11 September 2009 • 7:00 am

Blockbuster and Hollywood Threatened by Redbox

A Redbox kiosk outside a Walgreens. Peter Wynn Thompson for the New York Times

A Redbox kiosk outside a Walgreens. Peter Wynn Thompson for the New York Times

According to an article earlier this week in the New York Times, there will be 22,000 Redbox automated vending kiosks renting DVDs for a dollar a day by December. In the already crowded market for video rentals, Redbox and similar firms are occupying a niche between Blockbuster’s retails stores and Netflix’s rent-by-mail and nascent online streaming services.

With self-service machines, overhead is quite low. Not only do such retail stores as Walgreens, Wal-Mart, and McDonald’s welcome the foot traffic that the kiosks bring, but some are even subsidizing rentals – the article reports that Walgreens has discounts that essentially make the rentals free. So the business model combines the low overhead of Netflix (with no retail stores) with the convenience and spontaneity of any-time impulse rentals (sort of like Blockbuster). And Redbox supports the kiosks with a simple web site that enables its customers to locate machines, view the surprisingly extensive (yet limited) inventory of titles in each machine, and reserve movies online. Very low cost rentals, web-enabled browsing, same day rentals, convenient locations (movies can be returned at any kiosk, not just the one at which it was rented), in short, yet another new value proposition for video rentals.


21 May 2009 • 1:32 pm

Blockbuster vs. Netflix: A Case of Technology-Driven Strategy

For a few years now, I’ve been doing a riff on Blockbuster and Netflix in some of my speaking engagements. It’s been a useful case for sharing many of my insights about strategic management and the role of technology in strategy (disclaimer: neither of these firms has been a client of mine, and my impressions have been formed only from publicly-available information).

The essence of the riff is this: Blockbuster built a very successful business model and then had its lunch eaten by Netflix. The key lessons we can learn from this case are:

  • Don’t underestimate the power of technology to change your competitive environment.
  • Constantly be looking for ways to challenge and reinvent your value proposition, or your competitors will do it for you.
  • Recognize and overcome the forces that will resist change in your own organization.