Blockbuster -- Case Study

Essay by schadenfreudeUniversity, Master'sA, May 2008

download word file, 2 pages 4.0 1 reviews

Baseball, apple pie, fried chicken, and Hollywood - few things are as stereotypically American. Accordingly, Americans love their movies and the glitz and glamour that accompany them. It seems obvious, then, why the concept of watching a movie of one's choice in one's own home on a cassette tape became so wildly and instantly successful. David Cook, a wise entrepreneur from Texas, opened his first video rental store in 1985 (

At that time, many independently owned video rental shops were small but boasted an expansive adult movie section, which while profitable, was also seedy and unsavory. Cook's brainchild, named Blockbuster Video, set itself apart from its competitors by a noted lack of such content. By offering a wide selection of children's videos, Blockbuster was effectively portrayed as a family-friendly option. Management took additional strides to set Blockbuster head and shoulders above its competition: extended hours, faster and more convenient checkout, a large snacks selection, and superior computer information systems.

Such well planned strategies proved to be very successful. By 1992, over 2800 Blockbuster retail outlets existed in 46 American states as well as over 10 foreign countries. Blockbuster enjoyed similar success until the late 1990s, when emerging forces (video pirating, cable television, and pay-per-view service) converged to gouge a chunk of its profits. By the early 2000s, Netflix and its popular unique concept of online DVD rental posed an even greater threat to Blockbuster's financial well-being.

In response, Blockbuster revamped its business model. It introduced an online rental program reminiscent of Netflix, expanded its selection, raised its paid membership rates, and dramatically altered its late fees policy. Also, Blockbuster utilized relationship marketing by offering the Blockbuster Rewards program, a paid membership that allows customers to receive coupons and frequent-renter benefits. Additionally, it purchased its movies from wholesalers as...