Is Netflix The New Blockbuster?
It is a well-known fact that Blockbuster could have owned Netflix. The then struggling business opted to offer their brand to the then DVD rental giant Blockbuster. Netflix CEO and co-founder Reed Hastings courted an offer of $50 million. In hindsight, this is definitely a very big opportunity that Blockbuster missed specially that Netflix now has a market cap of almost $20 billion.
To their defense, Netflix did not really seem like a good investment at that particular time
They were by all means a struggling company that barely raked in good profits to offset investment costs. Around year 2000, the offer was made inside one of Blockbuster offices in Dallas, Texas. When the offer was made, Reed Hastings was reportedly responded with laughter that made it apparent that Blockbuster thought acquiring Netflix was ridiculously bad and was never going to be considered. This was apparently due to the very niche market of their business.
Over the years, the niche began to grow due to Netflix’s commendable decisions to evolve their company’s demographic
Initially offering only DVD by mail – in contrast to Blockbusters then more convenient services of DVD rentals – they began to adapt online streaming as one of their integral services. The simple fact that they have pioneered online streaming of movies and numerous TV series have catapulted their popularity through word of mouth, on top of their advertisements. Recently however, they have split their DVD mailing services with online streaming into smaller companies. But are ultimately still owned by Netflix.
Although Blockbuster have also embraced online streaming in addition to their DVD by mail services, they still maintain a few store front buildings. Their online streaming service have a different business model wherein clients are presented with a ‘pay as you go’ system. This essentially means that customers don’t need to pay a fixed monthly fee but have to do so per movie watched. Some argue that this is an inferior payment system since the monthly fee charged by Netflix is only about twice the price of each Blockbuster movies. However, these advantages and disadvantages of both companies do not necessarily make one superior to the other. These differences in their business models simply presents customers with choices that would cater to their specific lifestyle and needs.
Paying a monthly fee for Netflix for example, yet only watching one movie a month is an obvious disadvantage to that particular customer. Blockbuster’s movie on demand would fit his particular usage better. Presently, some people will claim that Netflix has become bigger than Blockbuster. Some claim that they are of equal footing. At any rate, we can only hope that both companies continue to innovate and provide quality services and prevent one to rise way above the other and cause a monopoly.