Blockbuster

1. PEST

1.1 Politic

Under the "Family Entertainment and Copyright Act", a person or the offense in second or subsequent offence can be either imprisoned for not more than 3 or 6 years or fined or both if found guilty to uses or attempts to use recording device to transmit or make a copy of a motion picture or other audiovisual work protected under the title 17 [http://www.copyright.gov/legislation/pl109-9.html].

1.2 Economic

Source (http://www.dvdinformation.com/News/press/010802.htm)

According to the DVD Entertainment Group, Americans spend more money on purchasing and renting movies on DVD n VHS. Statistic shows that, DVD becomes a popular entertainment among Americans by the year 2001 by reaching $16.8 billion compare to other entertainment spending.

Digital American stated that, retails of DVD sales grew 34 percents in 2003 to 34 million units. This followed by a 50 percent gain in 2002 and a 69 percent gain in 2001. [http://www.ce.org/publications/books_references/digital_america/home_theater/video_source_components.asp]. Relate to above statement, it is proven that DVD become more popular than CDs and VHS on the market since there are lot of DVD players been sold out for the pass 3 years.

1.3 Social

Changes can be seen from a typical customer behavior into an E-process renting process. Beside that, culture changed from watching movies in cinemas to home after they enable to rent their preferred DVD title movies by renting them in any DVD renting and selling shops or order them through the net. [ ]

People now days enable to record their favorite TV shows and save them into DVD through their recorder that is built with TiVo compliant. Their can just set the time to record in the recorder and it will record the TV shows when come to the time been set to. [http://www.summer.harvard.edu/2005/courses/syllabi/31820/ssams196.pdf]

1.4 Technology

Copyright data embedded within the audio signal is an excellent protection piracy of disc. Copyright protection information technology "Digital Watermarking" in the main audio stream is a clear technology to protect the original disc to be burn without the glass mastering equipment used to make the original disc stumpers. [http://www.daisy-laser.com/technology/techsacd/techsacd22.htm]

A high quality audio format 'DVD-Audio', that was launched in 2000, offering the music industry a new revenue opportunities. [http://www.disctronics.co.uk/technology/dvdintro/dvd_intro.htm]

2. Rivalry Among Competing Sellers

2.1 Lower Prices

A high percentage of chance for buyers to change product or switch to competitor's product is cost. The main competitors in DVD online rental industries are Netflix, Blockbuster and WalMart. According to Netflix 2003 pricing level, consumers that subscribe Netflis membership pay an amount of $13.95 for four DVDs in a month and $19.95 per month to rent unlimited DVDs rent [crafting and executing strategy, book]. Blockbuster, another large DVD distributor in US, is also giving the lowest price to compete with Netflix. News.com stated that, Blockbuster provides 3 DVDs for $19.99 and Netflix is charging their members $21.99 for 3 DVDs [http://news.com.com/Blockbuster+enters+online+DVD +rental+business/2100-1026_3-5305669.html]. Even Netflix offered a cheap price for their minimum unlimited DVDs rental, Walmart come with an offer of $15.54 for unlimited service to their members in the year 2003 [http://www.shopping.com/xMR-Walmart~MRD-31083~RD-116023332484]. This makes Walmart to be the cheapest DVDs rental company currently in US.

2.2 More or different features

Netflix comes with a different feature where the consumers can rent unlimited amount of DVDs for the price of 19.95 [crafting and executing strategy, book]. There will be no late charges will be charged to members that return the DVDs that they rent late [http://timefordvd.com/NetFlix-DVDRental.html]. Another feature is where the members will get the latest DVD movies after they return all the DVDs that they lease [http://www.fool.com/News/mft/2005/mft05030102.htm]. CineMatch might be one of the features that can be found in Netflix that help subscriber to search on titles that they looking for and recommend to Netflix consumers on the next title that from their favorite categories [http://72.14.203.104/search?q=cache:5AWNakp5I0MJ:www.nvr.org/dvd/dvdstudy.pdf+netflix+with+CineMatch&hl=en]. Blockbuster's main feature is the various collections of DVD categories [http://www.blockbuster.com/catalog/DisplayAllCategories.action?channel=Movies&subChannel=sub&displayBoxArtFlag=true&cctr=CategoriesLeftNav] that might be an advantage for consumers to have their own flexible and satisfaction in searching for their favorite DVD.

2.3 Bigger or better dealer networks

- Netflix opened 12 regional shipping centers in 2002 in the following markets:

- The company plans to open an additional 10-15 shipping centers in 2003

2.4 Higher Levels of advertising

- Online marketing includes pop-ups, pop-under, banners and direct e-mail marketing and all placements are pay- or performance deals

- In addition, the Company has a number of third-party retailer partnerships such as the one with Best Buy.com, which directs online customers to Netflix for DVD rentals.

- In 2002 the Company spent $36M marketing new trial subscriptions to old and new DVD owners, using Internet advertising, third-party promotions and ad inserts in DVD boxes.

2.5 Better Customer service capabilities

- The Company reported that in Dec. 2002, 36% of all subscribers were reachable in one day.

- At this pace the Company will have more than 25 regional hubs by year-end and, management says, able to reach 70% of its subscribers in one day. (2003)

- Netflix uses multiple Internet channels to attract customers to the Company's 14-day free trial.

3. Potential

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