The online Entertainment Rental Industry

Introduction

The Online Entertainment Rental Industry is new and growing rapidly. Online DVD rentals are very popular and book loaning is closely following this trend. This paper explores the Internet business strategies of two industry leaders: Netflix.com (Netflix) and Booksfree.com (Booksfree). Netflix is the founder of online DVD rentals. Booksfree is currently the only known online book loaning company. These two companies currently dominate the Online Entertainment Rental Industry and are studied in this paper. The lack of late fees or due dates has, without a doubt, quickly made these services highly desirable.

Netflix offers over 13,500 DVD movie titles for its subscribers to choose from. Selections include classics to new releases, including many independent, foreign and documentary films.

Booksfree is a pure Internet business, as is Netflix. Booksfree offers a virtual library in excess of 30,000 paperback titles. They have taken a market that already exists, and enhanced it to provide their customers with cheap access to books from the comfort home. Selections include current and former bestsellers as well as other popular titles from novelists who make their books available in mass-market paperbacks. Additionally, the retail portion of Booksfree offers over 600,000 titles available at competitive discounts.

Products and Services

Netflix offers DVDs only. Services include background information on DVD releases; including critic reviews, member ratings and reviews, and personalized movie recommendations. Also NetflixЎЇs proprietary Cinematch technology personalizes recommendations based on a member's tastes and preferences and allows Netflix to promote smaller, high-quality films to customers who otherwise might not hear about them.

Booksfree offers the mass-market paperback novel, which is the most popular recyclable product to process efficiently. Book categories range from Romance to Biographies and everything in between. A recognized opportunity for growth exists for books on CD as well as other recyclable products such as game discs. With more people traveling and new automobiles offering the CD player as a standard item, greater revenue growth is anticipated in the future.

Target Market: Demographics

The online book rental target market encompasses 80 million readers while the video rental market is an $8 billion industry. Because of the variety of books and DVDs offered by the Online Entertainment Rental Industry, the target markets are diverse. Anyone who enjoys reading or watching movies is welcomed as a customer. Both the book and movie rental sectors tailor product recommendations to customers based upon their rental history.

Welcoming all types of customers, specific markets for both book and movie rentals include the following:

Ўм Customers on the go, who prioritize flexibility, convenience and ease of use for their entertainment needs.

Ўм Women

Ўм Retirees

Ўм Persons without easy access to libraries and video rental retail stores. This includes a growing number of people on the go or those homebound due to age or disability.

Ўм Senior facilities. This service provides a wider access to recent entertainment for the greater enjoyment of the residents.

The DVD rental target market hinges on the success of DVD players, which has become ÐŽothe fastest selling consumer electronics device in historyÐŽ±. [i]

Market Share, Competition and Positioning

The Online Entertainment Rental Industry is emerging as a unique E-process and has accepted the challenge of altering typical consumer behavior. Rather than visit a library or video store, consumers adjust to ordering/queuing books and movies online and then receive them via mail. Available market share can be interpreted as that portion of the $8 billion video rental industry or the 80 million readers willing to alter consumer behavior and adjust to the online process. Attraction to this process lies in promoting better customer-friendly services than currently offered in the typical rental market. By holding a larger selection of products, offering free shipping, and eliminating late fees, the Online Entertainment Rental Industry has been able to lure customers into a new behavior pattern. This also offers expanded opportunities for people who live in remote locations with limited access to large video stores and libraries (i.e. Alaska).

Booksfree is a unique process without any known competitors offering similar online service and therefore currently maintains 100% of the market share for online book rentals. While they consider book retailers and libraries as competition, they currently hold the market with their online process. Unfortunately, this process cannot be patented or specifically protected and does not involve specialized/unique technology. Therefore, Booksfree is developing a set of complimentary assets to ensure their position as a market leader.

By partnering with the nationЎЇs two largest book distributors (Ingram Book Co. and Baker and Taylor, Inc.), Booksfree has established an effective means of acquiring books. Investing in an efficient warehouse management system and adequate website development enables the company to meet customer expectations. Booksfree plans to establish itself as the ÐŽobrand productÐŽ± for online book rental with a loyal customer base before others enter the market.

Netflix possesses a lead position in the national online DVD rental market, but has seen several competitors enter the market. Based upon our analysis, the following competitors play a role in this market:

Company

Number of DVD Titles

Distribution Center(s)

Netflix Inc.

15,000

15 nation-wide

RentMyDVD.com

12,000

California & New Jersey

WalMart

12,000