As I drive through town, I pass the local Blockbuster and wonder to myself, "why are they still in business?". As the last couple years have gone by, I have seen Netflix gain more and more momentum in the video rental industry and on the flipside have not seen Blockbuster do anything at all. Matter of fact, when is the last time you can remember even seeing a Blockbuster Video commercial? I can not remember one for at least 2 or 3 years! For a company that just about owned the entire industry it is a shame. So what happened? Did they just drop the ball? Did they not see Netflix coming at all? Or is it something completely different and have absolutely nothing to do with Netflix?
Blockbuster was the giant on the block. A few years back you could not go anywhere and not see one somewhere. It was almost the Starbucks syndrome. A blockbuster on almost every corner. Back before they hit it big, I think right before the DVD craze, everyone had a membership to their local mom and pop video store. And almost everyone could name every employee in the store. That is one thing that seemed to be a big difference between Blockbuster and the mom and pops, the personal treatment. The local video stores were usually so friendly. Mainly because the people who owned and ran them were regular people just like you and I. They were just people who loved movies. And back in the day the video rental store was a great business model. Everyone loved renting movies, to do so required a membership, and each movie rented for about $ 3 to $ 5 each. And you never went home with just one!
That all changed with the advent of Blockbuster. So much so that their name seemed appropriate. When they came to town, at first it looked a novelty. They had the bright lights. The familiar yellow and blue color scheme. And rows upon rows of movies. And that is just it. They had tons of them. Blockbuster came into town with multiple copies of popular movies and new releases. It was not unusual for the local Blockbuster to have a copy of the movie you wanted to rent on Friday night even though it was a brand new release that day. Maybe that was the draw? Maybe it was their "chain-store" like feel? Or maybe none of those reasons. But it was something, because soon after Blockbuster came to town the mom and pop video stores slowly fell apart. You could tell things were changing when the local video store that used to be crowded on Friday and Saturday evenings were almost empty when you walked through the doors.
In what seemed almost no time at all Blockbuster became the big kid on the block. They completely owned the movie rental market. And soon after that happened all the lesser stores were gone. Even the start-ups like Hollywood video did not stand a chance. Blockbuster was too ingrained in the market. It was theirs to lose, and that may have been exactly what happened. A few years after their dominance was solidified a new player came on the scene. It's not too often that after dominating a market so completely a company can be knocked off it's perch. But that is rather what happened to Blockbuster. Because a new player has just entered the game, and they were playing for keeps.
Netflix joined the movie rental party in 1997. Their business model was a bit different from Blockbuster. Instead of you having to go to the store to rent a movie, Netflix bought the movie to you. By now we are all familiar with Netflix and how they operate. But at the time, they were entering a market that was solely dominated by one company and doing so with a service that was untested. A risky move by anyones standards. However, their astute marketing and excellent service proved they were not only in the game but that they were in it to win it.
A short time after entering the market Netflix made what could have considered a smart business move. Early on in their history that they decided that instead of trying to compete with Blockbuster, the big guys, with their as yet yet un-proven business model, that they would attempt to join the movie rental monster. They offered Blockbuster a chance to join forces. They offered to Blockbuster a chance for Netflix to run their Online sales while Blockbuster would manage their brand in stores. According to an article by CNET about Netflix and their dealings with Blockbuster, they were actually laughed out of the office after Netflix made that proposal. Blockbuster did not think at the time that Netflix would be able to even compete with them in the rental market.
It did not take long for Blockbuster to see the error of their ways. A year or so after that meeting Netflix began to slowly eat away at Blockbuster's market share. Netflix was beginning to not double, but triple and quadruple their earnings from one year to the next. They welcomed in a subscription service to their model and that was the real difference maker. Netflix was now the dominant force in the video rental game and Blockbuster found themselves wishing they had a second chance at the Netflix proposition from years back. Sadly, a time machine has yet to be developed.
In September Blockbuster filed for bankruptcy protection and professors are teaching the Netflix business model in colleges all over the country. This story is clearly going to show that no matter the size of the company or the market, things can take a sharp turn anytime. You have to be very careful when change is upon you because most of the time you can not even see that it is there. Blockbuster should have seen something coming because when Netflix was making their proposal the ecommerce market was on the verge of exploding.
It is rather strange that the big wigs at Blockbuster could not see that when the rest of the business world did. Was it overconfidence in their brand? Or were they just secure in the fact that they had a hold on the market no matter what changes were up them? I think they should have perhaps examined their options more because they had opportunities to enter various avenues of the movie market and they sat on their opportunities. When they should have expanded their market, they expanded their store count. Eh .. but who am I to say what they should have done, I am just a Netflix subscriber!