Monday, July 19, 2010

Redbox vs. NetFlix: Strategy Convergence?

Over the past few years, NetFlix and Redbox have both been very successful, each taking aim at Blockbuster from different directions. NetFlix provided a deep movie library and great recommendations that matched consumer tastes quite well. It did not focus on renting new releases. Blockbuster, with its brick and mortar stores, could not match the selection offered by NetFlix. Meanwhile, Redbox took aim at the new release business at Blockbuster. It went with a very lean product inventory, only carrying a very small number of recent hits. Redbox offered incredible convenience at a very low price. Blockbuster found itself attacked from each flank, and it has suffered as a result. Redbox and NetFlix thrived in part because they were each attacking the weakened Blockbuster, but not threatening each other much at all. They had distinct strategies, meeting quite different consumer needs.

Now, that may change. Business Week reports that Redbox is contemplating a move to the web. We don't know the details of such a web strategy yet, so it's impossible to judge the chances of success. However, we do know that the two firms could be moving toward increased head-to-head competition. A collision could harm profits for both firms.


Unknown said...

Which company do you think has more to lose?

Michael Roberto said...

I think Redbox is taking the risk, by moving in on the space of a very established and successful rival. However, NetFlix is the one facing the new competition (as I don't think NetFlix is going to be putting any vending machines in convenience stores soon).