Since launching in the 80s, Blockbuster has been synonymous with renting movies.
However, the company now finds itself on the brink of bankruptcy and may be forced to close stores across the globe as a result. With debts of £635m and a share price that has dropped to 32 cents per share, the company is struggling to cope with changes in technology.
So what has caused Blockbuster’s demise?
DVD kiosks
A newcomer to the market, DVD kiosks are quickly eating into Blockbusters share of the rental market. Placed within existing retail stores the automated kiosks minimise premises and staffing costs, enabling these savings to be passed on to consumers, undercutting rental prices of traditional high street chains including Blockbuster.
Up until the spread of internet usage by the general public, Blockbuster had a tight hold on the DVD rental market
In the US, Redbox have set the pace with DVD kiosks and now have more than 22,000 kiosks in operation giving them a market share of 13% in 2009. The kiosks offer rentals for $1 a night from many of the largest grocery stores in America.
In the UK, Blockbuster's 630 stores are coming under threat from Movie Booth DVD kiosks. The company has 50 kiosks in operation spread throughout many of the country’s most well known retail groups, with five new locations opening each month.
Offering movie rental for £1.50 per night, the company model is based on convenience and price of renting from kiosks leading to UK consumers embrace renting movies from DVD kiosks in the same way the US public has.
Rental-by-post
Blockbuster’s single biggest competitor has been the growth of the rental-by-post market.
Up until the spread of internet usage by the general public, Blockbuster had a tight hold on the DVD rental market. With the highest number of stores, the largest selection of movies and a ubiquitous brand, the company dominated the industry.
The onset of the new Millennium brought on mass-usage of the internet, and with it a horde of new competitors for Blockbuster. Online rental by post has been the major winner, where in the US Netflix now has more than 10 million subscribers and Lovefilm in the UK now controls a greater share of the DVD rental market than Blockbuster with more than 1million people subscribing to their service.
The internet
And this isn’t the end of Blockbuster's online competition as consumers begin to embrace video on demand. Apple has launched its movie rental service through i-Tunes, and whilst the range and cost of titles isn’t yet competitive, people looking to rent movies through their computer will embrace this service.
A plethora of similar services now exists where consumers can either stream or download movies directly to their computer. Whilst this technology isn’t yet end-user friendly – additional hardware and software is required to watch these movies on a TV – the inexorable growth of this sector is a further threat to Blockbuster.
Blockbuster themselves have noted the growing popularity of kiosks and begun installing their own machines in the US. However, the question on everybody’s lips is whether it’s a case of too little, too late for the retail giant.
