Netflix 2010 Case Study free essay sample

How strong are the competitive forces in the movie rental marketplace? Do a five-forces analysis to support your answer. Five Forces Analysis of Movie Industry Rental: Rivalry among competing movie rental: The movie rental industry is intensely competitive and will continue to be in the future. The rivalry between the competitors is to strategize to set them apart from one another. Some marketing maneuvers are prices for rentals, instant DVD’s, promotional products, and its reputation. Netflix, blockbuster, iTunes, Hulu, and many more are among the competitors. They send Blockbuster, Movie gallery and its associated stores to bankruptcy and it even ended with companies closing doors for good. Google announced their abilities of Google TV. This let households combine their regular TV experience while accessing music, videos, and photos anywhere on the internet. Hulu who was owned by NBC Universal was also a free online video service that offered TV shows, movies from a few cable networks and movie studios. We will write a custom essay sample on Netflix 2010 Case Study or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page Also offering a larger library as Netflix offered it customers by purchasing plans. The concept was based on promoting â€Å"TV everywhere†, having such devices ad iPad, iPod, or smartphones with wifi capability you could watch TV practically anywhere. Changes in 2009 technology required all TV stations to use digital technology. Promotion is very important between these rivals when you are trying to promote in a highly competitive environment. For instance, Netflix free trials that the company took to make a new tactics paid off for the company. Redbox and Blockbuster put kiosks at every street corner that you could think of to attract customers. Price is one of the biggest attractions that a company has to bring consumers to its company. A way that Netflix brought that was giving potential customers 30 day free trials of instant shows, movies, as well as DVD’s shipped to your front door. This gave customers a feel of what Netflix was offering and gave them 30 days to see if they wanted to continue a membership with more offerings than the trial had t o offer. They had trials of 4. 99 subscriptions for a limited time to bring in customers. This also led the company to the fore front of the rental industry. Redbox charge $1 for a day of DVD rentals. * Hulu a free movie and cable network online video service. They had the concept of watching cable anywhere. Hulu consisted of t networks popular shows and movies you could watch anywhere from your came systems, iPods, iPad, or smartphones. They also offered customers the option of purchasing a plan where you could reach a larger library as Netflix offered. * Redbox gave customers the option to rent DVD’s got $1 from kiosks at different areas in your city. They were placed by supermarkets, gas stations, and retail stores such as CVS, Walgreens, and Wal-Mart. Blockbuster also had a kiosk around different areas as Redbox did. * Netflix gave companies a run for their money. They made stationary movie rental stores to go bankruptcy or go out of business. * Video on Demand has started to increase as well. Watching movies over the internet instantly to any internet ready computer, gaming console, and wifi enabled televisions. This increased competition between Redbox and Blockbuster which will presumably take away from their plans and they will soon have to market a new plan. Conclusion: The movie rental industry is intensely competitive and will continue to be over the next couple of years. Video on Demand will be a bigger household name going over its competitors. Netflix and Google offering â€Å"TV everywhere† have already shown that people prefer the online streaming. Thus putting end to retail rental stores such as Blockbuster, Movie Gallery, and its associated store that closed its doors. Threat of new competition: In mid 2010, N etflix marketed a plan that would take them to the top movie rental industry. They made it very difficult for any new entry to enter into the r movie rental industry. Netflix especially made it had to surpass them in the online subscription. They built and are continuing to build a comprehensive library and maintaining relationships with entertainment video producers. Netflix entered agreements with Universal Studios, Twentieth Century Fox, Warner Bros, and more to expand and broader its ability to stream movies and TV episodes. Video on demand streaming movies directly to your in-home device has become and will become the fast growing movie rental segment. With these barriers being high it makes the competitive entry somewhat low because the industry continues to grow. It has become more and more attractive to its loyal customers and potential customers * Netflix, Redbox, Blockbuster are households names. They have attracted and attached their brands to make it difficult for people to move into the industry. * An important factor for new entrants into the mov ie industry would be brand recognition. Many suppliers or distributors make it harder for new entrants to come into the marketplace. Most of the time they are putting their own capital up, or have a great marketing plan to build it clientele. * Customer loyalty will be a slow process considering the competition has a great amount of cost to be put up. * Government agencies can limit or stop the entry of new companies in the movie rental industry. The government controls the entry not just for cable but for telecommunications, electric and electric utilities, radio and television broadcasts. * New entrants may face a harder time when they enter the market because its well competitors with a loyal customer base may use incumbents against them. They may use price cuts with its movie rentals, increase advertising, new improvement of its services and products, also launch legal attacks to prevent building a new clientele Conclusion: VOD or video on demand is now and will be the fast growing streaming movie segment to come. Netflix has the made the competition even harder and the competition is high. They have higher brand recognition and will make it harder for other companies to come close unless they market and have a lot of capital in order to enter the market. Bargaining Power of Suppliers in Movie Rental: Movie suppliers bargaining power is a competitive pressure in the movie rental industry that they are supplying. Movie suppliers who supply to Netflix and its other competitors may charge premium prices. This reason is why the rivals continue to raise prices in order to meet the prices of their suppliers. The only way that Netflix, Blockbuster, Redbox, and etc will survive is if movies suppliers because they make prices for their DVD’s. Movie suppliers have pricing leverage over these companies. They have the authority to make release dates for their products. Movie suppliers have the upper hand against these rival companies because they can choose a pattern of competition within the marketplace. In the end result, the rivals should face the facts that they will be paying higher prices to be supplied the necessary product. All these rivals want to keep their library growing to meet the needs of its current customer and potential customers and to always be in the fore front of the competition. * Conclusion: Movie suppliers have the upper hand in the bargaining power. They choose when, what, and how they distribute to these rivals. However, since Netflix has a better brand recognition it shouldn’t be too hard for them to be the first that these retailers sale to. Bargaining Power of Customers Movie Rental: Customers will continuously use online streaming and video on demand. This is why rates are going up because customers are so comfortable with the situation that they are in. Thus they will pay more if the companies were to increase. Netflix customers enjoy the video on demand with their favorite television shows and movies. Customers also can switch between rivals for lower prices, which can negotiate leverage between them and they suppliers. Switching between can easily encourage them to change plans and prices to fit the consumers. Netflix picked up on the weak strategy that other movie competitors lacked from. They made sure that there were enough DVD’s to supply people with. In-store DVD’s usually sold out of DVD’s and had upset customers. Netflix informed customers about the purchase of their DVD’s. You had no limit to turn them back in. In-store movie rentals you usually had 1, 3, or 5 days to return you DVD’s. Netflix marketed its plan on website, mail, and commercial ads. Substitutes in Movie Rental Industry: Substitutes that are readily available would be premium movie channels. These would include Starz, Encore, HBO, and Showtime. These cable channels are available through cable and satellite providers. * Movie theaters are still grossing profit through new released movies. People still want to have that movie theater experience. You want to catch movies in HD, 3D, and IMAX to experience new movies. * Consumers also want to buy movies just to have them on hand. You can buy these at various retail stores such as (dollar store, supermarkets, Wal-mart, K-mart, Target, Best Buy, and other retailers. The movie rental industry should not forget that substitutes are always available. In some cases they are by far more available than their products may. Some customers would well off buy DVDs, watching movies, or watching premium channels than streaming or renting DVDs. There are plenty of substitutes so companies should always be reminded of that. Conclusion of Five Forces Analysis The competition in the industry of movie rental is strong and will continue to grow in the next few years. The rivalry between the competitors is to strategize to set them apart from one another. Promotion is very important between these rivals when you are trying to promote in a highly competitive environment. Video on Demand has started to increase as well as watching movies over the internet instantly to any internet ready computer, gaming console, and wifi enabled televisions. Movie suppliers bargaining power is a competitive pressure in the movie rental industry that they are supplying. They have the authority to make release dates for their products. Movie suppliers have the upper hand against these rival companies because they can choose a pattern of competition within the marketplace. All these rivals want to keep their library growing and meet the needs of its current customer and potential customers and to always be in the fore front of the competition. Customers will continuously use online streaming and video on demand. This is why rates are going up because customers are so comfortable with the situation that they are in. Video on demand will grow and squeeze the competitor for a sizeable amount of money. No one in any of these industries should ever under estimate what their sales are. Movie Gallery one of the second largest movie rental in the U. S. closed its door because of these new technologies.