Description
Micro Economics Choice
Option #1 - Pick ONE of the Stories below from:
Business Wars - Podcasts (avg 5 or 6 episodes, 20 to 30 minutes each)
https://wondery.com/shows/business-wars/
Explanation & Answer
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Running Head: BUSINESS WARS
Business Wars: Netflix vs. Blockbuster
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BUSINESS WARS
Introduction
Netflix vs. Blockbuster is an eight-year business war about the vicious battle that existed
between Blockbuster and Netflix. This war began around the year 1997, with a person known as
March Randolph, a marketing wizard, together with his colleague Reed Hastings, a computer
programmer (Business Wars n.d). The war between Netflix and Blockbuster left behind
immeasurable casualties in their aftermath. There were also a lot of buildings that had been
hollowed out, together with financial losses experienced in billions. Generally, this paper mainly
discusses three major economic concepts illustrated from the business war. Three mistakes by
the loser (i.e., Blockbuster) in the battle between the two will be named. Lastly, ideas that
brought about the winning of the battle, along with the opinion of the future of the market, will
also be discussed comprehensively.
Economic Concepts explained
At the most fundamental level, the economic concepts often explain ways in which and
why we do make the purchasing choices that we do. The four primary economic concepts
include costs and benefits, incentives, supply and demand, and scarcity, which illustrate the
numerous decisions made by humans. These are also the four concepts explained in Netflix
versus Blockbuster. Such that once, Blockbuster owned more than nine thousand video rental
stores in the USA. Though, in the year 2010, it became bankrupt with approximately one billion
dollars in debt since it could not keep up with its competitor i.e., Netflix that has established the
DVD-by-mail service. Presently, just one blockbuster store is known to survive (Business Wars,
n.d).
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BUSINESS WARS
Generally, Blockbuster's profits had to adequate to help sustain and maintain their
staffing levels and worldwide stores. A weighty proportion of revenues needed by Blockbuster to
maintain its position in the business was the revenue stream, which Netflix did not even impose,
as one could keep his or her movies as much as he or she wanted. Blockbuster also reduced its
late-free stream of revenue and built a 200 million dollar for another online platform cost. If
these costs are added up, then it's evident that Blockbuster did pay a $400 million to
revolutionize and be competitive with its competitor Netflix. With regard to incentive, Netflix,
in numerous ways, tried following in the HBO's, which started by luring its subscribers, with
whichever content one could afford until exclusive content is offered. This helped it have
content of high-quality.
Mistakes by Blockbuster
Blockbuster made several mistakes that brought about its failure. These mistakes are as
follows: firstly, Blockbuster failed to embrace change while Netflix did embrace change. For
instance, through the progression of changes and disruptions to the home or video entertainment
industry, tables did turn (Business Wars n.d). When the VHS video was an industry-standard in
the year 1997, Netflix founder, Reed Hastings, saw the opportunity to launch the monthly DVD
subscription service through the mail. However, in contrast with Blockbuster, there existed no
late fees. When the consumers used their DVDs, they would return them to Netflix and be given
another DVD. Generally, Blockbuster didn't adopt the model of subscription service; thus, it had
to charge its consumers for every video rental; this included the late fees.
Secondly, Blockbuster, for years, had dominated the industry, though, at one point, they
ended up losing sight of the kind of business they were actually in. Rather than aiming at
conveying affordable and incredible entertainment to their consumers, it placed more stock in a
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BUSINESS WARS
model that was comfortable for them to use. Though, since technologies are changing and rather
than investing its efforts in trying to find new ways of delivering on their actual purpose, its
innovation ended up stagnating.
Lastly, B...
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