EXECUTIVE SUMMARY
Both Netflix and Redbox are in competitive but still growth industry. The ability to keep good relationships with suppliers, have up to date, reliable technology and continue to look into moving into more Video On Demand services. It is recommend to look in to expanding services into video game rentals alongside movie rentals.
ANALYSIS
Renting Movie And TV Episode Industry Competitive Forces
Competition among industry rivals is medium to strong. While they still hold most of the market for movie rentals at this time local movie stores are plagued with financial issues leading to store closures and bankruptcy. They are losing market share to less expensive and more convenient kiosk and by-mail services for physical DVD and the ever increasing consumer move to Video-On-Demand (VOD). Internet movie providers bring strong competition by offering a large variety at a relatively inexpensive price quickly and easily to the customer’s computer, TV or handheld device. Cable companies have also joined the VOD trend offering movies rentals without the hassle of going to the video store but price is relatively the same and variety can be limited. Movie rentals from kiosk centers located in popular locations offer low priced rentals for consumers that prefer the physical DVD’s but currently lack variety. Potential Entry into this market is medium. The initial start-up cost could be prohibitive for companies starting from the ground. For those companies adding VOD to their already established services it is much easier and less expensive. The importance of the suppliers is high. The movie rental industry is in a struggle with the movie industry for market share of movie watchers. The movie industry holds the titles and sets the rules. Good relations with suppliers are crucial to this industry. This is another reason for limited potential for entry of startups. The buyer force in this industry is also medium. Movie rentals are a luxury good. Buyers have other options for their entertainment dollar and if the economy has left with no entertainment dollars then movie rentals are not necessary expenses. The strength of the buyers’ aspect of competition is eased some by the wide range of consumers. The threat of substitutes is strong. The advertising for family game nights, online books for handheld devices, and discounted movie rates and other inexpensive forms of entertainment make switching between them easy and inexpensive. Overall the competitive intensity for this intensity is strong.
Driving Forces In The Industry
The driving force in this industry is the push towards digital internet based movie rentals. The increase in internet ready devices handheld devices on the market means the consumer isn’t simply viewing movies in their homes but everywhere. It is this force that will take continue to force the movie rental business to adapt.
Key Success Factors
The trend of movie rentals is going toward video-on-demand. In order to bring the consumer the ease, price and variety that draws them in it is essential to keep up the technical hard and software that makes it possible. Reliable and up to date technology is the foundation of what will make separate the companies competing in this industry.
Netflix SWOT
A strength for this company is that it is bridging the gap between consumers who are watching movies on physical DVD’s and the offering VOD to those consumers that have the technology. Strength can be found in their rating, review and suggestion software. Their extensive relationship with the movies studios is both a strength and a weakness. A good relationship determines how quickly and what titles they can offer to the consumer and at what cost. Increases in the cost of the contracts signed in the future will determine the cost passed to the consumer in the future, the amount of profit that can be made and their attractiveness to stockholders. Their large and ever growing variety of movies to choose from also sets up the potential for a weakness. The variety can actually be overwhelming. Their software somewhat offsets this weakness but still leaves something to be desired. Threats to the company come in the form of supplier power which has already be discussed. Another threat from the macroenvironment is the tread as of recently toward fitness and moving consumers to healthy outdoor activities. The biggest opportunity for them going into the future continues to go along with the new technology in the way of hand held devices with better screens and sound qualities. Another currently untapped faucet of opportunity may be in the gaming industry. Because of their already existing set up it would be easy to get video games rentals available both by mail and by download. Most video game systems are already Netflix ready. The only substantial cost would come from contracts with the video game industry. Being able to offer both would also act as a buffer to against upheaval with the movie industry and making a substitute no longer a substitute.
RedBox SWOT
Redbox’s biggest strengths come from its low cost operations. The cost of the kiosk is very low which can be passed on to its customers. The kiosk are located conveniently and because of the good relationship pre-established with Coinstar. Their weakness comes in the form of their lacking in variety due to the lack of space in a kiosk. Another weakness comes in the form of the trend away from physical DVD use. Threats come from the power of the movie studios for supplies. Opportunity is there for them to move into the VOD market.
CONCLUSION
Both Netflix and Redbox are in competitive but still growth industry. The ability to keep good relationships with suppliers, have up to date, reliable technology and continue to look into moving into more Video On Demand services.
RECOMMENDATIONS
I recommend looking into video game rentals as a way to continue to grow.