Recently, Blockbuster announced that it lost $435 million dollars in the last quarter. Blockbuster also has close to $1 billion in debt. Competition from companies such as Netflix and RedBox have put enormous pressure on Blockbuster. Netflix and RedBox primarily rent movies through online and kiosk DVDs. Netflix has $320 million in cash with only 6% debt. Clearly, Netflix is in a better financial position than Blockbuster.A lot of people especially those born in the 1980’s and 1990’s grew up with Blockbuster. Blockbuster has a nostalgic feel to it. Memories of Friday’s and weekends staying up late renting VHS (in the 1990’s) while eating pizza, having sleepovers, and spending time with friends is what this generation will remember. However, all we will have are these memories especially if Blockbuster goes out of business.
People should remember though that when a company goes bankrupt it doesn’t always go out of business. Sometimes other companies can purchase the bankrupt company and try to turn it around. Also bankrupt companies can try to reorganize and restructure their company and try to come back, but I doubt this would apply to Blockbuster given their dire financial situation
In understanding why Blockbuster is bankrupt it is important to realize that the company did not satisfy enough customers to cover their costs. People sometimes forget that it is the profit and loss system that markets operate under. The main reason however I believe Blockbuster went out of business is they didn’t keep up with the times. The digital media for DVD’s has changed in the past 5 years. Netflix allows people watch movies online and also transmit movies to televisions provided the user has the proper equipment. Equipment to transmit Netflix movies from the internet to the television can be purchased for only $80. Netflix also allows users to rent movies through the mail. One problem I see with Netflix is the selection of movies you are allowed to watch on the computer isn’t very wide. Hopefully, this will change in the near future. Perhaps, if Blockbuster really does go out of business it will allow Netflix to purchase content at a very cheap price.
RedBox is another service that customers to go to various kiosks usually at grocery stores, McDonalds, or various drug stores. RedBox allows people to rent movies through the kiosk but is only limited to the inventory that the kiosk provides. Also bringing back the movie to the location might get some people turned off. Maybe RedBox will allow people to watch movies online like Netflix.
At the end of the day, I think Netflix might come out as a major winner given they customers can get movies not only online but also through the mail. If Blockbuster really does go out of business this will increase Netflix’s moat and allow them to increase their profits. I don’t know what the future holds for RedBox for the reasons mentioned above but it will be interesting to see what the future holds for both companies. Although, I could be completely wrong and there could be an entirely different company that comes along and gives both Netflix and RedBox a run for its money.
In understanding why Blockbuster is bankrupt it is important to realize that the company did not satisfy enough customers to cover their costs. People sometimes forget that it is the profit and loss system that markets operate under. The main reason however I believe Blockbuster went out of business is they didn’t keep up with the times. The digital media for DVD’s has changed in the past 5 years. Netflix allows people watch movies online and also transmit movies to televisions provided the user has the proper equipment. Equipment to transmit Netflix movies from the internet to the television can be purchased for only $80. Netflix also allows users to rent movies through the mail. One problem I see with Netflix is the selection of movies you are allowed to watch on the computer isn’t very wide. Hopefully, this will change in the near future. Perhaps, if Blockbuster really does go out of business it will allow Netflix to purchase content at a very cheap price.
RedBox is another service that customers to go to various kiosks usually at grocery stores, McDonalds, or various drug stores. RedBox allows people to rent movies through the kiosk but is only limited to the inventory that the kiosk provides. Also bringing back the movie to the location might get some people turned off. Maybe RedBox will allow people to watch movies online like Netflix.
At the end of the day, I think Netflix might come out as a major winner given they customers can get movies not only online but also through the mail. If Blockbuster really does go out of business this will increase Netflix’s moat and allow them to increase their profits. I don’t know what the future holds for RedBox for the reasons mentioned above but it will be interesting to see what the future holds for both companies. Although, I could be completely wrong and there could be an entirely different company that comes along and gives both Netflix and RedBox a run for its money.
No comments:
Post a Comment