Competition in the Movie Rental Industry Research Paper

Competition in the Movie Rental Industry - Research Paper Example Suppliers adopt strategies such as patents in order to acquire supremacy within the industry. Companies provide attractive movie prices and services in order to control the buying power of their customers. Buyers have several companies to choose from, and these companies must strive to keep their customers. Competition is high in the movie rental industry due to easy entry by new companies. There are several companies with similar products at reduced prices, which increase competition. Some of the new entrants provide substitute products such as cable services. Customers subscribe to cable providers, and they gain access to several movies at a reduced monthly price. Competitive rivalry between companies creates the need for new strategies and businesses enjoy a competitive advantage only for a short time. One of the five forces of competition is supplier power. Companies in the rental business acquire their content from studios and movie distributors. The movie industry has several s tudios such as Walt Disney, Pixar, and Warner Bros and other distributors from which rental companies can choose from. The number of suppliers and the uniqueness of their products determine the supply prices. Blockbuster purchased Movielink which is a leading movie downlink service and reduced the need for DVD’s and plastic cases (Blockbuster Corporate, 2009). Suppliers and distributors who deal with DVD movies will experience reduced purchase power. Blockbuster customers can purchase and download movies from Movielink which reduces the need for DVDs. Netflix acquires its content by buying DVDs from studios and distributors, paying on a fee-per-DVD basis (Thompson, Strickland, & Gamble, 2009). Some suppliers offer unique products, which reduces the chances of substitution. Movie studios and distributors generate revenue by selling movies to rental companies and a large number of viewers. This creates a symbiotic relationship between suppliers and rental companies, which contr ols supply prices. Buyer power in the movie rental business is usually high due to the wide range of movies present in the market. There is no legal substitute for movies in the market, which makes rental companies dictate the market prices. The industry has few operators who have similar product prices and deal in almost similar products. This enables the companies maintain high prices affordable by several buyers since they do not buy large volumes of movies. Netflix has over 8.4 million subscribers who prefer online browsing and mailbox delivery of movies. There is no cost of cancelling subscriptions and switching to other companies; therefore, there is little migration of customers. Blockbuster utilizes total access sealed envelopes that can be traded for movies at no extra cost. Buyers can utilize these envelopes to purchase movies of their choice from the local stores without incurring any shipping charges. Movie rental companies offer downloadable movies to increase the buyin g power of their customers. Competitors may offer different prices to attract more buyers. Redbox offers its customers reduced prices in order to have a competitive advantage over Netflix and Blockbuster. The high demand for entertainment across the world provides rental companies with large numbers of customers. The presence of substitute products in the market creates competition between different businesses in the industry. Customers have a wide range of entertainment products to choose