Module: 5    EDUC – 7108 – 2)

Red  Queens / Increasing Returns?

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 (4^th 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