Case Study: Netflix's Vs Blockbuster's
1.0 INTRODUCTION
Innovation in technology has brought about major changes in the entertainment sector. The
success and failure stories of Netflix, a digital streaming pioneer, and Blockbuster, a prominent
video rental corporation, are diametrically opposed. Using the Porter 5 Model, PESTEL,
marketing, and value innovation analysis, this study examines their business strategies, creative
methods, and the elements that contributed to Netflix's success and Blockbuster's decline.
2.0 INNOVATION BUSINESS ANALYSIS
2.1 Blockbuster
Blockbuster, which was founded in 1985, was a pioneer in the video rental industry and at its
height had over 9,000 locations worldwide. Blockbuster, which was well-known for its wide
in-store assortment, prospered before the advent of digital technology but struggled when
customer tastes changed.
Summary of Findings on Analysis
When Blockbuster first entered the market in 1985, it set itself apart from the competition using
a number of creative tactics that allowed it to outperform smaller, independent video rental
businesses:
• Centralized Inventory System: In order to improve stock management and customer
satisfaction, Blockbuster invented a barcode-based inventory system that made
monitoring rentals and returns easier.
• Diverse Selection: Blockbuster was a one-stop shop for all audiences since, in contrast
to most neighbourhood’s video stores, it carried a huge assortment of titles, including
VHS and Beta tapes.
• Uniform Store Design and Branding: By using a franchise model and standardizing
store layouts and blue-and-yellow branding, Blockbuster was able to provide a
recognizable and uniform consumer experience throughout all of its locations.
• Strategic Partnerships: Blockbuster solidified its dominance in the rental business by
securing exclusive deals with studios and game developers, which allowed it to obtain
newly released films and video games before its rivals.
Late fees and physical retail were the main sources of Blockbuster's revenue, which in 2000
totaled $800 million. Even though it grew through partnerships and acquisitions, its inability
to adjust to the expanding trend of online services proved to be devastating. Blockbuster's
refusal to accept digital innovation is exemplified by its refusal to accept the $50 million deal
to purchase Netflix in 2000.
Causes of Failure
a. Resistance to Change: Blockbuster postponed its online endeavor until 2004, six years
after Netflix's debut, because it misjudged the impact of digital streaming.
b. Customer Discontent: Given that Netflix offered a no-late-fee model, policies like late
fees alienated subscribers.
c. Debt Burden: Unsustainable debt resulted from Blockbuster's rapid expansion.
d. Market Competition: Blockbuster's market share was reduced by rivals like Netflix
and Redbox, who provided more affordability and convenience.
Blockbuster filed for bankruptcy in 2010, and its last locations shut down in 2013.
2.2 Netflix
Netflix was founded in 1997 with an emphasis on mail-order DVD rentals, prioritizing
consumer happiness and ease of use. It switched to streaming by the middle of the 2000s, using
new digital trends to completely reimagine the entertainment sector.
Summary of Findings on Analysis
When Netflix launched subscription-based streaming in 2007, it completely changed home
entertainment. To provide a customized watching experience, it made use of data analytics,
customer behaviour, and technological improvements.
a. Content Strategy: To cultivate a devoted following, Netflix shifted from licensing
content from third parties to producing original shows like House of Cards (2013) and
Stranger Things (2016).
b. Global Reach: With localized material, dubbing, and subtitles, Netflix appealed to a
wide range of audiences when it launched in more than 190 countries.
c. Technology Integration: By investing in a user-friendly platform and cutting-edge
algorithms like its recommendation engine, Netflix was able to retain users and save an
estimated $1 billion a year.
By November 2024, Netflix had more than 282.7 million subscribers and is worth more than
$362.07 Billion USD (Statista, 2024).
Source; 2080 Ventures
Comparative Analysis:
a. Business Model: Blockbuster relied on antiquated in-store rentals, whereas Netflix
prioritized customer convenience and digital delivery.
b. Technological Adaptation: While Blockbuster hesitated and became irrelevant, Netflix
embraced new technology.
c. Marketing & Strategy: Netflix's focus on global accessibility and a variety of material
stood in stark contrast to Blockbuster's inflexible and regional business model.
3.0 CONCLUSION
The necessity of innovation in maintaining economic success is shown by Netflix's progressive
initiatives and Blockbuster's inability to adapt. Netflix is a prime example of the ability to
embrace change in order to generate value and gain market dominance, whereas Blockbuster
is a warning against complacency.
