Abstract
As old always gives way to the new, there are elements of the old that still hold on and refuse to be obliterated when their dispensation ends. Among the common examples are books in print, newspapers, and the movie rental shop. Whereas technology has created more efficient and effective ways of selling movies through online streaming, the movie rental shops, albeit exponentially reduced are still holding on. The instant research paper results from an in depth analysis of the current status of the movie rental industry in general and particularly how it has been affected by the advent of information technology. The study clearly shows that albeit the numbers of movie rentals have reduced, the industry still thrives.
Introduction
As man continues to advance technologically, new ways of doing things appear. Sometimes, the older ways of doing things get overtaken by events but others survive (Chao, Hegarty, & Fray, 2016). The movie rentals business entails having movies that are recorded in some form of device given over to customers for them to cart away at a fee and watch then return after an agreed period (Chao et al., 2016). This business was made possible by great technological advancement that resulted in the Video Home System, the Betamax tapes and later VCDs, DVDs and Blue Ray (Chao et al., 2016). In the advent of the 20th century however, film producers and marketers have come up with new ways of availing content directly to the home based consumers thus seemingly cutting out the movie rental shops. Yet there are still over 6000 movie rental shops in the USA still thriving (Chao et al, 2016). This research paper uses the Porter’s five factors to evaluate the current status of the movie rental business from a commercial perspective.
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Competition in the Industry
Competition in this sense refers to the threat of rivalry in the market and the propensity of losing to other businesses providing the same product. Within the scope of movie rentals, the competition considered is the overall competition from all businesses attempting to provide product to the market base not just among movie renters. It is worthy of notice that competition within the movie rental business circles is extremely low with no new investors venturing into the business. However, competition from other ways of availing movies is exponentially great and indeed consistently taking away the overall market of movie rentals (Chao et al, 2016). This competition mainly comes from marketers who stream videos directly to the consumers. The streamed content is relatively cheap and creates a lot of ease of access.
Potential of New Entrants into the Industry
The movie industry emanated from technological advancement and as technology continues to advance, the industry continues to change bringing in new entrants into the industry. In the 21st century came streaming, which took a larger part of the market. Within the last few years, other new and technologically adept players have come along. Companies such as Netflix are providing long term streaming contracts further whittling away at the market for movie rentals (Chao et al., 2016). The kind of technology that makes Netflix possible was unimaginable a decade ago yet technology continues to advance even as the film industry grows. This creates an assurance of the entry of more new players in the industry in the near future. (Dobbs, 2014)
Power of Suppliers
The power of suppliers is inversely proportional to the number of players in the industry (Dobbs, 2014). The film manufacturing industry has become extremely lucrative within the last half a century thus bringing in a continued supply of new players and widening the scope of suppliers (Hill, 2016). Even within Hollywood in LA, California, there is a high number of independent film producers not to mention other local centers such as New York and Atlanta and international centers such as London and Hong Kong (Hill, 2016). This high volume of suppliers results in very low supplier power which is good for the movie rental business.
Power of Customers
The power of customers in this case is directly proportional to the availability of choices (Dobbs, 2014). Currently, there is a wide array of legal and illegal choices for customers in the industry under which movie rentals operate (Hill, 2016). This includes legal and illegal streaming and buying movies in the form of DVDs and Blu-ray which has exponentially reduced overall costs through increasing the volume per disk (Hill, 2016). The aforementioned Netflix as well as cable based companies also provide a lot of options for customers. This results in high power for customers, which is detrimental for the movie rental business. However, for a specific clientele who is interested in older movies that were popular before the contemporary technological advancements, options are limited leading to low customer power thus giving movie rentals a bit of an advantage.
Threat of Substitute Products
As aforesaid, technological advancement has brought about major transformations on the world and substituted some industries. The movie rental industry has not yet been substituted despite the presence of many competitors in the market (Chao et al., 2016). There is however a very high probability that this might change soon. Netflix has taken a large are of the market that had been taken away from movie rentals by streaming companies. With every passing year, the technology employed by Netflix continues to advance. It is possible for Netflix or another technologically astute company to develop a way of leasing films online not just streaming them. A good example would be a film that is downloaded by a customer and remains available for use offline for a specific amount of time then it expires. This would result in a movie rental company with a branch within reach of any customer’s device. This creates an actual threat of substitution by a better product. (Dobbs, 2014)
As aforesaid, the movie rental industry is surviving but not thriving. From the totality of the above, it is clear that towards the end of the 20th century, movie rentals survived through adapting to new technology. However, with the advent of the 21st century and technology such as film streaming and Blu-ray, there is little room to adapt and movie rentals might only remain relevant for traditional content. The traditional content will however relegate movie rentals to a specific clientele which will further lessen its business.
References
Chao, C. N., Hegarty, N., & Fray, I. (2016). Impact of movie streaming over traditional DVD movie rental—An empirical study. Journal of Industrial and Intelligent Information 4(2),104-109
doi: 10.18178/jiii.
Dobbs, M. (2014). Guidelines for applying Porter's five forces framework: a set of industry analysis templates. Competitiveness Review , 24 (1), 32-45.
Hill, J., & Kawashima, N. (2016). Introduction: Film policy in a globalized cultural economy. International Journal of Cultural Policy, 22 (5), 667-672, doi:10.1080/10286632.2016.122364
