Movie Rental Industry Analysis - Case Study Example

Question a) Movie Rental Industry Analysis Movie Rental Industry Five-Force Graphic Representation Question b). Movie RentalIndustry Five-Force Analysis Bargaining power of Buyers The bargaining power of the buyers is moderate, considering the fact that it can neither be rated as low or high, since the buyers have access to different sources of movie rentals, and on the event that Movie Rental Industry sets its prices relatively high, the buyers can easily cancel their subscription and move to the cheaper alternatives. The cost of switching from one rental movie industry to the other entertainment alternatives is zero, meaning that the buyer can easily shift to the providers of their choice, making the movie rental industry highly competitive (Patton, 137). Therefore, the buyers have a reasonable influence on the prices that Movie Rental Industry sets for its rental movies, though not wholesomely. Bargaining power of suppliers The bargaining power of suppliers in the rental movie industry is high, since it is the content providers, the networking companies and the distribution studios that regulate the prices that movie rental industry pays for the supply of the rental movies (Patton, 142). Therefore, considering the fact that the movie DVD format are continuously getting out of fashion while the digital hiring of movies is becoming the common trend in the modern world, movie rental industry is completely vulnerable to the distribution studios terms and conditions, since the studios hold the copyright privileges and may rent or withdraw the rights at will (Patton, 42). This leaves movie rental industry without much say regarding what price to pay for whatever content is offered. Competitive rivalry Internal competitive rivalry for movie rental industry is low, because the niche market operated by movie rental industry has the theater as the other main competitor, meaning that the internal competitive rivalry is low (Patton, 140). However, outside of the niche market, the competitive forces might be high, owing to the fact that there are many other operators in the wider entertainment industry, especially the theater locations for live performances. Thus, while the movie rental industry is a growing industry where competition is set to be high in the coming days, the niche market of digital rental movies is currently not very crowded, making the internal niche market competition low. Threat of new entrants While the entry into the rental movie market is not very restricted, the cost of attaining the digital distribution license is high, thus making it relatively difficult for many similar entities offering the same product to enter and thus offer a low-medium threat to the movie rental industry services (Patton, 143). Additionally, the digital distribution of movies, TV program episodes and other form of entertainment content is increasingly going digital, an occurrence that increases the chances of digitally rental movie services finding high usage, thus making the threat of more new entrants into the market a possibility, though in the future. Threat of substitutes The threat of substitutes for the movie rental industry is very high, owing to the fact that there are a range of similar products such as theater performances, comical and the music industries, which makes it highly possible to substitute the rental movie product offered by movie rental industry (Patton, 143). The possibility of increased digital entertainment growth in the foreseeable future also increases the threat of substitution to the movie rental industry products, since the digital content providers in the music and the comical industry that are likely to offer more efficient services and lower prices will definitely rule the market (Patton, 44). Question 1(c) Thus, in summary, the movie rental industry is a very attractive market for making profits, owing to the fact that it is a growing market, yet with the potential of an even high growth prospective in the future. Additionally, the competition in the industry is healthy, thus offering the prospective of earning good profitability. Changing movie rental industry Question 2(a): What is changing about where and how we get our movie rentals? The changes in the movie rental industry is occurring in the form of how we access the movie content, where the current mode of access is through online digital content, as opposed to the traditional access of movie content through DVDS. The location where we get the movies is also changing, from the traditional physical locations and the brick and mortar kiosks, to the current online locations, where direct streaming of the movies is the current trend (Patton, 62). Question 2(b): The movie rental industry’s driving forces of change Emerging new internet capabilities: Adapting to new and emergent internet capabilities such as direct streaming is a major driving force for change in the movie rental industry, through increasing content accessibility (Patton, 55). Shift in long-term growth rate: The transition from physical delivery to internet content delivery is a factor contributing to the increased growth of the industry, acting as a major driving force for change in the movie rental industry (Patton, 55). Increased globalization: The strategy to expand the movie rental services to international destinations is another driving force that has transformed the industry from a local to an international outlook industry (Patton, 156). Question 3: Possible nature of the future movie rental industry The future movie rental industry is likely to be characterized by digital distribution of content, with the physical content such as the DVDs being no longer available (Patton, 151). This will transform the industry from the current modes of movie distribution comprising of a mixture of physical and digital content, into purely digital supply. In response to this change, the production and distribution studio companies will adapt new strategies of competing for profits through establishing their own online platforms from where they can distribute the movies, as opposed to the current situation where they are licensing digital movie rental companies. Question 4: Keys success factors to the movie rental industry competing successfully Quick streaming software: The rise of software that stream the movies quickly will be a key success factor for the rental movie industry, owing to the fact that customers will seek for service efficiency, which of course occurs in form of ease of access of the movie content (Patton, 63). Diversification of products: While offering rental movies is a good niche market, diversifying the same to include other forms of entertainment such as comedies and music will go a long way in determining which form succeeds in the industry in future, since people love a one-stop-shop where they can easily access everything. New payment methods: The introduction of a variety of methods that customers can pay their subscriptions will also determine the success of firms in the industry, since customers want easy and cheaper methods of making payments, offered through various options (Patton, 63). Question 5: The strategic change that Netflix made in DVD vs. Streaming The introduction of subscription-based model is a strategic change by Netflix, which has seen a complete transformation of the global movie rental and entertainment industry. This has occurred through the introduction a service for the customers to subscribe for a monthly package of streaming movies directly, as opposed to renting and returning movie DVDs through mails (Patton, 147). Netflix achieved this through the huge investment into a software that would allow direct streaming of the movie content from its site, while also licensing thousands of content to be streamed live, and also introducing new technology of streaming the content either through the TV screens , gaming consoles and specific streaming devices (Patton, 151). The result has been the revolution of the rental movie industry and the overall entertainment industry, from the use of physical deliveries of content into direct streaming content paid through monthly subscriptions. Here, industry revolution has occurred, courtesy of a strategic technological application. Works Cited Patton, Joseph. Management and Strategy. New York: McGraw-Hill Publishers. 2013. Print. Read More