Why wasn't Blockbuster prepared for online movie streaming?

People now forget or never experienced just how obnoxious and arrogant Blockbuster was, even when they were making money off of you. In the 90s I had a habit of renting a move or two to watch over a weekend, and would usually end up dropping them off a day late, and pay the late fee next time I went in. One time I didn’t rent any movies for a few weeks, and they sent me a letter threatening to take me to collections over the $2 late fee that I always ended up paying next time I went in. So I sent them a check for the $2 and switched how I watched movies (mix of a local rental chain and buying used DVDs for about twice the price of a rental). I would have been fine continuing to pay rental plus late fees, but not once they started making threats.

While they made good money when they were big, they got a really bad reputation with customers with escalating late fees and aggressive collection techniques. Since they were convenient people used them a lot, but they really killed any general attraction people had to their brand, so no one was loyal to the brand. While being late to the online game didn’t do them any favors, the fact that their brand wasn’t liked also hurt their attempts to shift; if I have a choice between streaming service ‘new and unknown’ and service ‘obnoxious and full of gotcha fees’, I’m going to go with the first one.

Generally, businesses fail because the executives don’t understand technology, don’t put any time into understanding it and then make bad decisions based on ignorance and fear.

Being in IT, I’ve seen plenty of companies shoot themselves in the foot by refusing to upgrade ancient, beyond support hardware and insist that we just keep it working.

Sears was the Amazon of the early 20th century, but the Ayn Rand cockroach who owns it now was never interested in investing in it’s future, just gutting the corpse.

Back in 1981, just as the first PCs were coming out, I worked for a company that sold and programmed CADO minicomputers. The owner was a sexist piece of shit who had already lost a sexual harassment suit brought by his ONE female employee. Then he made the timely purchase :rolleyes: of a company that sold electric typewriters. The entire female staff of the new company quit en masse, leaving him with the shell of a company (and no employees) selling something that was going to be obsolete within a year or two at best.

IBM was the very poster boy for jumping into technologies in the 70’s to 90’s that their executive team didn’t understand or support, then abandoning rich markets for dumbass reasons.

Likely the executive team of Blockbuster didn’t understand the technology and/or blew off the idea as cutting into their store sales.

OK, define what you consider a ‘mainframe’, because the z Series (IBM’s mainframe line, lineal descendant of the System/360, LPARs out the ass, MVS and TSO… that thing) is definitely not obsolete in terms of being a very high-availability high-throughput system with serious process separation capabilities. The i Series (AS/400, rack-mounted, from the 1980s Future Systems project… ) arguably is obsolete, but that’s midrange, not mainframe, and could reasonably be called a minicomputer if you’re Not IBM and therefore don’t use terms like ‘midrange’ to refer to computer designs.

It’s true the mainframe is no longer the default computer design, but that’s how progress usually works: Mainframes got pushed to the role they’re most suited for, they didn’t get swept away entirely. Things only get swept away entirely when they’re like Williams-Kilburn tubes or mercury delay line memory, and have absolutely no redeeming features relative to new technology. Mainframes, as high-availability systems with extremely strong process separation capabilities, have redeeming features.

Excellent answer to the OP!

Did Netflix rent vhs in the early days?

I recall Blockbuster had vhs and dvd for a long time. Some of the older titles were only on vhs.

“The Innovator’s Dilemma” https://en.wikipedia.org/wiki/The_Innovator’s_Dilemma covers this kind of issue in detail. Companies can innovate with new technology, but have a hard time dealing with a new kind of value to the customer. All the rewards to employees and managers go to those who are improving things in recognizable ways - while a small company is finding a dissatisfaction that hasn’t yet been recognized. So the Blockbuster manager making great deals to get the latest movies on their shelves at low prices, or to accurately predict how many copies of Kickboxer 4 is needed at each store to satisfy the customer, or starts selling popcorn at the checkout counter is innovating (and probably making the company a lot of money) in the recognizable DVD market - while Netflix is appealing to a few people who live out in the country, or hate crowded stores, or like the kind of obscure movies that never show up at Blockbuster - but Netflix happens to be setting itself up for the next growth industry, by having a business model that naturally can grow into a streaming service.

Blockbuster WAS prepared. Carl Icahn wasn’t (Icahn is a so-called ‘activist investor’ which basically means he’s rich and likes to buy up companies and force them to be run as he sees fit. He bought 191 million worth of Blockbuster stock so controlled the company), so he booted the CEO who was making the pivot to streaming and hired one of his own guys. Icahn was an idiot who didn’t understand the market and valued short-term gains over long-term stability. He thought the amount of debt taken on in order to go full streaming was too much, so he preferred bankruptcy. Honestly, if Icahn weren’t an idiot, there’s no reason to believe that Blockbuster wouldn’t have eventually won.

I don’t agree with this. Undoubtedly it happens, but in my experience tech business failures are more often due to failing to predict market factors accurately. I’ve worked for a couple of dozen high tech companies in my career, and almost all of them failed. But I can’t think of one that failed because the e-staff didn’t understand technology. Usually it was because they thought there was a bigger market for a product than there actually was, or that consumers would pay more for a product than they were actually willing to pay.

For example, I worked for 3DO, a company that made a high end video game console in the mid 1990s. It was a technically awesome machine, with features far ahead of its competitors. The company certainly understood the technology and was totally on top of the latest chips that could make the product better. What they didn’t appreciate was that consumers mostly didn’t want to pay $700 for a console when they could get one from a more familiar name (Sega, Nintendo) for less than half the price.

Later I worked for ReplayTV. Again, the company was totally on top of the technology. What they didn’t appreciate was, again, how much consumers would be willing to pay for their product, and in this case, the legal troubles they would get into with media companies by implementing a feature to automatically skip commercials in broadcast TV.

I have no doubt that Blockbuster considered the streaming business. They may have looked into it quite deeply. But a company whose main business is buying tapes and DVDs and renting them out isn’t really in any position to implement a full video streaming infrastructure, which is an absolutely ENORMOUS undertaking. It requires software and hardware engineers, network specialists, and a host of other technical expertise that Blockbuster previously had no use for. It would have been a major investment just to hire the appropriate staff, not to mention the infrastructure cost. They had to make the decision about whether it was worth the risk. They clearly made the wrong decision, but hindsight is 20/20 and there’s no way they could have been sure about the future course of the streaming video market.

Is Netflix itself now ripe for a disruptive challenger taking market share?

Netflix essentially killed Blockbuster by offering the same thing (movies) in a better way – cheaper, bigger selection and (once it began streaming) much faster. But since then, Netflix has evolved into more of content creator, and their selection skews heavily toward series (both self-produced and licensed).

That’s all fine, to a point. (I’m a happy subscriber myself.) **But what if you want to watch a movie? **Almost nothing from the big screen makes it to Netflix anymore (reportedly because the studios now view Netflix as a competitor).

So a new streaming channel offering recent movies for a flat monthly fee could probably take a big bite out of Netflix.

They say that Netflix killed Blockbuster and maybe it’s just me but 9 out of 10 movies I search for on Netflix just aren’t there. Blockbuster would have always had these for rent.
I assume you just use the “search” function on Netflix and type in the movie?
I couldn’t find Bill & Ted’s Excellent Adventure or Bogus Journey, Psycho, Mad Max, Ghost, Groundhog’s Day, Point Break, Star Wars.
Am I doing something wrong or is the selection on Netflix that piss poor?

Pretty much what I said one minute earlier!

And if Blockbuster didn’t have the particular movie, the surviving mom and pop might.

Remember Blockbuster had a chance to buy Netflix for $50 million. They passed on the opportunity. Netflix is now worth around $40 billion.

Companies are like animals that have evolved to fill a particular niche in the ecosystem. When things change it is very hard for that animal/company to adjust to the new environment.

Blockbuster was on every street corner. Despite being less convenient Netflix got their foot in the video rental door because there were no late fees. People despised late fees with a passion and Netflix solved that problem. Order a video, keep it as long as you like and pay a flat fee.

Blockbuster just could never break from its original model (I think, near the end, they did away with late fees but by then it was waaay too late).

Here’s another example: Know who invented digital photography? Kodak. But it did not fit with their model of selling film so they shelved it. Look where that got them.

Unfortunately the powers that be in a company would be fired in a heartbeat if they pushed out a new tech that destroyed the thing that made the company profitable. Instead they limp to their inevitable demise.

The Netflix streaming service and the Netflix DVD-by-mail services are very different. Many titles are available on physical DVD/BR but aren’t available for streaming.

If they would have jumped that would have been a death sentence too. The side of the coin they were getting was soon to die.

How is this new streaming company going to acquire the rights to stream recent movies, and how much will it cost them? Would you pay for this service if it cost $100 a month? If it were possible to stream recent movies profitably, Netflix would be doing it.

Actually at the time 1.5 Mbs was enough as HDTV was just a glean in the super rich’s eye, everyone else sported standard definition, with compression would be deliverable at that rate or slower. At the worst some buffering.

This is why I kept my DVD subscription with Nextflix for so long. You can still get almost any movie you want on DVD from Netflix. But there are all kinds of licensing issues with offering streaming video. If you buy a physical DVD, you have paid all you ever need to to pay for it and you can rent it out, sell it, or give it away. The licensing deals for streaming content have expiration dates, and the availability is paltry. There are a handful of recent movies and classics available for streaming and a whole bunch of “B” movies. I don’t know why Netflix doesn’t license more titles. I am looking at Amazon and Verizon (my cable provider) as alternatives for recent on-demand films I actually want to watch.

Are you looking for these movies on Netflix’s streaming service or the DVD service ( which I think has a different name now)? I’m guessing that you’re looking on the streaming service and I suspect they would still be available through the DVD service. There’s a very big difference between streaming and DVD rental - if Netflix buys a DVD copy of Star Wars, it can be rented as long as the physical DVD will play. Even if only one person a year rents it, it doesn’t cost Netflix anything more than the storage space to keep it available. If instead of buying a DVD, they instead pay for a streaming license, that license will expire. When it expires, either the license will be renewed or it will be removed from the collection. If it’s not popular enough, it will be removed. The same thing happens with libraries and ebooks - I was on a wait list for an ebook and was notified last week that the license expired.

( I’m actually not sure you could find those movies at Blockbuster today if it still existed. I seem to recall Blockbuster having a fairly good selection of relatively new movies and not much of a selection of older movies)

The classic book on this is My Years With Xerox: the Billions Nobody Wanted by John H. Dessauer.

Chester Carlson invented xerography (as it later became known) and went around to sell his patent to all the big business companies of the day such as IBM. They all passed. The small Haloid company made a deal with him, eventually becoming Xerox, and the rest is history.

Later, it was Xerox on the other end. They bought out a company making IBM 360 clones. It tanked. They got gun shy of computers. Meanwhile their research folk at Xerox PARC were inventing the future. The Xerox Alto desktop computer, Ethernet, laser printers, the “windows” interface, etc. Didn’t jump into the office computer business until it was too late.

It was said that if Xerox had marketed all this right away Apple wouldn’t exist.

Rochester, NY became a tech hub with Kodak and Xerox. Kept it alive while other cities like it were dying. Now it’s catching up.