Blockbuster, its no surprise

Tom Dougherty, CEO – Stealing Share

8 April 2009

Blockbuster’s shocking, shocking news

OK, maybe it’s actually the most predictive news imaginable that Blockbuster may have to file for bankruptcy and not shocking news. Many of us have been predicting its demise for years as its model – the brick and mortar movie rental store, complete with late fees and a small, extremely mainstream inventory – is as outdated as the home phone, the VCR and the cassette tape. In the land of Netflix and iTunes, many have been calling for its eventual demise.


What’s most interesting to me, however, is that Blockbuster tried to become relevant and failed. It attempted to adopt the Netflix model by also establishing its own mail-order service and even an on-demand device, yet Netflix just kept zooming on past it. Blockbuster’s revenue and market share has continued to slip while Netflix has boomed, reporting $1.3 billion in revenue last year. Why is that?

There are several reasons, all lessons of which companies should take heed. For one, Blockbuster was late in the game. When Netflix first started up in 1997, DVDs were just entering the market and the idea of ordering movies through the mail seemed quaint to the big retailers who blindly ignored the trend. That strategy, to an increasingly tech savvy public, felt like arrogance.

That’s when the backlash started. Blockbuster had been notorious for overcharging late fees, basically asking for the entire cost of the movie plus a restocking fee if you were late by more than a week. That resulted in a 2005 lawsuit and the timing wasn’t by accident. With new technology and business models, we didn’t need Blockbuster any more and were ready for some vengeance.

We’ve never felt the same about Blockbuster since.

Soon, the brand of Blockbuster was the one that looked quaint. It entered the mail-order business when its brand had little permission to do so from the point of view of consumers. It was the equivalent of Edsel marketing a sports car. It was still a car, but the brand – what Blockbuster stood for and how consumers saw themselves in it – did not fit the new model or, more importantly, the new customer.


Blockbuster simply made the catastrophic mistake by refusing to alter its brand. Without it, one that spoke directly to the new consumer, anything Blockbuster did operationally was destined to fail.

See more posts in the following related categories: Blockbuster DVD Netflix


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