Home video rental industry is a technology intensive industry. Technology provides several growth opportunities and challenges. It provides an opportunity for companies in the industry to stream movies to their customers. However, it also increases competition from other sources of movies. This necessitates companies in the industry to develop efficient development strategies to cater for the current and future needs of the customers.
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In addition, efficient strategies would help in strategic positioning of the company to enable it to cope with the changes in the market. Failure to develop efficient strategies would lead to the ultimate collapse of a company. Netflix and Blockbuster are some of the major players in the home video rental industry.
Both Netflix and Blockbuster rely heavily on online streaming of movies on demand for a sizeable percentage of their revenues. Amazon and iTunes, other major players in the industry, also enable customers to download movies online for a certain fee. Downloading movies online is the trend that is likely to continue in the future. This necessitates companies to look for efficient platforms to distribute their movies.
Gone are the days when companies relied heavily on physical distribution of their movies via mail or certain drop-off points. Companies desire to be market leaders in the industry should strive to make watching movies at home faster and easier (Greenwald para 3). Grown in online consumption of products necessitates companies in the industry to shift their focus to online sales.
Analysts predict that online sales of movies will surpass sales of DVDs in the near future (Frankel para 3). This would greatly benefit companies that are market leaders in online sales of movies. These include Amazon and iTunes. The major benefit of online sales is the low cost of management. This is because companies do not need a physical presence to operate in the areas. Customers only need an internet connection to access the movies regardless of their geographic location.
For companies in the home video rental industry to acquire a competitive edge, they should have a wide collection of movies. Having a wider collection of movies would enable companies to compete effectively with other sources of movies, which include cable TV.
Having a wider collection of movies would also increase customer loyalty to a company as they are guaranteed of getting the movies they desire. In addition, diversification of services would enable companies in the industry remain profitable. One of the major areas of diversification for companies in the industry is provision of games.
Netflix is one of the companies that has the best chance of survival in the industry, which is changing rapidly. In 2011, Netflix created Qwikster in an attempt to split its subscription model. The Qwikster brand would deal will solely online subscription of movies while the Netflix brand would continue offering DVD services.
The company opted to implement this strategy as it realized the importance of online sales of movies for its future growth. Netflix introduced the Quikster brand in an attempt to phase out its DVD sales business. However, this strategy failed. Netflix continues to offer both DVD services and online subscriptions of movies.
Online subscriptions now account for a sizeable percentage of the company’s revenues (Stelter para 5). The failure of Quikster led to a significant fall in Netflix’s share value and profitability. However, the company is slowly repairing its reputation.
Frankel, Daniel. “Forecast: Online demand for movies, TV shows will top DVD sales this year.” PaidContent. 2012. Web.
Greenwald, Will. “Change or die: Netflix and the future of home video.” PCMag. Web.
Stelter, Brian. “Netflix, in reversal, will keep its services together.” The New York Times. 2011. Web.