficiency drives incremental costs, and therefore pricing, to zero)
- including the recommendation engine and reputation (aka customer reviews)
- Continual improvement of Netflix service
*ondemand to multiple devices (computer, Roku box, Wii, IPad/iTouch, etc.)
* improved recommendation engine
* customer interface online
* Back end statistical modeling

Ultimately, the success of Netflix stems from the fabulous execution as an online business in all aspects (user interface, back end, fulfillment), and systems operations. There is a Harvard Business School case on them from 2007 I have used in the past.

(side discussion: What other implications Netflix ? What other industries could it impact? What business challenges are there for Netflix?)
Blockbuster
- Didn't match Netflix online in pricing, plans, availability
- Didn't keep easy to understand pricing and convenience
- Didn't user "bricks" advantage with high value-added services
- Didn't give enough incentive (or penalty) to keep customer base, convert them to online, etc.
- Moved slowly into online space.
- Competition from other sources for entertainment consumption/mindshare (cable TV on-demand, gaming, YouTube, etc.)
- Financials: high debt obligation, http://www.reuters.com/article/idUSTRE68L32K20100922
Blockbuster itself was highly disruptive when it started -- studios tried to block use of VCRs in the home.

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1 comment:

Dorian Benkoil said...

One of my students points out that the queue -- a way to create loyalty and change the psychology of anticipating and then watching movies --is a crucial piece of what has made Netflix successful.

September 22, 2010 at 9:07 PM

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