Blockbuster Video Swot Analysis
Blockbuster Inc. is an American-based chain of VHS, DVD, Blu-ray, and video game rental stores currently under Chapter 11 bankruptcy. As of January 3, 2010, there were over 5000 Blockbuster stores in the U.S. and 17 countries worldwide. It is headquartered in the Renaissance Tower in Downtown Dallas, Texas. Because of competition from other video rental companies like Netflix, Blockbuster has seen significant revenue losses. The company filed for bankruptcy on September 23, 2010.
* Lead market share of online rentals
* Low fixed costs
* Worlds largest selection of DVDs
* Fastest delivery ...view middle of the document...
The amount of households subscribing to cable and satellite television has indeed grown. What they could not have foreseen was the emerging rent-by-mail market.
Pay-per-view has always been a competitor to Blockbuster, but also offers a limited, dynamic selection of new releases only. Premium cable channels such as HBO and Showtime have also been on the rise in subscription, but lack of quality movies and control over what is shown have still allowed Blockbuster to fulfill its target market.
Recently, certain major cable providers have begun offering On Demand television. On Demand has two forms, fee per month, and pay-per-view. The fee per month system is offered by the major pay channels such as HBO and Showtime, and basically allows the subscriber to browse the network’s constantly rotating selection and pick what movie they want to watch and when. This is not widely available but could become a major threat as more cable providers offer it as an option. Its only drawback is the consumer pays their monthly fee and has no control over the selections they have to choose from.
Now, there is online rent by mail. Under rent by mail, the consumer still pays a monthly subscription fee comparable to HBO On Demand, but now can choose from thousands of titles and watch and return them whenever they please. The leader in this niche of the market is Netflix. Netflix boasts offering over 25,000 titles available for rent at anytime.
Netflix, according to its website, has 2 million members paying the $17.99 a month to rent up to 3 movies at a time for as long as they please (Netflix 1). With 2 million members Netflix is clearly the leader in this fast growing market. Quick on its heels however, is Blockbuster, and Wal-Mart who have offered similar services but failed to knock off Netflix as the leader. The firm now faces its biggest threat in its young life, Amazon.com entering the online rent by mail market.
Though still on the horizon, Netflix has begun proactive efforts to prepare for the coming battle with Amazon’s massive inventory and distribution systems. One of its efforts was dropping its price this year from $20.00 a month to the current $17.99. Blockbuster responded by dropping its price to $17.49 but has failed to see any serious shifts in market share (WSJ).
Investments in Blockbuster have steadily become even more of a cause of stress among investors since the case. Its most recent issues include a plummeting stock price, its split from Viacom Incorporated and the resignation of its CEO/COO Nigel Travis.
Blockbuster has tired to quell the unrest this year by increasing dividends but with the company reporting a loss for the 3rd quarter of this year, this has not stopped its stock from hitting record lows (WSJ).
Strategic Alliance with Philips Electronics
In 1992, Blockbuster joined forces with Philips Electronics. Philips Electronics bought 13 million shares of Blockbuster stock, which...