Question:
1) Is there room for both an independent video rental store such as Video Vault and a large
chain such as Blockbuster in this market?
2) If you were managing video Vault, how many copies of Heist, A.I., and Zoolander
would you stock?
3) Why does Video Vault differ from Blockbuster in the number of copies of movies it
stock? Would a studio that owns the title to the movie be indifferent between the stocking
policies of Video Vault and Blockbuster?
4) What is revenue sharing? What impact will it have on the number of copies stocked by
Video Vault, its profits, and on the profits of studios?
5) What is the role Rentrak plays in this scenario? Should Video Vault sign
Answer:
1) Is there room for both an independent video rental store such as Video Vault and a large
chain such as Blockbuster in this market?
Yes, we think there is room for both an independent video rental store such as Video Vault
and a large chain such as Blockbuster in this market. They both have their own advantages
and disadvantages and they are both indispensable in the market.
Advantages of an independent video rental store such as Video Vault:
up with Rentrak?
– A lot of small video stores closed, they were able to get a percentage of their business.
– They have an independent nature, which is their personal touch. They are familiar with
the customers and their favorite movies. But the in the large chains, the employees are
young and inexperienced, they dont know or care about the customers and they are paid as
little as possible.
– Some independent video stores such as Video Vault have good locations, which are close
to residential area.
– The big chains marketing and product mix can put people off. They carry too many
DVDs. But the independent stores carry DVDs as well as enough amount of VHS product,
so they arent as overwhelming to the customer who hasnt adopted the technology yet.
Also, the big chain stocks too many new releases they the older classics are left out.
– Studios began to offer special price packages directly to retailers after the class action
lawsuits by independent storeowners.
Advantages of a large chain such as Blockbuster:
– They have struck incredible deals with the studios, which provide them with hundreds of
new releases. The revenue-sharing contracts with studios provide them much lower
product prices and greater copy depth.
– They have good promotional strategies such as giving away coupon for a free rental.
