The

Demise of
Blockbuster
Submitted to: Prof. A K Pundir

By
Aastha Tomar – 2002003
Abinash Srichandan – 2002009
Akshay Mishra – 2002019
Ayan Ghosh – 2002041
Debesh Ghosh - 2002064
Video Rental Market
Scenario in 1980s

• Fragmented Market with most stores

having relatively modest operations.

• Less variety in terms of Collection.

• Small selection of former big hit

movies due to higher costs.
About BLOCKBUSTER

Founded in 1985 by
James Cook and was Opened stores at a
at its peak between rate of about one for
1987-1993 (led by every 24 hours
Wayne Huizenga)

Movie & game rental 8000 tapes with over Key competitors:
service provider 6500 titles Netflix & Redbox
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Blockbuster Timeline 1985

Founded in 1985 by James Cook
with its first rental outlet in Dallas

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Cook turned over the company to a group of
investors led by Wayne Huizenga due to liquidity
problems
1986
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Had 3400 stores throughout Americas, Europe,
1993 Asia & Australia

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Blockbuster posts positive net income He r
1996 e

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e 2010 Filed for Bankruptcy in September 2010 under CEO James
Keyes
About NETFLIX
Founded by Reed Hasting, 1997 as a pay per rental mail order video
rental company

Experimented both pay per rental and subscription and settled on

subscription-based strategy in 1999

By 2010, Netflix is the world’s largest subscription service

Users paid only $8.99/month for over 100,000 DVD titles delivered to their
homes most of which were old releases

60 regional distribution centers

About REDBOX
Concept was
originated in The company Purchased by
2002 within was started in Coinstar, Inc. in
McDonald’s 2004 2009
Ventures LLC.

By 2010, Each kiosk had

Redbox had Customers paid 630 discs of
approx. 23,000 $1/night movie which 200
kiosks rental would be new
nationwide movies
Financial Summary
In what ways did Blockbuster achieve better
strategic fit than Local Stores?
Greater Presence
Large brick and mortar stores in high traffic neighborhoods.
Broad & Deep inventory
Large stores allowed Blockbuster to carry more inventory (8000
tapes & 6500 titles) resulting in better availability.
Ability to meet market demand.
Technology
Streamlined computerized system for inventory control &
checkout.
Customization
Merchandize selection customized at store level to meet the
needs and preferences of the local customers.
 How did Netflix & Redbox achieve better
strategic fit than Blockbuster?
• Netflix offered subscription-based model.
• Saved costs by purchasing only limited new
movies & wide variety of old releases.
• Recommendation software (movies in stock were
recommended)
• Automated distribution centers for rapid
processing and locating distribution centers close
to USPS.
• Low cost, budget conscious customers.
• Controlled inventories (Even has options to buy
disk for $7 to focus on keeping new movies).
• Convenience factor (multiple kiosks & can be
returned at any kiosk).
• Kiosks in high traffic centers.
 Summary
Blockbuster Netflix Redbox
Launched 1985 1997 2004
Variety Moderate High Low
Availability Moderate High High for new titles
Lead Time Instant Instant over the internet, Instant
moderate for shipped DVDs
Cost to Customers $5 per Rental $8.99 per month (Unlimited $2 per Rental
Rentals)
Supply Chain Decentralized Centralized Decentralized
Movie Collection Both new and old titles Mostly older titles Mostly newer titles
Model Pay per Rental Subscription + Pay per Pay per Rental
Rental
Facility Cost per rental High Low Low
Distribution Sold through stores Shipped via DCs + Digitally Sold through Kiosks
Others Late Fees Recommendation Retailers even offered
discount for installation
THANK YOU