Blockbuster has been dealing with competition from Redbox, Netflix and other media distributors for quite some time and has recently released a plan that will allow people to use new technologies to watch movies wherever and however they want.

Rajeev Goel, professor of economics, said, “This market in the delivery of digital media content is changing very rapidly and has still not stabilized.”

Blockbuster executives explained at the Consumer Electronics Show last month that they will be expanding the online video streaming service and also allowing people to buy or rent individual movies over the Internet. Patrons will be able to buy movies through one device and watch it on another.

Like Netflix, Blockbuster will be mailing movies out to those who are unable to find the movie in the store.

Blockbuster is also working with Motorola to create a video viewing application that will work with a new Motorola phone.

“Improvement of cellular networks to the point where they can deliver live streaming video to phones and other devices in areas that are not densely populated has the biggest upside for consumers,” John Hooker, professor of communications, said.

Two Texas Blockbuster stores are experimenting with machines that will allow users to download movies to a memory card then watch the movie at home.

The company is in early stages of testing and does not know if there is enough demand to expand the program.

While these ideas are a step in the right direction, some feel Blockbuster is making the changes later than expected.

“Two factors could be at work: Blockbuster failed to foresee the new challenges posted by changing technologies; or Blockbuster was waiting to see which technologies would stabilize and be viable in the long term before responding,” Goel said.    

“When technology advances, the previous industry leader often falls behind because the risk/reward ratio is much worse for them,” Hooker explained.

“When a new company with a new paradigm, like Netflix, arrives on the scene, they are able to push the envelope because they will either find great success or crash and burn. Large, successful companies like Blockbuster aren’t going to shift the entire focus of their business until a competitor pushes them.

“They could still win the battle to be the leader in movie delivery but they will need to rethink the entire way their business is structured to maximize their chances to succeed,” he continued.

Even with these challenges, Blockbuster does have some advantages over other companies.

“Blockbuster has the advantage over Netflix and Redbox in that it has physical locations, often in strategic places. The challenge for Blockbuster is to capitalize on this locational advantage in the face of changing technological landscape,” Goel explained.

Hooker believes the physical locations will not save Blockbuster in the long run.

“The brick and mortar stores such as Blockbuster will cease to exist 10 years from now. Focusing on convenience and Internet infrastructure will be the key for media delivery. The biggest challenge is figuring out how to monetize the service in a way that is competitive and still turns a profit,” he said.

“Redbox only costs you $1 per night to rent a film, but they can only offer so many options due to physical space. Blockbuster stores offer many more, but cost roughly five times as much to rent a film. Netflix streaming is paid for with a mail subscription, but isn’t high definition quality. That’s the easiest problem to fix and I think that is the direction the industry is headed,” Hooker continued.