I don’t understand why a company with such wealth and success in the 1990s wasn’t prepared before Netflix existed.
Or is a lot of a company’s success in the name? Netflix automatically tells the consumer that it’s watching movies online and without a physical copy.
Blockbuster could have created a new name for online streaming similar to Netflix before Netflix existed.
Didn’t they hire people to plan for the future?
When the status quo is greatly to your benefit, your desire is to maintain that status quo.
Smart companies enjoy the status quo while acknowledging that it won’t last forever and making plans for the changed future. But not all companies are smart; some ignore or resist change. But the change occurs anyway and they can then be overwhelmed by it.
Netflix started as a mail order service.
Blockbuster was right around the corner from many people’s homes. You could browse movies in a rental store. Something I enjoyed a lot.
It seemed like Blockbuster had a better business model. Everyone, including me, was shocked when the mail order option became more popular. People liked just picking a movie from a list and ordering it.
People disliked returning discs to a store. They paid a little more to keep the disc. Or they mailed them back to Netflix.
Remember that Netflix didn’t believe in streaming either until much later. They started out, believe it or not, as a DVD rental company just like Blockbuster. What was disruptive about them was their much bigger catalog (centralized efficiency of scale), their much cheaper monthly subscription, their deals with the USPS, and their recommendation system based on your personal ratings. By the time Netflix started considering online streaming, Blockbuster was already nearly dead.
Netflix was just a better service all around, and Blockbuster didn’t want to improve their service (even when they eventually did a subscription package much later, it was on worse terms and still more expensive). They bet on their name brand (meaningless to younger people), and immediate gratification (undermined by Redbox) and ended up with a worst-of-all-worlds scheme. If you wanted many cheap movies, Netflix was better. If you absolutely had to see something tonight, the local Redbox was better. Blockbuster was only if your parents forced you to go to the store they were familiar with and willing to pay for their rip-off prices.
shrug They paid for their own arrogance. They had plenty of time to adapt to change, and stubbornly stood their ground. Netflix took a decade or so to really become established, and all Blockbuster did in that time was “Nah bro, we got this, we’re Blockbuster!”. They deserved to die.
Edit: Also the franchising probably didn’t help, since they couldn’t quite turn on a dime the way centralized Netflix could.
Hubris.
In 2000 Netflix founder Red Hastings proposed a partnership with Blockbuster; Netflix would run the online services, and Blockbuster would promote Netflix in their stores. Blockbuster emphatically declined (described in several articles about the meeting as “laughed out of the room”). Whoops.
They just didn’t see it. They were already heavily invested in their brick-and-mortar locations and were very good at what they did, but they assumed in-person rentals would last forever. They were very, very wrong. Once they saw the writing on the wall, they had to re-tool their entire organization and tried to compete directly with Netflix but were already too far behind to ever catch up.
Edit: Someone beat me to it.
I think I’ve read Reed Hastings quoted as saying that he intended to build a streaming service all along, but it wasn’t feasible until fast Internet was common. Their DVD-by-mail service started in 1998 and around then, I first got DSL at about 1.5Mbps. Not nearly fast enough to stream a movie.
And I believe Blockbuster had its own DVD-by-mail service for a while.
Kodak went down the same path at Blockbuster. They actually had a digital camera ready to go but wanted to keep their film business going as along as possible. They completely missed the boat on purpose.
It wasn’t just Blockbuster - streaming killed pretty much all of the video stores.
You also have to remember that Netflix’s bread and butter for a long time wasn’t streaming, it was their mail service. Netflix was founded in 1997 - broadband wasn’t ubiquitous for a long time after that.
Blockbuster and Hollywood Video both tried to pivot while still taking advantage of their existing infrastructure, which was all about getting lots of physical copies of a movie to centralized locations. They had “all you can eat” monthly models where you could go into the store as often as you wanted and rent as much as you wanted. For a while, that made them better options than Netflix. Why wait for snail mail turnaround when you can just swing by the
video store on your way home?
When I lived close to a Hollywood Video, I used their service. Later I moved and was a five-minute walk from a Blockbuster. I loved being able to stroll over there and get a movie or TV show.
edit: That’s what I get for walking away from my computer while typing a response. This thread has more ninjas than an 80s action movie.
It’s ironic Blockbuster swallowed up the 80’s mom & pop video rental stores.
Then they get wiped out by Netflix.
The entire local video rental industry just imploded.
Okay, how common is it in general for companies to “plan for the future” in the sense of looking for ways to change their currently-successful business model?
How many people remember the small local video stores that had at least one movie buff that would steer you to wonderful, older movies? My local rental store had a deep section of film noir. The owner loved that genre and often talked with customers.
Quentin Tarantino famously had a video store job like that before he made it big in films.
Blockbuster never offered that service. The staff never seemed interested in discussing films or making any recommendations.
Blockbuster also reacted by leaning the wrong way. In response to pressures from both Netflix and Redbox the company elected to emulate Redbox with standalone movie kiosks at convenience stores. It didn’t go well.
One of the big advantages of the Netflix model was and is that the central warehouse can stock many more titles than a single Blockbuster location can. So you can get really obscure stuff from them.
Corporate inertia. Much the same as Poloroid and digital photography.
Man, the balls of that ad: cheering crowds! Fireworks! People applaud, or dance in the streets, or drop to their knees! A black man nods approvingly! A white woman says, “it’s so beautiful!” It’s as if one thing can unite folks from all walks of life, as we’re told, Someday, You’ll Remember Where You Were When You First Heard That There Are No More Late Fees At Blockbuster! If You Need An Extra Day Or Two With Your Movies Or Games, You Go Right Ahead! Take ‘Em! Relax! Enjoy!
(Unsaid: oh, there’s still a fee if you’re late; but it’s not a late fee!)
Sure, but at the time all I really cared about was how quickly I could get my hands on season three of [whatever], and the physical store still beat out Netflix in that regard.
It’s not uncommon. IBM invented the PC, but refused to price them competitively for fear of cannibalizing their minicomputer sales. So instead they let Compaq et al. cannibalize their minicomputer sales. :smack:
The list of companies that didn’t sabotage themselves by trying to cling to obsolete business models is probably significantly shorter than the list of companies that did.
There are many technology companies that failed to see or respond to a sea change that rendered their primary business model obsolete. IBM was dominant in the mainframe business but the shift to desktop PCs opened them up to all sorts of competition. Microsoft famously almost missed the shift to the Internet.
And then Google introduced the Android OS for smartphones as a response to Apple’s closed IOS model. They copied the way that Microsoft offered DOS and then Windows to any and all manufacturers as opposed to Apple, where the Macintosh OS was only available on its own computers (except for a brief experiment with letting others build compatible computers).
It is very difficult for a large, established company to pivot away from their successful business model and into something completely new. In the case of Blockbuster, their original path to success was selling franchises and buying competing video stores and regional chains. They maintained a large inventory of videos for customers as well many property holdings, and supplemented video rental income with food sales and other items. Moving to a streaming video model would serve to undercut their existing business while reducing overall revenues compared to a subscription service like Netflix, so even though they might reach a wider audience it would represent a contraction of revenues. Kodak is a good comparison; digital would so undercut their fundamental business (film) that it just didn’t make financial sense to sell a competing product, even though it is in retrospect (and obvious even then) that others would step in and undermine their business regardless.
In both cases, it was pretty obvious that the transition would happen even though when the enabling technologies were sufficiently mature. I predicted video streaming in the early ‘Nineties and the ascendence of digitial photography in the mid ‘Nineties (and was poo-pooed at the time for both), but both required not only improvments in computing and imagining technologies but advances in processing power and lossless or low-loss compression in imaging codecs, as well as wide availability to high bandwidth internet access to become viable.
Almost never intentionally in the case of a fundamental transition because even when companies know that a change is coming they are resistant to undermining their current business. IBM is the perfect example of this; they developed the PC but tried to restrict its usage to not compete with their mainframe business, and then competitors advanced PC and Unix workstation/server technology rapidly to the point that truck sized mainframes became obsolete in a matter of a few years. IBM was never very competitive in the personal computing hardware business even when they produced a superior product like the Thinkpad, and ended up essentially failing out of the hardware market entirely despite of how lucrative it can be for a company which can control costs and attract a customer base. It is actually fortunate that they did, because IBM essentially transitioned into an enterprise information technology service provider, while competitors like DEC, Wang, and SGI have disappeared completely while other computer makers like HP/Compaq, Dell, Sony et cetera have struggled or gone through various mergers and aquisitions in order to remain viable in the field of computing hardware.
Stranger