Turbulence – No business model is safe or everlasting

A few months ago, I wrote an article titled “Innovation is the only sustainable competitive advantage” Here are some of the excerpts:

The video rental business was dominated
by Blockbuster and Hollywood (plus a large number of local and regional
players) until 1999. Netflix entered the scene with an innovative (at
that time) way of renting videos in DVD format.  Netflix basically
changed the rules of the game forever. While the traditional rental
stores were determining response to this new kind of assault (and many
of them ignored that this was a passing fad), several other companies
sprang up emulating the Netflix model. Internet levels the playing
field for all. While it is easy to change the rule of the game, it is
difficult to defend a pure internet business model for a long time
(there are exceptions though!).  The initial success of Netflix
did not make a significant impact on the bottom line of Blockbuster for
quite some time. However, observe some of the events that have happened
in the recent past:

Introduced “Blockbuster Movie Pass” at $24.99 per month for rentals
with no due dates. For $2 more, you can rent a few more movies per
month as compared to Netflix. Also, Netflix can never satisfy the
instant gratification quest.

McDonalds: Announced in May 2004 that they are going to test the DVD rentals at about 100 of their stores in Denver.

Walmart: Offers a similar service for $13 a month

Blockbuster: Announced that they are going launching their own online rental service (now launched!!)

Broadband movie rentals: The two key players in this space are CinemaNow and and MovieLink. You can download a movie instantly if you have a broadband connection. Rentals begin at 99 cents per movie.

In the past few months what has happened:

Netflix: Cuts it prices drastically. Now rentals will start at $9.99 per month

Blockbuster: Cuts its monthly price to $14.99 per month. Plus you can rent a couple of videos from the store as well.

Media Center PCs are becoming popular and will make MovieLink and CinemaNow attractive alternatives. Watch out for one more post related to MovieLink soon.

The point is just to prove the need to innovate like crazy and keep
ahead of the game. If any of you would like to read the complete
article, please send me an email with subject “Innovation article”
(that’s the way I setup my filter) “rs at lifebeyondcode dot com”