Ten years ago, if you would have said that Blockbuster Video would disappear or fade out of relevancy people would have doubted your sanity. As of today, Blockbuster is in critical condition and expected to die at some point in 2011. How did this happen? How did a company that seemed ahead of its time fall so fast? As is the case in the business world, the winds of change blow in quickly. The inability to adapt quickly makes your company go from relevant to archaic.
The interesting thing about the fall of Blockbuster is not how quickly but how slowly it happened. At first, Blockbuster was a monster that stood alone. From its beginnings in Dallas, Texas it seemed that the market was one that they could dominate for many decades to come. However, as most things go in entertainment, the medium changed. First, VHS tapes became DVD’s. This wasn’t a problem. Entire libraries nationwide were switching from the clunky tape format anyway. What they didn’t expect was that anyone would be interested in anything more than a pay-per-rental model. Netflix quickly proved this wrong. They provided subscribers with unlimited rentals, no due dates and no late fees. This was made possible by the relatively simple and cheap methods of manufacturing multiple copies of DVD films. Normally a VHS tape suffers generation loss from one copy to the next. No copy ever looks as clean as the original source. However with DVD’s each copy looks as crisp as the one that came before it. This meant that any damaged or lost copies were easily and cheaply replaceable.
Blockbuster attempted to employ many different strategies to counter the growing number of Netflix subscribers. They dipped their toes into the online rental business only to see it flounder. They also tried to eliminate late fees. This campaign lost them even more money. While late fees had been abolished, many customers were charged the full purchase price and restocking fee of the film. This lead to a lengthy and costly investigation in 48 states. As of July second one of the last major blows was announced to investors. Blockbuster will voluntarily delist from the New York Stock Exchange due to share prices falling below $1 a share.
The future doesn’t look bright for the once dominate force in entertainment rentals. With Netflix, Hulu, and even Youtube entering into the market of streaming media, Blockbuster is once again left out in the cold. At this rate it only seems like a matter of time before the once dominate empire crumbles into obscurity.