QBlockbuster Inc. Model Assignment
Blockbuster Inc. is a movie rental company based in America. In the 1900s, this company had owned more than 9000 stores of video rental in the US. It has become a $3 billion company within a year. But in 2010 the Blockbuster Company had failed to do their business in the target market effectively. The key reason for this company’s downfall was poor management in 2010. They had experienced bankruptcy of around $1billion because they were not able to compete with their key competitor Netflix.
Christensen’s theory of disruptive innovation states that the circumstance by which any innovation converts into an existing sector or market by introducing convenience, affordability, simplicity and accessibility were high costs and complication are the status quo (HBR, 2020). This theory is totally connected with the case study of the failure of Blockbuster Inc. In 1994, Viacom has bought blockbuster Inc. for $8.4billion. Their poor leadership and lack of infrastructure prevent them to consider streaming-centric technology. From 2008 to 2009 Blockbuster Inc. did not have sufficient money to invest in subscriber growth just like Netflix. This was the reason they were unable to retain their subscribers nor able to attract new subscribers. At that time they had the capital to enhance their business operations whereas Blockbuster Inc. did not have this opportunity (Piacentini, 2021). They also made various wrong decisions that encourage the failure of their business. In the year 2000, they had an opportunity to buy Netflix for $50 million but they pass this chance. Due to this wrong move, Netflix becomes more popular than Blockbuster and a more profitable organization than Blockbuster. Apart from that, in 2002, Redbox become another competitor of Blockbuster Inc. This firm strengths the idea that individuals wanted their rental option quicker without any late fees. Due to this, Blockbuster had done some major changes in their business. They had introduced Blockbuster Online but Netflix had already implemented this idea a year before which lead them to the failure of their business.As per the definition and concept of disruptive technology it can be said that Blockbuster’s failure was actually definable. Some of the operational implementation costs were actually the main reason behind the failure the downfall of Blockbuster in the year 2010. About $60 million was utilized for the reason of implementing and marketing the concept of waiving off the late fees like main competitor Netflix. This led towards a concern for decreasing popularity of Blockbuster and therefore such an attempt was taken from the end of Blockbuster’s management. Most probably the mercy of late fees for the audience resulted in forgo of almost $600 million of money that was generated from their late fees structure. This potentially influenced the cost and price structure of Blockbuster’s rental subscription plans. Some of the consumers in order to sustain their cost behind entertainment switched to cheaper options such as Netflix. There was a very stagnant growth of their movie revenue (5%) and the company was reported to be at loss and not in a state of survival. It was actually running the sort of disruptive innovation which altered the traditional rule or norms regarding renting of shows and movies. The shift of the rental charging systems and brochures was the main disruption that they entertained within their strategic move. Apart from that the process of charging was very odd rather than Netflix’s charging options. Rent was charged on the basis of the per movie for the Blockbuster and thus people opted for Netflix as it offered only a single subscription for all of their digital contents. But most interestingly the 20 years deal of streaming video through high power optical fiber was eventually more costly than Netflix’s subscription rates (Russell, 2012). Ernon was not satisfied with the concept and rather stayed back to the traditional modes of delivering entertainment and thus was not at all effective in terms of sustaining the business. Finally, this resulted in their downfall only due to the negligence towards technological innovation and also was not able to sustain the major benefits that could be attained with disruption in technology. Thus it can be definitely said that the failure of some innovative deals entertained from the end of Blockbuster lead to their failure. Even they had also ignored the concept of partnering with DirecTV which was another major reason for their outranged marketing and fall of customer bases ultimately resulting in the decline of the business.
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