Question
Netflix and Redbox Compete for Movie RentalsCharging $17.99 a month for an unlimited number of movie rentals (three at one time), Netflix revolutionized the movie
Netflix and Redbox Compete for Movie RentalsCharging $17.99 a month for an unlimited number of movie rentals (three at one time), Netflix revolutionized the movie rental business with a one-dat mailing service for DVDs and acquired 12 million subscribers and $1.5 billion in revenue. However, Blockbuster, the video rental giant from the earlier $5.5 billion bricks-and-mortar movie rental business, decided to enter the mail-in delivery and online-DVD rental businesses. Blockbuster (now a division of Dish Network) drove prices down to $14.99, attracting 2 million subscribers. Netflix responded with a cut-rate service of one movie at a time for $9.99 per month, which drove the net profit right out of the business. (Please read more in the photo)Questions:1. What disruptive technology has threatened the bricks-and-mortar and mail-in movie rental business?2. Does easy access to distribution channels at grocery stores for Redbox's 22,000 vending machines indicate a high- or low-entry threat in the movie rental business? Why? Why might McDonald's be an eve better distribution channel than grocery stores?3. Are there any economies of scale in the on-demand video rental business to serve as an barrier to the entry of Amazon?4. Who are Netflix's and Redbox's suppliers? Are they in a position to appropriate much of the value in the value chain? Why or why not?5. What factors determine the intensity of rivalry in any industry? Is the intensity of rivalry in the video rental industry high or low? Why?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started