How Netflix has Replaced the Video Rental Industry-
By: Ian Petoskey
Back in the late 1990’s, when the idea of Netflix was spreading the owner Reed Hastings wanted to team up with the owners of Blockbuster (video rental store) but, they turned him down thinking it was a horrible idea. As time went on Netflix started off slow, but when it hit 2007 the major video rental stores like: Blockbuster and Hollywood Video, the firm they had turned away had turned into a $2.2 billion company. As you can see in the chart below the audience of Netflix grows exponentially every year. Netflix gets closer and closer to knocking out video rental stores by providing similar services that takes less effort to receive, they are becoming the fall back to customers in the market. Netflix lets their customers watch whatever they want for a low of $7.99 a month and Netflix provides their own series to cheapen their average total cost. Netflix having such a low price that allows customers to watch any movie or show anytime they want had impacted the video rental industry by replacing the services that caused other businesses to lose profit.
“The number of video rental storefronts in the U.S. has dropped dramatically, to 6,122 in 2012 from 28,000 in 1999.”(Fairchild) Blockbuster believed with Netflix being in the market, families wouldn’t want to come out and rent movies for a higher price because users that use Netflix don’t have to leave their house and spend money on each individual movie. Blockbuster and other video rentals were forced to lower their prices which decreased their profits and total revenue. In the long run their business had started to have their average total cost above their marginal revenue forcing them to shut down. It was costing more to keep them running than it was to produce or sell the service because they weren’t making enough money. Hollywood Video was forced to cease their operations in 2010 right before Netflix started to be known internationally. Blockbuster had to cease their operation during 2014. Blockbuster had their breakeven price help them through four years of business until they had given up and didn’t see the point of selling their services if they weren’t making profit and Netflix was getting more popular every year. Overall, the strong recognition of Netflix has diminished the video rental industry by replacing the time and effort it takes to use the service.
Works Cited
Aquino, Judith. “15 Companies That Died In The Past Year.” Business Insider, Business Insider, 30 Mar. 2011, www.businessinsider.com/15-companies-that-tanked-2011-3#blockbuster-will-close-110-stores-by-the-end-of-march-4.
Dunn, Jeff. “Here's How Huge Netflix Has Gotten in the Past Decade.” Business Insider, Business Insider, 19 Jan. 2017, www.businessinsider.com/netflix-subscribers-chart-2017-1.
Fairchild, Caroline. “Blockbuster Didn't Have To Die. This Video Rental Company Proves It.” The Huffington Post, TheHuffingtonPost.com, 8 Nov. 2013, www.huffingtonpost.com/2013/11/08/blockbuster-die_n_4235344.html.
“Hollywood Video.” Wikipedia, Wikimedia Foundation, 18 Oct. 2017, en.wikipedia.org/wiki/Hollywood_Video.
Satell, Greg. “A Look Back At Why Blockbuster Really Failed And Why It Didn't Have To.” Forbes, Forbes Magazine, 21 Sept. 2014, www.forbes.com/sites/gregsatell/2014/09/05/a-look-back-at-why-blockbuster-really-failed-and-why-it-didnt-have-to/#2c8c35781d64.
I agree with your post. It is clear that Netflix and its brand recognition knocked out almost every single video rental store. Obviously there are still some around but people quickly realized that paying a set price for Netflix to have unlimited access to super trendy and popular shows and movies is a much better use of their money. They also realized it is much less of a hassle to browse for movies at home than actually go out to a store, browse their selection and then come home with only a couple movies whereas with Netflix you can stay home and have access to almost all the same movies that are in the video rental stores. That is why I agree with your statement because there are many reasons why Netflix has almost put all video rental stores out of business.
ReplyDeleteWhen I was younger, I remember going to my local Blockbuster with my father every few days and how amazing it was to see the wondrous selection of movies and games at my fingertips. Now I look at Netflix's selection in my own home, and I see the convenience of Netflix and that many consumers today would enjoy something like that.
ReplyDeleteI remember when blockbuster and home video stores were everywhere and I always wanted to go there to get movies. Today it is very rare to see one of these stores and if they are still around, they are old buildings that are struggling to bring in customers. Netflix has become a norm and so many people I know have netflix. Netflix definitely appeals to people because it is inexpensive and you are not limited to the amount of shows/movies you can see. Because people do not have to leave their home to watch a movie, it makes sense that Netflix audience will continue to increase exponentially and soon enough, not many people will remember the blockbuster stores.
ReplyDeleteI thought that this idea was very interesting. I really liked how you explained the backstory of netflix, and how it related to the end of the companies like blockbuster. One thing I was curious about though is how netflix has impacted the economy. Did it help the economy or hurt it more? Other than that I really enjoyed the post and thought you did a good job.
ReplyDeleteI liked your topic because I remember going to Blockbuster as a kid and then transitioning over to Netflix as a teenager. It's sad that Blockbuster's demand has decreased to quickly over just a small amount of years because it brought a different feel to watching a movie because you'd go with your friends or family to the story and now you just click a button to any movie, which is very efficient, but not as exciting. Overall, I do see how Netflix is able to take the video stores out of business, but video rentals will always be remembered.
ReplyDeleteI like your topic as Netflix is a craze in today's society. However, I think it was a poor economic decision for Blockbuster, Hollywood Video, etc to opt out of teaming up with Netflix. Technology has been and is continuing to thrive; so, it was only a matter of time before television shows and movies were available online. Additionally, people prefer to stay in the comfort of their own homes, therefore they will choose Netflix over taking a trip to Blockbuster any day.
ReplyDeleteI use Netflix on a daily basis whether its for movies or my favorite shows, but when I was up north with my friends, we had a lot of fun going to the local movie place to pick out scary movies for the weekend. I felt very nostalgic because I remember going on family movie night to go pick out a movie. Netflix is clearly the more modern option, but I think that the increase in demand for Netflix is for more than just its availability online. First, people are very lazy and like to do everything from home. Similar to online shopping, Netflix is a way to "online shop" for your movies and shows. Second, Netflix has come out with many "Netflix originals" such as Stranger Things and 13 Reasons Why that have gained a ton of popularity. Since these shows are unique to Netflix, people are forced to watch them through a Netflix account. Lastly, Netflix is unlimited. When we were up north, we regretted not getting more movies because we watched all three in one day. With Netflix, we could have watched movies the entire trip without having to get off the couch once, and at a single monthly rate.
ReplyDeleteI completely agree with this post and I think it is mostly due to the fact of truly how much Netflix has taken control of the entertainment industry. Today in our modern day world, people are are set on that instant satisfaction and that instant reward and Netflix gives its consumers exactly that. They let you have access to thousands of films by simply just clicking a button rather than going out and actually having to go through some sort of effort to get the movie. The way our society is has simply just increased the demand for Netflix, as it matches the wants of every consumer out there.
ReplyDeleteI agree, Netflix had a huge advantage over both of these companies. Netflix offers hundreds of popular movies at a constant low monthly cost. To add onto that they also can easily be accessed from home on apps or on your TV which makes the purchasing side of it much quicker than driving to a local movie
ReplyDeleterental store. Netflix also makes watching TV shows or movies much easier as you can bring your phone, tablet, or laptop anywhere. These are the key factors to why other movie rental stores could not compete with Netflix in multiple places which caused them to close down so fast.
This is a very interesting topic and I agree with your point of view. As a Netflix watcher myself I limit the need to go to video rental stores. Netflix is getting rid of the need to leave your home to pick up a new movie to watch with the family. The only problem with Netflix is that it is limited and they do not have all the movies in the world. This could cause a decrease in demand for the company. However, they have many popular movies and actually reduce the demand for rental places like Redbox. It is amazing to see a well known company take over the entertainment industry as they having a growing number in demand while other well known movie rental companies are losing demand. Smaller competitors like Hulu and Amazon prime have tried entering the movie industry with Netflix, but Netflix has already taken almost complete control of the industry.
ReplyDeleteI agree about what you think about Netflix. I think they have done a great job of succeeding and seeing the future of streaming and online services. I thought it was very interesting that blockbuster turned them done when they first had the idea. I bet they are kicking themselves for that one. It is really easy to see why Blockbuster has went out of business.
ReplyDeleteI agree that Netflix has a huge advantage over these other companies. Netflix offers so many different things to watch such as movies and TV shows for a low cost per month. But I always thought having DVD's from these others companies would be beneficial to have if for example your WiFi crashes. If your wanting to watch a movie on Netflix and you don't have have WiFi, you cant watch. But if you have DVD's you can watch with our without WiFi. There are pros and cons of each company but overall I agree that Netflix has the advantage over these other companies.
ReplyDeleteThis is an extremely interesting topic that you are discussing here. As Netflix has become and extremely well-known brand that has morphed into a common household term, it is extremely obvious the power and spread it has over consumers wishing to not go out and buy videos and DVDs, but rather stream them over Wifi or other means. We can observe from the absence of companies like BlockBuster and other video rental stores, the success of the company in this market and I personally expect it to continue to be extremely successful in the years to come.
ReplyDeleteGrowing up as a kid, my family and I used to love going to Hollywood Video and renting movies. However, this has changed recently due to Netflix. I agree with you that because of Netflix offering the same service as Hollywood Video for a lower price, it has forced them to shut down in the long run. I was surprised by the fact that by Netflix having their own series, it lowers their average total cost. This does however make perfect sense and is a brilliant idea. Personally I do not see anyone catching up to Netflix in the long run as I believe they will dominate the market for many more years. Other competitors have come in to challenge Netflix such as Hulu and Amazon Prime TV, so it is safe to say this market is in an oligopoly.
ReplyDeleteI think that this is a great example of perseverance and ability to adapt to the market. Even though Netflix was shut down by a big name brand in the industry they continued to grow their business. Blockbuster was not thinking about the long term growth of technology and Netflix was. Nowadays there is very little blockbuster stores and Netflix is constantly getting more and more subscribers while adapting to the changing market which is something Blockbuster refused to do.
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