THE DEMISE OF

BLOCKBUSTER
Case Study Analysis

By
Lakshmi Niharika Addepalli
INTRODUCTION
 Movie & game rental service provider.
 Founded in 1985 by James Cook and was at its peak between 1987-1993
(led by Wayne Huizenga).
 8000 tapes with over 6500 titles.
 Opened stores at a rate of about one for every 24 hours.
 3400 stores by 1993 throughout Americas, Europe, Asia & Australia.
 In 2004, it had 84,300 employees worldwide.
 Filed bankruptcy in 2010 under CEO James Keyes.
 Key competitors are Netflix & Redbox.

Supply Chain Management BUS 528 3/25/20 2

 Founded by Reed Hasting, 1997 as a pay per rental
mail order video rental company.
 Experimented both pay per rental and subscription and
settled on subscription-based strategy in 1999.
 By 2010, Netflix is the world’s largest subscription
service.
 Users paid only $8.99/month for over 100,000 DVD
titles delivered to their homes most of which were old
releases.
 60 regional distribution centers.

Supply Chain Management BUS 528 3/25/20 3

 Concept was originated in 2002 within McDonald’s
Ventures LLC.
 Launched in 2004.

 Purchased by Coinstar, Inc. in 2009.

 By 2010, Redbox had approx. 23,000 kiosks

nationwide.
 Customers paid $1/night movie rental.

 Each kiosk had 630 discs of which 200 would be new

movies.

Supply Chain Management BUS 528 3/25/20 4

 FINANCIAL SUMMARY

Supply Chain Management BUS 528 3/25/20 5

 1. IN WHAT WAYS DID
BLOCKBUSTER ACHIEVE BETTER
STRATEGIC FIT THAN LOCAL
STORES?
 Greater Presence
Large brick and mortar stores in high traffic
neighborhoods.
 Broad & Deep inventory

Large stores allowed Blockbuster to carry more

inventory (8000 tapes & 6500 titles).
Ability to meet market demand.
 Technology

Streamlined computerized system for inventory control

& checkout.
 Customization

Merchandize selection customized at store level.

Supply Chain Management BUS 528 3/25/20 6

2. HOW MUCH IMPLIED CERTAINTY DO
NETFLIX & REDBOX FACE?
WHAT LEVERS DO THEY USE TO DEAL WITH
UNCERTAINTY?
High Uncertainty

Levers used:
 Information

 Inventory

 Time

 Capacity

Supply Chain Management BUS 528 3/25/20 7

HOW MUCH IMPLIED CERTAINTY DO NETFLIX & REDBOX
FACE?
WHAT LEVERS DO THEY USE TO DEAL WITH
UNCERTAINTY?
High Uncertainty

Levers Used:
 Price
Time

Supply Chain Management BUS 528 3/25/20 8

3. HOW DID NETFLIX & REDBOX ACHIEVE BETTER STRATEGIC FIT THAN
BLOCKBUSTER?
 Netflix offered subscription-based
model.
 Saved costs by purchasing only
limited new movies & wide
variety of old releases.
 Recommendation software
(movies in stock were
recommended)
 Automated distribution centers
for rapid processing and locating
distribution centers close to USPS.
Supply Chain Management BUS 528
 Low cost , budget conscious
customers.
 Controlled inventories (Even has
options to buy disk for $7 to focus
on keeping new movies).
 Convenience factor (multiple kiosks
& can be returned at any kiosk).
 kiosks in high traffic centers.
3/25/20 9
 THANK
YOU
10
Supply Chain Management BUS 528 3/25/20