Block Buster Entertainment Case Study

Blockbuster is one of the world leading companies that provide video, DVD rental and games. It has grown more than 8500 stores franchised worldwide that bring Blockbuster as one of gigantic in rentable home entertainment. It also has more than 40,000 titles that can be choosing by consumers’ every day. In the year 2000, Blockbuster begins to explore the Pay-Per-View market and well establish in the 2001 [Cases in Crafting and Executing Strategy].

Leading market position- Blockbuster is the world’s largest video rent chain, with about 9,000 company-owned or franchised stores in 25 countries including US. In the United States and its territories Blockbuster has 5,194 stores operating under its name. Of the 5,194 stores, 939 were operated through its franchisees. One of the largest competitors of Blockbuster, the Movie Gallery, owns and operates approximately 4,575 stores in the US and Canada, which is less than what Blockbuster, owns only in the United States. Blockbuster has 2.2 million online subscribers, including 2.0 million paying subscribers in the fiscal year of 2006. The strong market presence enhances the brand name image of the company and helps in attracting new consumers and as a result increasing the market share.

Strong merchandise sales division- Blockbuster has the strongest merchandise sales division. Beside the rental business Blockbuster is strong on the merchandise sales, which include sale of movies and games. In addition to sales of new movies and games blockbuster has positioned some small merchandise like popcorn candy etc. next to the check out counter so people waiting on line are more likely to purchase those merchandise.

Total access program.- Blockbuster has generated an online subscription program that allows consumers to have easy access to their preference of movies. This is an Internet based subscription that allows customer to rent a DVD by mail and offers more varieties of titles than the store offers. Through the Total access program, Blockbuster enhanced and integrated its in-store and online rental business.

Blockbuster continues to focus on offering programs that are an alternative to the programs offered by mass merchant retailers and other online subscription service providers.

Strong brand equity-Blockbuster has 3,166 stores operating under the Blockbuster brand name internationally because of its strong local brand awareness (Finance.yahoo.com). The company operates under XTRA-Vision brand name in the Republic of Ireland and Northern Ireland. Also they offer free-standing under the Game Rush brand name in Canada, Ital, Mexico and Denmark. The company’s strong brand name gives it an advantage of successfully introducing newer services and increasing its market share.

Blockbuster, has about 40% share of domestic rental market and a globally recognized brand, is the leading provider of rentable DVDs (Full report). Let us take a closer look at each components of marketing mix and various strategies that Blockbuster is currently using to achieve its vision.

Product ” Blockbuster is known for its movie renting and also now has video games and products available. Blockbuster also has option for buying DVDs as well as video games. It is also trying to get extended movie rights for International and making deals to have high volume of movies available at any given time.

Price- Blockbuster had different services offered for various prices. The price for in-store movie rental is about $4.32 for new and old movies for x amount of days. The online movie services are as follows –

The company uses different approaches to acquire new and retain existing customers. In response to Netflix’s online rental program, Blockbuster deployed its own version of online rental program. Moreover, the company went one-step further by offering the exchange of the online movies against more at the local stores. Customers find it convenient and a quick method to swap, and Blockbuster acquires the much needed flow of customers in and out of the stores.

Recently, the company also went through two different types of store remodeling tests. One of them is called ‘Rock the Block’, which is for the technology-savvy customers who are comfortable using kiosks and interactive displays. The other one is called ‘White Tornado’, which also includes new paint, carpet, fixtures, and lower-hanging shelves for a different look and appeal. The prototype test stores results reflected an increase of 7% to 12% in revenues (Gruenwedel).

Another aspect of this business is high price-elasticity. Consumers can easily switch to another product (from a different source) without losing quality or some other attribute. They also have a choice of acquiring the same product from redbox for one-fourth the price. To overcome these challenges, the company employs different methods to add value for the economic profit. These include rewards programs and online marketing with coupons, and are created based on the psychology of consumer behavior. For example, the rewards program offers one free movie after every five rentals, and one free older movie with every paid rental on Monday, Tuesday, and Wednesday (when the traffic tends to be slow). Finally, all employees are trained and expected to offer best possible customer service to the customers; this is critical in retaining the existing customers and earning new ones through word of mouth.

Blockbuster is very active in building community relations. The company’s community mission states: “At Blockbuster, our community relations activities are designed to: Utilize corporate and employee resources and talents to benefit the communities we serve by supporting organizations which impact children/families, reflect a film/video focus or fulfill specific company operating objectives related to diversity and employment” (Blockbuster Community, 2008). Similarly, the organization is committed to providing diversity through each phase of the business.

The size of the organization and market share are also important social trends for both the company and the stockholders/shareholders. Although the value of Blockbuster decreased over the years, “the value of a stock depends entirely on the economic profits that investors expect a company to produce in the future. Past profits matter only because they play a role in creating expectations about future performance (Boyes, 2004, 51). The financial results of the company reflect profits for the four consecutive quarters, after years of reported losses; therefore, the value of stocks is expected to increase.

Perhaps the most important political trend for a company is to get involved in a merger or acquisition. Blockbuster had attempted to acquire Hollywood in 2005, but Hollywood entered into the merger agreement with Movie Gallery (Fran Finnegan & Company, 2008). In April 2008, Blockbuster proposed a merger with Circuit City (Blockbuster merger, 2008).

Facing legal actions in the business would be another aspect of political trends. Blockbuster has faced numerous lawsuits in the past including being sued over no late fees in 2005 by consumers, and over using the online rental model by Netflix in 2006. The legal department (of the company) works diligently to handle these and similar legal and political issues as they arise. In the online DVD rental channel, Blockbuster’s competitor Netflix has forced it to pursue a cross-channel strategy. Blockbuster has been able to successfully leverage its physical storefront presence with its Total Access program which allows customers to have DVDs sent to their house and exchange them at the actual store (Blockbuster.com). This synergy has allowed Blockbuster to actually earn a twenty cent profit in the first quarter. (Motley Fools Website ” Blockbuster Eats Brains)

The current in-store strategy and requirement is to focus more on the retail items, and push the sale of impulse purchase products. There are rumors that the company would be pulling away from the rental, and would only be offering the new retail movies and games. This would certainly be an interesting change, and Blockbuster stores would become more like Game Rush stores.