Movie Rental Industry: Adapt, Migrate, or Die

In a capitalist economy, companies will eventually have to adapt, migrate, or die.  In my opinion, the ideal option to do is adapt to markets when possible rather than move to other markets.  In the movie rental/streaming industry, the company that is most convenient wins out.  To adapt this industry, a company needs to become more convenient than the other options.  Price, availability of receiving merchandise, proximity, and movie selection are all factors that contribute to the convenience of a movie rental/streaming company.  From evaluating some of these factors, it is clear why certain companies in this industry prosper or dwindle.  

 

Blockbuster has long been the giant of the movie rental industry.  During its time was also Hollywood Video and Movie Gallery (Hollywood Video eventually bought out Movie Gallery).  The initial concept of these stores was great at the time, and these stores, especially Blockbuster, did very well because they was relatively convenient.  Why buy when you can rent?  That was the initial idea.  The competition between movie rental stores to become more convenient was illustrated by Blockbuster's long-anticipated removal of late fees.

These types of stores still exist today, but they are on the sharp decline as the much more convenient concept of, you guessed it, streaming.  In the graph above you can see a clear correlation between the rise of Netflix and the fall of Blockbuster.  Blockbuster tried to combat this with its own mail-in movies and streaming, which it still utilizes, but Netflix still won out.

The most important deduction from this convenience phenomenon is that Netflix is going to want to continue to adapt if it wishes to remain the forerunner.  However, they might have adapted in the completely wrong direction at least once. When Netflix saw its lead in the industry, it decided to try to raise prices and even decided to split streaming and DVD services.  This quickly lost them hundreds of thousands of accounts, and they aborted the plan, but again, the damage was done.  Netflix has since attempted to adapt by focusing primarily on TV shows rather than movies.  It has also attempted to migrate somewhat by expanding into the UK and Ireland, but many experts say that this is clearly moving too quickly. 

Once Film-Focused, Netflix Transitions to TV Shows

So who is the future bright for right now? The vending machine.  Redbox requires actually going to but it is available in convenient places like gas stations or grocery stores which are places people are going to go to anyway.  Redbox is cheap and they weren't jerks like Netflix was.  Also, they are currently teaming up with Verizon to begin to offer a mobile streaming service in the near future.  Blockbuster is adapting and is still alive, and it is putting out its version of vending machines as Redbox's top vending competitor.  The movie rental industry is anybody's game right now.  The most convenient will win out.  Personally, I'm pulling for Redbox.

GREAT Links!

Redbox Threatens Netflix

Redbox and Verizon to Create Streaming Mobile Service

4 Things Redbox Streaming Service Needs to Beat Netflix and Amazon