Summary:
The fight between Netflix (NFLX) and Blockbuster (BBI) is getting uglier. Blockbuster's new strategy, though expensive, is robbing Netflix of profits and subscribers. Netflix reported earnings of 37 cents per share on July 24, up from 25 cents a year ago. The online movie rental service also warned investors that its revenue, earnings and number of subscribers will be lower than predicted. That sent Netflix stock falling, down more than 6% to $16.21 on July 24, after touching a new 52-week low of $15.24. That comes on top of a 12% drop the day before, when the company cut prices for subscribers. The problem for Netflix is renewed competition from Blockbuster. With its store movie rental business withering away, Blockbuster has spent heavily on its Netflix competitor "Total Access" program. The service delivers movies through the mail but also allows customer to exchange videos in person at Blockbuster stores. Blockbuster is losing money on the program, but it's succeeding in depriving Netflix of new subscribers.
Opinion:
To outsmart their competitor, Blockbuster tried to give lower price, shipping cost and distribution to their customers. With the result that Blockbuster did measure an increase in in-store rentals after eliminating late fees, but there were no early returns, so the annual late fee revenue no longer was being collected. I think it is too risky. It should take advantage of its prevailing position in the bricks-and-mortar rental industry. They accepted the Netflix’s good points, and to outsmart their competitor they tried to give lower price, shipping cost and distribution to their customers. However, there were revenue and inventory management problems. Because it was too complex to make the plan reality and report card was mixed. So, when Blockbuster has 1 million subscribers, Netflix has 3 to 4 million subscribers. In their complex situation, they kept up there business policy.
Now they are faced with a new set of challenges because of VOD technology to watch movies and programs that are not yet available on DVD. And there was a problem about file size. Six movie studios, including Warner brothers, Sony pictures, Universal studio, MGM, and Paramount offered movie download via online. Considering this issue, legal digital distribution of movies is not good in their business condition. I think there are continuous appear about company like ‘Movielink and Apple’ without development of new technology, they will be declined.
The fight between Netflix (NFLX) and Blockbuster (BBI) is getting uglier. Blockbuster's new strategy, though expensive, is robbing Netflix of profits and subscribers. Netflix reported earnings of 37 cents per share on July 24, up from 25 cents a year ago. The online movie rental service also warned investors that its revenue, earnings and number of subscribers will be lower than predicted. That sent Netflix stock falling, down more than 6% to $16.21 on July 24, after touching a new 52-week low of $15.24. That comes on top of a 12% drop the day before, when the company cut prices for subscribers. The problem for Netflix is renewed competition from Blockbuster. With its store movie rental business withering away, Blockbuster has spent heavily on its Netflix competitor "Total Access" program. The service delivers movies through the mail but also allows customer to exchange videos in person at Blockbuster stores. Blockbuster is losing money on the program, but it's succeeding in depriving Netflix of new subscribers.
Opinion:
To outsmart their competitor, Blockbuster tried to give lower price, shipping cost and distribution to their customers. With the result that Blockbuster did measure an increase in in-store rentals after eliminating late fees, but there were no early returns, so the annual late fee revenue no longer was being collected. I think it is too risky. It should take advantage of its prevailing position in the bricks-and-mortar rental industry. They accepted the Netflix’s good points, and to outsmart their competitor they tried to give lower price, shipping cost and distribution to their customers. However, there were revenue and inventory management problems. Because it was too complex to make the plan reality and report card was mixed. So, when Blockbuster has 1 million subscribers, Netflix has 3 to 4 million subscribers. In their complex situation, they kept up there business policy.
Now they are faced with a new set of challenges because of VOD technology to watch movies and programs that are not yet available on DVD. And there was a problem about file size. Six movie studios, including Warner brothers, Sony pictures, Universal studio, MGM, and Paramount offered movie download via online. Considering this issue, legal digital distribution of movies is not good in their business condition. I think there are continuous appear about company like ‘Movielink and Apple’ without development of new technology, they will be declined.
I think Movie rental service is in plentiful supply. Even Amazon.com already operates an online movie rental service in the United Kingdom. Considering that flow, they have to go with flow and see the business world more widely. They need not only alter their present problems but also have a broad vision about business to pass the other runners.
And I want to consider this in Korean market’s perspective. Because of the VOD file which is trade illegally through internet, Korea's DVD and Video market has experienced the failure. The war, which is made by Hyoung-Rae Shim, earned 11 billion dollar at theater market and 22 billion dollar at DVD and video market in US. In Korea, video and DVD market is below the level of Theater market. It’s just 10 percent. What is it mean? The theater market needs to study the Netflix's case to survive in a flood of the illegal VOD file.
Annotation;
Netflix Battle with Blockbuster Gets Ugly; Business week, by Ben Steverman, July 24, 2007
Annotation;
Netflix Battle with Blockbuster Gets Ugly; Business week, by Ben Steverman, July 24, 2007
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