Syracuse - MS in Communications

Week 2 Blog Post: The Innovator’s Dilemma and Home Media

Home media as mentioned below, is any form of TV or Movies that are produced and distributed with the purpose of allowing people to consume the content from the comfort of their home, or own space. Traditional versions of this were the VHS tape, DVD and Blu-Ray Discs, and now digital downloads and streaming options.

The Innovator’s Dilemma is basically how companies sometimes struggle to innovate because doing so may hurt a current well performing product. A product that is doing great, or just good enough, is making money for the company, and can not allow you to see future possibilities. From our lectures, Apple is an example of a company that didn’t fall victim to this, as they introduced the iPhone in 2007, knowing that it would lead to the discontinuation of the iPod, its largest revenue driver at that point. Apple knew that eventually people would want all of their music directly on their phone (instead of carrying an iPod and a phone) and wanted to be the company to innovate to that point.

When trying to decide on a topic for this week’s blog assignment, I never had to investigate any other ideas. As an individual who owns over 100 movies on DVD, this topic interests me greatly. Especially as laptop computer manufacturers have begun discontinuing the disc drive, my DVD collection’s life expectancy sits in the balance. For the time being, I am in an okay place, as my Xbox One has a disc drive, but I have a feeling that eventually game consoles may go away from physical discs as well.

At its peak, DVD sales were a major aspect of disposable income for families. DVDs, and VHS players were clearly the dominant tech in the home video industry as they had the official backing of the movie and TV industry. Even if people did not buy DVDs from stores like Target or Best Buy, they were likely to eventually rent a movie or TV show from a rental store like Blockbuster, which notably only has one store left in the U.S. Competitors to DVDs included cable television, and premium subscription channels like HBO and Showtime. Still, those competitors had the issue of being non-negotiable on start times. Similar to network TV, people had to schedule their time around when the program was on TV. DVDs allow the individual to watch the program on his or her time.

Dominant players in the home media industry were Blockbuster and stores that sold/rented DVDs (as mentioned before), as well as Sony, Toshiba, Mitsubishi, and the other companies that produced the hardware required to play the discs. In addition, the DVD Forum was integral as it was “an international organization composed of hardware, software, media and production companies that use and develop the DVD and formerly HD DVD formats,” according to its page on Wikipedia.

A disruptive trend that was missed by many in the market was the creation and addition of video on demand (VOD) service. Cable companies began to offer in home ordering or rentals of movies directly from the TV. People like to watch movies, but it was certainly a hassle to go to your local video store and go through the aisles looking for the specific movie you wanted. It may be out of stock or it may be hidden. Video on demand service never sells out of a movie, is easy to find through the search feature, and costs essentially the same as Blockbuster charged for rentals. Video on Demand services and trials began popping up as early as 1992, but due to poor connectivity, and the cost associated with the service, it didn’t seem to truly become mainstream until the early-mid 2000s. Apparently Blockbuster attempted to get in on the early action by partnering with Enron (oops), but that deal ended up falling through.

Blockbuster responded by creating its own video on demand subscription service. Similar to Netflix, it allowed subscribers to rent movies in the mail, or subscribe to its limited inventory of movies available to stream. It’s interesting how similar the two were at their beginning stages of VOD, because Blockbuster actually had the chance to buy Netflix for $50 million in 2001. Netflix had a solid subscriber base of 300,000 customers, but was losing money from the costs associated with using USPS for its DVD mailing services. Most people don’t seem to know that Netflix is in fact a 20 year old company, having been founded in August 1997. 10 years later in 2007, it officially introduced its VOD service.  As it grew into the giant it is today, Blockbuster’s online streaming service ultimately failed, causing the company to cease operations in 2013. The on demand portion of the business still exists under the DISH and ROKU brands.

 

I think a main hindrance to Blockbuster was its belief that people would still prefer the ability to have more options available at the store. Netflix and other subscription on demand services, don’t offer all the new release movies that you would find in Blockbuster, but they make up enough selections. Cable on demand services and same day rental kiosks like Redbox offer enough as well, for a fraction of the price. On demand also benefits by only allowing a person to have the rental for 48 hours. No more rushing back to Blockbuster to return the movie or face the outrageous late fees. So essentially, on demand services are faster, more convenient, and usually cheaper or a similar price.

 

Not to make this entirely about Blockbuster, but they could have easily avoided this by buying Netflix back in 2000. Additionally, by giving more resources to the online platform it did roll out later in the decade. It probably didn’t help that “Southern Stores Inc., one of Blockbuster’s largest franchise operators in the United States, filed a lawsuit in federal court alleging that, by introducing Blockbuster Online and Blockbuster Total Access, the rental chain has undercut the group’s franchise agreement.”

 

It will be interesting to see how the DVD technology continues. News organizations are reporting that DVD sales haven’t seen as much of a dip as anticipated due to the extreme use of video streaming services. I think the older generations still prefer to have a hard copy of their favorite movies, despite new releases costing upwards of $20. As long as people still have the hardware in their homes (it seems most 20 somethings do not) it seems DVDs will still be a profitable industry.

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