5 lessons from the fall of Blockbuster
Blockbuster was once the giant of the movie rental industry, with thousands of stores across the globe and a recognizable brand name that was synonymous with renting movies. However, the company failed to adapt to changing times and ultimately crumbled under the pressure of technological advancements and shifting consumer habits.
The first Blockbuster store was opened in 1985 by David Cook in Dallas Texas. What set his store apart, was its ability to offer customers a wide selection of VHS tapes and a modern computerized check-out process, unlike his competitors offering a few tapes. This differentiating idea took the company to the top of the video rental market as it expanded year after year, acquiring smaller video rental companies and expanding to 1000 stores and overseas in the 1990’s.
Viacom acquired Blockbuster for $8.4 billion in 1994 and in five years after that, Viacom had taken the store public and the number of stores had skyrocketed to 6000 worldwide.
Th new Kid on the block.
Blockbuster was the biggest video rental company in the 90s, up until Netflix was founded by Reed Hastings. Reed founded his new company for the simple reason of not wanting to pay late fees on his video rentals from Blockbuster, a growing frustration amongst the Blockbuster’s customers. The company was said to have been making 16% of its revenue from late fees, about $800 million, I don’t blame them for that for maintaining that. Reed’s idea was to send out DVDs in the mail at a flat monthly rate with no late fees, and it was a hit.
Despite seeing the writing on the wall, Blockbuster failed to embrace innovation and capitalize on opportunities to remain relevant. In 2000, Blockbuster was offered the chance to acquire Netflix for $50 million, but ultimately passed on the opportunity. At the time, Netflix was still a DVD-by-mail service and not the streaming behemoth it is today. Had Blockbuster acquired Netflix, it could have potentially saved its business model and remained a player in the movie rental industry.
Well, 2 years later, another competitor, Redbox peeked into the market and capitalized on Reed’s proven idea of customers wanting faster rentals with no late fees while Blockbuster remained the same. In fact, it reached 9000 stores and brought in a revenue of $5.9 billion around that time. Business was indeed booming.
The Downfall
Viacom and Blockbuster went their separate ways and Blockbuster launched a new venture, Blockbuster online, and ended its late fee charges. But at this point it was too late. Netflix had made that move years ago and was the company growing exponentially.
Netflix was growing in popularity as Blockbuster’s market value was freefalling to the bottom of the video rental market. Blockbuster lost part of its revenue due to the no late fee option it adopted in addition to building its online venture.
The company filed for bankruptcy in 2010 and was taken of the NYSE list. Dish stepped in to buy the company, hoping to keep its last remaining stores open but ended up closing half of what remained.
As you read this, the last Blockbuster store remains open in Bend, Oregon, for the last of the company’s loyal customers.
What happened to Blockbuster?
Blockbuster’s slow response to the changing market conditions and its lack of innovation ultimately led to its downfall. The company’s profits began to decline in the mid-2000s, and by 2010, Blockbuster filed for bankruptcy. Despite attempts to restructure and rebrand, Blockbuster continued to struggle and ultimately closed its remaining stores in 2013.
The company took Netflix’s idea too lightly. Instead of moving in to capitalize on Reed’s no late fee idea early on and acquiring the company for $50 million in 2004, Blockbuster watched as a new idea slowly stole its customers.
The downfall of Blockbuster is a valuable lesson to businesses about the importance of adapting to changing market conditions and consumer habits. Here are some key lessons that can be learned from Blockbuster’s demise:
1. Embrace innovation: Blockbuster failed to innovate and embrace new technologies, such as streaming services, that were disrupting the movie rental industry. This led to the company’s downfall. To avoid a similar fate, businesses should always be on the lookout for new opportunities and ways to innovate.
2. Keep an eye on the competition: Blockbuster had the opportunity to acquire Netflix early on but passed on it, which turned out to be a costly mistake. This highlights the importance of keeping an eye on the competition and being willing to take calculated risks.
3. Stay customer-focused: Blockbuster lost sight of its customers and failed to meet their changing needs and preferences. Businesses must stay customer-focused and remain attuned to their evolving needs and desires.
4. Be willing to adapt: Blockbuster’s in-store rental model became obsolete as the market shifted towards online streaming. Businesses must be willing to adapt and evolve their business models to stay relevant and competitive.
5. Don’t become complacent: Blockbuster was once a dominant force in its industry and perhaps became complacent as a result. Businesses must remain vigilant and never become complacent, as markets and consumer habits can shift rapidly.
By learning from the mistakes of Blockbuster, businesses can avoid a similar fate and position themselves for long-term success in a rapidly changing business landscape.
This story of the ones great video rental businesses in the world serves as a cautionary tale for businesses that fail to adapt to changing times and consumer habits. While the company was once a behemoth in its industry, its inability to innovate and keep up with technological advancements ultimately led to its demise. Today, the Blockbuster brand name lives on in popular culture, but the company itself is a relic of a bygone era.