When Blockbuster (traditional set top video game consol and hardward game makers of today SS), the huge video-rental chain, set up a mail-delivery service in the summer of 2004, rival Netflix (Transgaming SS) watched its stock price tumble. Netflix (Transgaming SS) had invented the business in the late '90s (late 2000's SS), and already survived one competitive scare after Wal-Mart began dabbling in DVD rentals. By 2004, Wal-Mart was backing out, having decided that video rentals weren't part of its core business. But Blockbuster(traditional gaming console manufacturers and game hardware developers SS), the nation's largest video-rental chain, was a much bigger threat. Video rentals were its entire business. Its very survival depended on conquering Netflix (Transgaming SS).
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Six years later, Blockbuster (set top manufacturer's game suppliers SS) is in tatters, leaving Netflix (TNG SS) as the undisputed winner in the DVD-by-mail business. Blockbuster's (set top manufacturer's SS) long-anticipated bankruptcy filing is clear proof that the company clung far too long to an outdated strategy and failed to understand changes that others eagerly exploited. Blockbuster (set top manufacturer's/video game developers SS) plans to reorganize and continue to operate its online rental service and its 3,000 retail stores while it comes up with a new strategy. But even writing off $1 billion in debt won't make Blockbuster (set top manufacturer's and game developers SS) competitive, and the chain's downfall reflects the huge risk any firm faces today by just standing still. "Legacy investments create a legacy mindset," says Vijay Govindarajan, a professor at Dartmouth's Tuck School of Business and co-author of The Other Side of Innovation. "Blockbuster (set top box manufacturer's SS) got stuck in the box. They never changed their business model." (which is what Transgaming has done-and is doing...transforming the entire way of gaming is done thru the advent and implement and reality of SmartTV sales now outpacing and oustripping the sale of traditional television sales for the first time and will continue moving forward as the trend now is firmly established SS)
Blockbuster (traditional set box and hard ware gaming manufacturers and service providers SS) was an upstart itself when it was formed in 1985 as a small, flashy video-rental chain in Florida. Businessman Wayne Huizenga bought the company in 1987 and began a series of acquisitions that eventually made Blockbuster (traditional gaming providers SS) the world's biggest video-rental company. While swelling in size, however, Blockbuster (traditional gaming providers SS) began to alienate customers with strict late fees and unimaginative, warehouse-style stores. It also overlooked e-commerce while sticking to its long-held retail strategy, even looking into buying the defunct Circuit City in 2009. Blockbuster's (traditional gaming providers SS) cardinal sin, says Govindarajan, was maintaining its commitment to a vast retail network, even when that was no longer the way movie renters wanted to shop.
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Netflix (TNG SS) was founded in 1997 (late 2000's SS) as a more convenient way to rent movies (games SS)—and to take advantage of lightweight DVDs that would be much cheaper to mail than bulky videocassettes. But the new firm's first idea flopped. Netflix (TNG SS) originally charged a set fee for each movie rented, just like Blockbuster (traditional gaming companies SS) , which didn't catch on. Then CEO Reed Hastings (Guptka SS) decided to change the business to a subscription model that allowed customers to pay a flat monthly fee and rent as many movies as they wanted (off of the SmartTV manufacturers in exchange for a fee or in the Samsung case...ad revenue sharing-which should be even exponentially more lucrative overall and predictable on a cash flow basis SS)—with no late fees. That got traction.
As Netflix (TNG SS) became successful, competitors emerged because its business model seemed simple: Simply keep DVDs in a warehouse and mail them out when orders came in. But Netflix's (TNG SS) business is anything but simple, and that's why the competition has faltered. Quick delivery, for example, depends on having regional distribution centers in just the right places, and in its early days Netflix (TNG SS)suffered from many complaints about slow delivery.(No big name SmartTV manufacturers as customers/joint venture partners -enter Samsung and Toshiba last week to address thisSS).
It took several years for Netflix (TNG SS) to get its distribution layout right. (see my previous comment on Samsung and Toshiba addressing this SS) Managing a huge inventory of movies is another challenge. Ensuring quick delivery means stocking thousands of titles and having plenty of copies of the most popular films. That can get expensive. But a slim inventory that leaves customers waiting for movies would drive business away.
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Then there is Netflix's (TNG SS) secret sauce: Algorithms that allow users to rate movies and then receive recommendations for other films they might like, including some they may never had heard of. This kind of technology is common today, as sites like Pandora and Amazon make it a routine part of their users' experience. But Netflix (TNG SS) was an early innovator (sound familiar boyz and girlz? cuz I been including this phrasing in most of my posts on TNG since entering the thread in late summer/early fall SS), and Hastings seems to have understood that enhancing customers' experience would build brand loyalty that's crucial in such a cutthroat industry. "Most people think you should be riveted on the competition," says Andy Rachleff, a Stanford Business School professor and Silicon Valley venture capitalist who has known Hastings for years. "Absolutely not. Be riveted on delighting your customer. If you do that all they can do is follow you. That's why Netflix (TNG SS) is so far ahead of Blockbuster (traditional gaming players in the market place of today SS) . They're focused on delighting the customer." (value added service and huge convenience factor ala the TNG SmartTV gaming and content provider model-same thing as what Netflix offered at the time which brought about a huge consumer shift towards it and away from the traditional way of doing business at the time SS)
Netflix, (TNG SS) of course, hasn't been Blockbuster's (tradtional game providers and gaming console manufacturer's SS) only competition. In 2004, Redbox began offering video rentals for $1 a night through vending machines at fast-food restaurants, grocery stores, and other retail outlets, stealing Blockbuster (traditional gaming companies SS) customers with practically none of the overhead that comes from running actual stores. Redbox now has 24,000 kiosks nationwide, eight times as many locations as Blockbuster. (traditional gaming providers SS) Apple is now in the movie-rental business, offering movie downloads for many popular devices. Cable and phone companies have also started offering video-on-demand straight to their customers' TVs, a service that suffers from a limited supply of movies but obviously offers the ultimate convenience. Netflix, (TNG SS) for one, saw this coming, and has been aggressively developing its own on-demand offerings for subscribers, including converters that allow streaming straight to the TV.
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Blockbuster (traditional gaming players SS) has copied moves like these, but it has also been consistently late to the game with no real innovations of its own. Meanwhile, it has been burning cash over the last few years, stuck between a costly commitment to retail real estate and fast-moving competitors with no such baggage. That left Blockbuster (traditional sector players SS) struggling to get more revenue from fees without alienating consumers. The recession sealed the deal, as business declined and Blockbuster (traditional sector players SS) was finally unable to make its debt payments, resulting in bankruptcy.
The video-rental business is still rapidly changing, and there's an outside chance that Blockbuster (traditonal gaming sector company's SS) could cut its debt and come up with innovations allowing it to leapfrog Netflix, Redbox, Apple, and the cable companies. Hastings of Netflix (TNG SS) has long said that sending DVDs by mail is just a temporary business, with the real prize being on-demand video streamed to wherever consumers want it, in real-time. If Blockbuster (traditional sector players SS) plans to be in that game, it had better come up with a fresh plot twist, fast. Otherwise, this story seems headed for a conventional ending.
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OKAY that wraps it up tonite for me...think the case here is that HISTORY REPEATS ITSELF because EINSTEINS DEFINITION OF INSANITY IS DOING THE SAME THING OVER AND OVER AND EXPECTING A DIVERGENT AND DIFFERENT RESULT SO THE WAY OF DOING BUSINESS HERE IN THE GAMING SECTOR INPARTICULAR IS SET TO CHANGE AND IS CHANGING JUST THE SAME WAY NETFLIX CHANGED THE VIDEO DVD BUSINESS OF BLOCKBUSTER...FOREVER AND THAT SEA OF CHANGE IS UNDERWAY...RIGHT NOW....RIGHT NOW!
the DEFENCE rests your honor...!
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