Blockbuster Hbr Case

Blockbuster became the dominant movie rental firm for a number of reasons. First and foremost in the early years, they were invested in by Wayne Huizeinga who infused the company with $18.5 million dollars and for a span of 7 years grew the company’s market capitalization at an annual growth rate of 118%. Once it started becoming large, it efficiently used economies of scale. It also had the most power to negotiate favorable deals with movie studios as opposed to mom and pop shops. Blockbuster covered all the factors critical for a successful video store which are depth of new releases, breadth of available copies, and store locations. One of Blockbuster’s biggest value drivers is geographic location. Most people, especiall in urban areas live pretty close to a Blockbuster location. Availability of titles is also a value driver that not all video stores can provide. Their reputation is also a value driver. Economies of scale are one of Blockbuster’s largest cost drivers. The ability to negotiate with movie studios with leverage while their competitors can’t as effectively win lower prices for inventory purchases gives a huge advantage. The aforementioned reasons are ammunition to defened against competitors. Geographic location and leveraging the brand name recognition are two of the most important advantages that Blockbuster has that none of its competitors can easily overcome.
After the formation of Blockbuster, the first major technological substitute to come along was the DVD (the digital versatile disc) and the DIVX (digital video express disc). There was a fierce battle between these two rival substitutes as they waged war. Both were looking to become the sole technology that would replace VHS. Blockbuster remained on the sidelines for the first few years after these technologies were introduced even though 8 major motion picture studios had committed to either DIVX or DVD (6 for DIVX and 2 for DVD) Once Antioco had made a decsion as to