Module: 5 EDUC – 7108 – 2)
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Red Queens / Increasing Returns?
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Increasing Returns &
Red Queens
The movie I watched that
was inspired by one of Philip K. Dick’s book titled “Next.” Along with the assistance of my son using his
Play Station 3 we accessed the movie from “Netflix.” I accessed Netflix library
that showed other movies that were available on demand. However, my choice for the
movie “Next” was to bring across information with a precognitive scenario which
might be evaluated and compared with technology and knowledge development.
My preference however, was
to rent the movie from a Block Buster store where I had membership. Block
Buster had movies (DVDs) that were in “standard definition” and “high definition”
blue ray. I got a movie in standard definition compatible for using my laptop
with basic technology but educational value and replay. Rental at the Block Buster was made on the
basis of convenience, traditional practice for DVD rental and the ability to
wonder in a store to satisfy my visual enchantment.
I was not able to immediately determine that my
venue choice for obtaining a movie, and the resource I used was within a
competitive market due to quality, service and availability on demand. The
current competition between DVD resource supplier Block Buster and Video on
Demand (NTFLX) has changed drastically from “store front” to internet via
DISH. Strategies to survive include
merger, operational cost reduction and price competition to customers. Quality
by digital 3D has become oligopolistic and does not seem to be the major
contributing factor for “Red Queens” scenario. For DVD suppliers such as Block
Buster and Netflix to be Red Queens competitor the technology base from which
both services resonates must demonstrate similar digital presentation and
availability, but other marketing and driving forces.
Another way to evaluate
both competitors (Block Buster & Netflix) for DVD movies and Internet
movies is to look at market shares volume. But an astounding development for
Block Buster is its bid to be an acquisition by Dish Network (DISH). Block
Buster seems to have invested most of its finances in tangibles (DVDs), and in
its prime days at the advent of Netflix Block Buster had 23% market shares,
which was considered to be well established with potential growth. The
remaining shares were split among mom and pop stores. Netflix had to establish
itself in1996 among the remaining residual market before taking on the Block
Buster.
According to Devan Alexis (2010)
“A 1999 Business Week article describe Hollywood Video and Blockbuster as the
"...industries Coke and Pepsi" despite the fact that Hollywood Video
only garnered 8% of the market share versus Blockbuster's 30% at the time
(Browder, 1999).” This meant that Netflix had to prove itself among the
underdogs to rise above Block Buster’s waves.
Netflix with proper timing
and market awareness observed that DVD technology (machine) were more
affordable and common (4th strand of Christopher Anderson 2004) in
homes. But that was not all; Block Buster by 2002 had gained 38% and 40% of the
market share (Anderson Forest, 2002). Block Buster became overconfident in its
hold in the market place with high rental prices and late fees. Netflix
observing the market discomfort developed operational strategies offering
comparable and enhanced service along with price for mail service and video on
demand through television and internet service. Netflix rise to capture market
shares by better business plan in 2007 was like unto a “Disruptive Technology.”
Block Buster immediately copied Netflix’s marketing strategy to maintain market
share. Devan (2010) espouses “…once Netflix began to seriously take on
Blockbuster, and DVD usage increased, it was allowed to make drastic and unique
pricing changes that led to a significant increase in market share and even
more important, brand awareness.”
Netflix public operations for buying into
unpopular movies became a trend in the market among consumers. This reduced the public's anxiety for popular movies that was in short supply. Netflix established
connections for distributors setting up a movie library service that the public
could access 24/7s with recommendation on where and when to access movies. This
public relations and marketing strategies satisfied 70% of the market that Block
buster could not service (Shih, et al. 2007 in Devan 2010).
Some of Netflix strategies
to “run as fast as it can” to stay ahead of the game are: (a) increase in distribution
centers across the States (b) showcase library service for available stock only
(c) information to the public on when, where to get movies along with wait time
(d) establishing priority postal services with UPS (e) service plan
modification to stay ahead of cable services video on demand, and internet
video downloading.
Block Buster has declared
bankruptcy. Its earning is less than its debts per year. In 2009 a New York
Bankruptcy Court decided that Blockbuster should auction its business to a more
viable company (Wikinvest 2012). DISH network
has acquired Block Buster and is using one of the largest TV service providers DirecTV
to rival Netflix once more. DISH network believes that there are great
potentials in the services and products that Block Buster used to build its
niche market. The competition between Block Buster and Netflix is definitely a
“Red Queens” scenario. Each competitor is still in the market. “Increasing
Returns” does not fit where “Between two competing technologies, one technology
is chosen and the other disappears” (Thornburg’s 2009b video presentation).
These two competitors are copying each other’s business strategies to keep
their “cutting edge.” Devan (2010) tells us “Netflix's initial operating
strategy laid the foundation for the major factors that led to the company's
success…Blockbuster's operating expenses, was the key innovation to the Netflix
business model…The last operational barrier that still left Blockbuster with a
competitive advantage was their relationships and revenue sharing contracts
with major movie studios.”
The Red Queens competition
between Block Buster and Netflix is a game of rise and fall. For any of the two
service provider to stay in competition they must also rival other Technology service
providers such as Comcast (CMCSA) and Time Warner Cable (TWC). Today there are more
players in the market such as Hulu, YouTube, iTunes, Apple, Vudu and other
emerging technologies. Both Block Buster
and Netflix are investing in network service technologies and aggressively pursuing
online video service.
On McLuhan’s Tetrad DVDs
and video-on –demand will be defined in technologies that carry similar but
unique adaptability. On one hand (DVD) tangibility and as a product for diverse
adoption will be likely to be in the “retrieval” quadrant. DVDs retrieve the film roll that was capable
of graphics, voice and animation. This multimedia world also goes back to the
overhead projector that was manual operated for learning or entertaining
purposes. The video on demand can be viewed as “obsolescence” or replacing DVDs.
Many small and mobile technologies are emerging as “personal entertainment
side-kick.” DVDs however, will continue
to be an alternative technology for niche market supporters for both Netflix
and Block Buster. My prediction based on the K-12 population for the demand of
mobile and personal technology is that within the next three years DVDs will be
cut from the market by 70%. Both the DVD
and video on demand have “enhanced” movie entertainment. DVD enables storage in
shelved libraries while video on demand is in “cloud.” DVDs and video on demand are two products that
jig-saw McLuhan’s Quad-model. Some factors that keep the model interchangeable
for DVDs and video on demand are:
(a) creativity in the movie industry (b) movie release timing (c)
innovations in technology (d)
customers’ demand for service (e) new generation of customers (f) impact of
science fiction and (g) Red Queen’s competitive strategy that both competitors
are using to run as fast as they can to try to stay ahead of the game.
References:
Anderson, C. (2004). Chris
Anderson of Wired on tech’s long tail [Video]. Retrieved from http://www.ted.com/talks/chris_anderson_of_wired_on_tech_s_long_tail.html
Devan, A. (2010). Yahoo
Voices: Netflix and Blockbuster: Video on Demand. Retrieved from: http://voices.yahoo.com/netflix-blockbuster-video-demand-5779634.html?cat=15
Huff Post Culture. (2012).
Netflix, Hulu, YouTube Corner The Traditional TV Market With Their Own
Programming. Retrieved from: http://www.huffingtonpost.com/2012/01/27/netflix-hulu-youtube-internet-tv_n_1236218.html
Laureate Education, Inc.
(Executive Producer). (2009a). Emerging and future technology: Increasing
Returns. Baltimore, MD: Author
Laureate Education, Inc.
(Executive Producer). (2009b). Emerging and future technology: Red Queens.
Baltimore, MD: Author
Voice of Online Marketing.
(2012). Netflix, Hulu Fight for Market Share with Original Programming.
Watershed Publications. Retrieved from: http://www.marketingvox.com/netflix-hulu-fight-for-market-share-with-original-programming-050615/
Wikinvest. (2012). Media
Wiki: Block Buster (BLAOQ). Retrieved from:
http://www.wikinvest.com/stock/Blockbuster_%28BLOAQ%29