Blockbuster

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industry. Essentially, this has created many barriers for traditional mom-and-pop video stores to maintain consistent revenues or expand and open new stores, ultimately driving many out of business. In the early '90s, there were some 70,000 stores nationwide that rented movies, compared to 18,000 today (Graham). The appearance of a new brick-and-mortar competitor for Blockbuster is an unlikely event.

Online however, Blockbuster faces different circumstances. In general, the internet will reduce barriers to entry for new companies by eliminating the need for an established sales force and existing channels. In addition, the internet makes applications difficult to keep proprietary. The internet has allowed Netflix to enter and become the leader in the online video rental business. Netflix has lower proportional upfront capital requirements than a chain of traditional movie rental stores. In addition, its distribution centers can be built in low-cost areas, and ...

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market for movie rentals and also created new competitors. Netflix, Wal-Mart, and Amazon.com are all competing with Blockbuster for online customers. With this new competition, Blockbuster was also forced to try and keep its brick and mortar side of the business as strong as possible. This caused a fight between Blockbuster and Hollywood Video for the acquisition of Movie Gallery, a fight Blockbuster ultimately lost.

These rivalries have also migrated competition to price. Netflix had been advertising its $17.99 price for its most popular three-movies-out, unlimited rental plan. Once Blockbuster entered the online segment, it cut its price to $14.99 for its ...

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