How Strong Are the Competitive Forces in the Movie Rental Marketplace?

How strong are the competitive forces in the movie rental marketplace?

I do not believe that the competitive forces in the movie rental marketplace are very strong at the current time. The only competitors that I am aware of are Netflix, Blockbuster, and Redbox. Many people are now recording movies on their televisions, or even watching movies online, some of which are free, and require no subscription to any movie provider. Some areas may have local movie rental places, such as Movie Gallery or something like that, but even most of those have shut down.

Do a five-forces analysis to support your answer.

Using Porter's five forces analysis:

I. Rivalry: As indicated, there is not much rivalry in the movie rental industry. The only possible rivalry competitors include:

a. Blockbuster

b. Netflix

c. Redbox

d. Any local vendors

II. Threat of Substitutes

The only threat of substitutes that I can imagine would be those websites that allow individuals to view movies free online. Furthermore, cable or satellite companies that allow you to rent movies pay per view from the comfort of your home.

III. Buyer Power

Buyers are very powerful in these areas. If a buyer does not want to rent a movie, or simply does not have the money to pay for a subscription, they simply won't order it. Buyers have alternative options, other than going to a movie rental company store or having movies delivered to their home, on a monthly subscription basis. Furthermore, they have the right to cancel a subscription at any time.

IV. Supplier Power

Supplies have power if they are the only ones that carry a specific movie. However, consumers can still go to the store and purchase a movie when it is first released. Furthermore, if the consumer does not care to wait awhile before seeing a movie, then they can wait for it to come on pay per view.

V. Barriers to Entry

It seems that Blockbuster and Netflix have control of much of the movie rental business. Because of the fact that consumers are renting less DVD's then they use to, this eliminates other competitors from considering getting into the movie rental business.

2. What forces are driving changes in the movie rental industry and are the combined impacts of these driving forces likely to be favorable or unfavorable in term of their effects on competitive intensity and future industry profitability?

The forces driving change in the movie rental industry include:

a. The economy - the economy has affected many consumers, even for small purchases like DVD subscriptions.

b. Cheaper alternatives

c. People can record movies via their satellite or cable provider, and watch them any time they like

I think that these forces are likely to be unfavorable for Blockbuster and Netflix. I know personally that I used to have a Netflix subscription and canceled it. I canceled it mostly because I wasn't viewing most of the movies when they came, and therefore, wasting my money. Now, if I want a movie I simply go to Redbox and only have to pay $1.00.

3. What does your strategic group map of this industry look like? Which company is best-positioned Netflix or Blockbuster? Why?