Why did blockbuster video fail

Nitpick here, Amazon was never really an online bookstore company. From wiki:

After reading a report about the future of the Internet that projected annual web commerce growth at 2,300%, Bezos created a list of 20 products that could be marketed online. He narrowed the list to what he felt were the five most promising products, which included: compact discs, computer hardware, computer software, videos, and books.

Bezos specifically went to Seattle to start a tech company, one that happened to sell books. I think Bezos envisioned Amazon selling it’s e-commerce IP to other companies from the beginning, as I’ve read that in the early days of Amazon he made sure that all of the engineering work for the site maximized scalability and reusability.

In much the same way, Netflix was very much a technology company that happened to rent movies by mail. It was founded by software engineers and run as a tech company, even when its only tech product was a website where you could sign up and search their catalog.

Anyway, I see your point that it’s not unheard of for companies to completely change business models, but a modern day Blockbuster would certainly be an extreme example of it.

I just can’t see that working. The B&M side would relentlessly focus on hamstringing the direct side. It would literally be an existential threat to their jobs.

I just don’t think it was possible to pivot. The best they could do is make bank as long as possible. It was structurally impossible.

I remember reading an article that talked about how Blockbuster had difficulty getting enough copies of the tapes/discs for the popular movies. So they made a deal with the studios. The studios would provide lots of free or low-cost copies for the new releases in exchange for a cut of the rental revenue (perhaps $0.25 per rental).

And in the glory days of Netflix’s DVD-by-mail service, they had what seemed like every movie ever released on DVD. So that was a huge advantage they had over Blockbuster, which had only a few hundred or a thousand titles in the store. And when I was a relatively new customer, I was on the three-discs plan and would get three discs, watch them the same day, return them and then get and watch another three movies within the week. Later, they started to throttle my account.

Honestly I don’t know how Blockbuster was successful in the first place. Around here at least, they were always the most expensive, let you keep rentals for the fewest days, had the highest late fees, and were the only movie rental business I know of that charged interest on their late fees. If you returned a movie one day late, most places you could wait to pay the late fee until the next time you rented from them, but Blockbuster kept tacking on fees and interest even after you returned the video. Also, their selection was only literal blockbusters. They didn’t have any independent, low budget or cult movies unless they got Oscar buzz or something. The only times I went there were when I was out of town and/or someone else was paying.

I’m not sure if it was actually possible, but they didn’t even try, not even 8-10 years before the bankruptcy. Everything they did try was after the fact and slipshod relative to their competitors.

The existential threat to the B&M jobs was the change in the movie market, not the existence of an online or mail order arm of the company. In other words, the B&M stores were doomed, no matter what the company did w.r.t. online or mail-order movies, and trying to pivot wasn’t likely to actually make things much worse, unless they did it too little and too late like they did. Had they decided to compete directly with Netflix as they came into prominence, they’d have positioned themselves better for the future, as well as sapped some of Netflix’s market share, etc…

FWIW, Netflix actually proposed a buyout by Blockbuster in 2000, with the idea that they’d rebrand as “blockbuster.com”, and perform the same stuff they already did, but under that name, and with better access to studios, etc…

You say it further down in your post- they were consistently the first to have certain blockbuster movies in any quantity. Most people (not all) aren’t interested in indie, cult or obscure movies, but would have rather rented the blockbusters of six months ago that they didn’t catch in the theater, or that they want to see again. That’s where Blockbuster was centered in the movie rental space.

Also, it was cheaper to wait for a movie to be available in the Blockbuster store than to take the entire family out to the theater. And back then, theater tickets were a bit cheaper than they are now.

I was thrilled when Blockbuster opened a store in my small college town. Before that, we were dependent on mom-and-pop video stores which had very limited selection and never enough copies of the most popular new releases. Blockbuster may not have had many indie or cult movies but they had a hell of a lot more than Joe’s Video or the rental rack at the grocery store, and you had a pretty good chance of finding that new release you wanted. The stores were also clean, spacious, and attractive. They did the video store thing better than anybody, and I can see why they were reluctant to abandon that model.

When I signed up for Netflix’s streaming service, I was on Comcast’s lowest, cheapest broadband tier—I think it was something like 3 Mbps. Netflix worked fine on that speed when no other services did. They proactively solved the problem, when they could have just told people “Sorry, the problem’s at your end. Sucks to be you.”

Also, they were ubiquitous. Right next to the grocery store and the pizza place. They were kid friendly. You could dump your middle-school age kids there while you shopped, let them pick out a couple movies, go get pizza or snacks.

That’s what they became eventually, but in earlier days Blockbuster actually had much greater selection. At least the one near me did.

I have very fond memories of Blockbuster when I was just out of college, and living on my own for the first time. This would have been in the very early 1990s, long before anyone knew what a DVD was, and video stores dealt in VHS tapes. There was a Blockbuster not too far from my apartment, and I thought it was absolute paradise! It was the biggest video store I had ever been in, and the staff was mostly friendly and helpful.

And while they did have a big focus on recent releases, in those days they also had a pretty good selection of more niche stuff as well. That store carried a good selection of foreign films, Hollywood classics from the 30s & 40s, old cliffhanger movie serials (which I was really into at the time), and even artsy stuff like opera and ballet. They even had a little section that was called “Le Bad Cinema,” with a small but interesting selection of cultish “so bad it’s good” films. That’s where I saw my first luchador movies!

It didn’t last, of course, and by the time that Netflix came along Blockbuster had long since pivoted to their 600-copies-of-the-latest-release-and-almost-nothing-else model. But in earlier days it was a damn good place to find movies, and I spent many a pleasant hour browsing through their selection back when I was a mere slip of a boy, and was able to see a lot of movies that I had previously only read about.

Redbox was started up as a side project by McDonalds. They located the kiosks in their restaurants and marketed it as an additional service to their main food business. It was eventually sold off to become an independent business. But that early connection was probably a big factor in its success.

Hindsight is 20/20. The Sears catalog was the Amazon.com of its day. They shut down the catalog before the internet took off.

It also still remains to be seen if Netflix will survive long-term. I’m bullish on them - they had a large head-start and leveraged that very well. Ironically the pandemic has been as good to them as it has to folks like Amazon. But they are carrying several metric shit-tons of debt and competition is finally starting to ramp up in a big way.

Amazon has made it, more or less. Netflix, as big as it is, is still jockeying for position.

Reminds me of Rand McNally - where my dad worked for 20+ years, and where I had my first jobs. They were never HUGE compared to really big companies, but they sure had significant resources and sway in their niche.

Who woulda been better poised to exploit on-line mapping and such? But the impression I got was that the rather conservative private owners pretty much assumed this internet thing would be a passing fad. Oops!

But so much of their existence was built around big fancy printing presses…

Just seems crazy every time I pass that vacant HQ up in Skokie…

this was my experience too.

The mom and pop stores maybe had 1-2 copies of new releases and you had a one night rental. blockbuster had many copies of new releases and let you keep films for several days. it was a huge step up.

But there were other chains back then too. Hollywood video, movie gallery, family video, etc. I think they did the same.

And yet this is precisely what NetFlix did.

I was one of the few people who signed up for Blockbuster’s DVD-by-mail service when they tried to go head to head with Netflix. In theory this could have been an even better service. It cost the same but also included the ability to return discs to local stores and get new ones rather than waiting for the mail. But the service was really bad. The discs took longer to go round trip and the error rate was way higher than with Netflix. The stores were kind of a hassle.

Obviously, sample size of one, but in addition to all the bad management and cost structure that doomed their traditional business, they also didn’t do a very good job when they tried to actually compete head-on.

The Innovators Dilemma (cited above) discusses this kind of thing. Netflix served its customers by providing a wide variety of movies to customers without requiring the customers to leave home - that meant that they served a set of customers who could get no good out of Blockbuster at all (if you’re housebound, or love obscure movies, or couldn’t guarantee that you’d be able to return a movie on a fixed schedule, you can’t get to Blockbuster or get what you want from it). Shift from mail to streaming served the same customer values - and it’s possible to reward staff for working on both mail and streaming at the same time, because the metrics are similar.

Blockbuster focused on having many copies of the most popular movies to draw customers into their stores where they could sell movie-related products (popcorn, etc.). Transitioning to streaming means giving up on the profits from popcorn, and devaluing the logistics of getting multiple copies of this month’s hits while selling off last month’s hits (because you don’t need them any more). Now the managers who are great at cross promotion of sales items at the brick and mortar stores need to learn to value a different kind of movie, and a different kind of service to different kinds of customers.

There is a VAST difference between reinventing a 5 yo business and a 25 yo business.

There’s also a vast difference between reinventing a business where most of your HQ staff will still have a job after the reinvention versus reinventing your business where most of the HQ staff will be gone.

I remember I got dinged for a late fee because I returned a video at exactly 12:02PM when it was due back at 12 noon exactly (this was back when they had the bright idea of making some rentals 36 hour rentals so you got a day and a half to return them in exchange for being slightly cheaper to rent) and it soured me on them for the rest of my life. Manager was adamant I had to pay the $7 “late fee” on a $3 rental despite the fact it was only two minutes late and if I had known that I would have just kept the film for an additional day.

Late fees.

I HATED them for those (hated, hated, hated). I get it but as soon as I had an alternative I left and never looked back.