Place Presentation Post: Disintermediation in DVD rental market
DVD rental company Blockbuster has some competitors in its DVD rental business. When Netflix started their mail rental service, Blockbuster didn't consider it as a big deal. In 2004, Blockbuster began DVD-by-mail to get their customers back. With $19.95 which is now lowered to $14.99 a month due to the harsh competitioin, movie lovers can watch as much as they want, no late fee, no due date, only with maximun 3 titles limitation at once.
Since Blockbuster had concentrated their distribution on only offline with about 9,100company-owned or franchised stores in 25 countries (about 65% are in theUS), Netflix penetrateed through the niche that Blockbuster couldn't reach, online. Now, 3 million subscribers with 34 distribution centers and 40,000 movie titles, Netflix is taking over extra subscirbers from Walmart's giving up DVD rental by partnership agreement(Walmart has 200,000 subscribers with 14 distribution centers and 16,000 movie titles).
Blocbuster's this disintermediation is an attempt to contact to more customer and it reflected customer's needs that are easy to access and return, and they might mave no choice but to response to considerable online market. In the textbook, the author said,(p.406) "Disintermediation presents problems nd opportunities for both producers and intermediaries. To avoid being swept aside, traditional intermediaries must find new wats to add value in the supply chain..()..However, developing these new channels often brings them into direct competition with their established channels, resulting in conflict. To ease this poblem, companies often look for ways to make going direct a plus for both the company and its channel parteners." To relieve a conflict, Blockbuster offers free rentals and special price at in-store to online subscribers. With this promotion, more people will visit offline stores, but it does not look clear if that promotion would really help offline franchisers, with taking away many customers to online.
The cost is another concern. The online system need investment, and personal working is subsituted by computer. And also, change of charging policy might not make that much profit because of no late fee and mailing fee to deliver(They are testing raising monthly fee to $17.99.) The thing is, there seems to be no competitive advantage but price. Textbook mentioned a condition of the disintermediation. "Disintermediation works only when a new channel form succeeds in bringing greater value to consumers."
"We remain committed to growing our online rental business and plan to continue to compete very aggressively in this space," said John ntioco, Blockbuster Chairman and CEO. "Just seven months after launching BLOCKBUSTER Online, we had more than 750,000 subscribers and we remain focused on reaching our goal of two million online subscribers by the end of the first quarter of 2006."
posted by kihuk @ 2:36 AM
4 Comments:
Good presentation on Monday...appreciate the fact that you're in the process of learning English and making presentations in class already.
This is my first chace of making presentation in fron of foreigner.
Thank you for your comment, I'll do my best in this class, and you too.
I have one word for Blockbuster AND Netflix: TIVO. I do have a subscription to Blockbuster, and I used to have a subscription to Netflix. I'll admit it - I loved Netflix. However, I found myself trying to watch countless movies just to get the value for my money. I was paying $19.95 for 4 movies a month. If I only watched those 4 movies, it would cost me about $5 a movie, which is not better than Blockbuster. So, we were trying to watch movies as quickly as possible to get as much as we could out of our membership.
Then there was Tivo, like a sunrise after three-months of darkness. I pay no more than $10 a month, and I get every movie I could ever ask for and more. It knows me, much like Amazon.com! The best example that I have is as follows: I was talking to our roommate about a movie that I saw over a decade ago - a completely random (and stupid) John Ritter movie. The next morning - that movie showed up on the list of taped programs. No one programmed the Tivo to tape that movie - it just guessed. Perfect timing, great technology! I will now retreat to watch reality TV reruns that Tivo thinks I should see :)
It's almost like HAL...
While TiVo really blew it when it comes to their own marketing campaigns, they really did identify the future of video. There are already open source software solutions to building your own TiVo using your computer. I think it is only a matter of time before a major software company starts selling a product that does all of TiVo's functions your computer. If TiVo did it themselves it would be a tremendous coup, but it will more likely be someone like Apple.
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