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How Movie Rental Industry Works - Research Paper Example

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The topic “How Movie Rental Industry Works” explains work scheme of the supply chains. Earlier movie studios - Warner Bros, Universal, Sony - released DVD’s for the rental stores before releasing it for the public. Today movie rental business like Netflix ’s is based on online transactions…
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Download file to see previous pages In 2004, a market share of Blockbuster in the US was 40% in the total movie rental market. The sale from videos in 2004 for Blockbuster was approximately $16 billion. Netflix entered the market in 1998 and provided online movie rentals which helped the customers to order movies from home. Netflix’s market share rose from 2% in 2003 to 7% in 2004 (Serrao-b, n.d.). 
In the period between 2008 and September 2009, the market capitalization of Blockbuster decreased by 60% which amounted to $233 million, and Netflix’s market capitalization increased by 60% to $2.45 billion.
In 2009, Netflix had a customer base of 12.27 million. It added 1.1million customers in the fourth quarter of 2009. The churn rate of its customers reduced from 4.2% in 2008 to
3.9% in 2009 (Bloomberg BusinessWeek, 2010).
The share value of Netflix touched the highest point in the first quarter of January 2010 at $89.10. In the first quarter of 2010, Netflix net income amounted to $32.3 million which was $22.4 million in 2009. It expects to end the year 2010 with a customer base of 16.5 million (Zeidler, 2010).
Red Box operated by opening kiosks to rent newly released movies. The NPD group reported that the market share of kiosks was 19% in 2009 (Cabral-b, 2009).
Netflix and Red Box have adversely affected the business of Blockbuster. Blockbuster would be facing a debt of $390 million in 2012. It closed 374 stores in the US in 2009 and 545 more are expected to close this year. It is also planning to file for bankruptcy. Analysts feel that the company is on the verge of dying (Kary, 2010).
The online rental industry faces a huge threat from online movie viewers. The Internet is expected to penetrate 90% of the households in the US by 2012. The number of online video viewers is expected to rise to 94% in 2012 from &&.8% in 2008. By 2012, the revenue from online video globally is expected to be around $4.5 billion.
The percentage of consumers who have rented or purchased a video is expected to reach 39% by 2012. It has been found from a survey that 54% of Americans still prefer a physical format like DVD and Blue-ray discs while purchasing a movie. ...Download file to see next pages Read More
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