The Fall of Blockbuster; the Rise of Netflix, Redbox and Online Video
You may have heard by now that Blockbuster has filed for bankruptcy. While the company will continue to operate and intends to be back in business once it has completed Chapter 11 proceedings, it will likely shed at least 1,000 of its 3,000 U.S. stores along with countless customers in the process.
According to Blockbuster’s pre-arranged plan, the company will cut its $1 billion debt down to $100 million or so. The proceedings include a $125 million deal that will keep Blockbuster’s stores afloat for now. Most of the company’s debt is to major movie studios — the company owes Fox $21.6 million; Warner Brothers, $20 million; Sony Pictures, $13.3 million; and the list continues.
As expected, Blockbuster tried to soften the blow as much as possible by calling the process a “pre-arranged recapitalization.’ As Mashable’s Jolie O’Dell quipped earlier today, it’s like calling an eviction a “pre-arranged relocation” when you haven’t been paying the rent.
Absolutely nobody should be surprised. The once-mighty king of video has been on the decline for years, as a lovely graph from The Consumerist points out. On the other hand, the fortunes of Netflix, Redbox, Hulu and others have been on the rise.
It’s the same thing that’s been happening to the newspaper and publishing industries; new and more efficient business models have emerged, making previous models increasingly obsolete. Netflix’s rental-by-mail model and Redbox’s $1 DVD kiosks have clearly won, but so have the online video distribution models that Netflix, Hulu, YouTube and others have pioneered.
In a word, Blockbuster is the past; Netflix, Redbox and online video are the future. No amount of pre-arranged recapitalization will fix a fundamentally broken business model.
Image courtesy of Flickr, RocketRaccoon
It's interesting to look at just how many opportunities Blockbuster missed to reinvent its business model for the digital age:
DVDs by mail – Netflix got there first
DVD kiosks – Redbox
Streaming video – Netflix again, Hulu, et al
These are all logical advancements in getting movies to consumers, and are all services that Blockbuster begun offering long after the market already had a dominant player. Businesses who can't evolve with the times don't deserve to remain in business. In Blockbuster's case, this has been a long time coming.
This is what i don't understand about Blockbuster. Sure they were beaten to the punch but why not put more effort and resources into those distribution channels. Because they never stole someone else's good idea and streamlined, they deserve to go out of business.
They new this would happen but banked on their members being loyal. They have their branches in areas where families live so they banked on them still coming into the stores and they didn't want to shell out the money to do it properly online. They can't say they didn't see it coming. I for one am saddened by this because I've always liked BB. They will just go away just like the print industry will… A slow and agonizing death.
I really don’t think loyalty counts for much in this industry. Blockbuster pushed out a lot of Mom and Pop Video stores 20 years ago and now the same is happening to them.
Redboxes are big at McDonald's restuarants
I have great memories of blockbuster.
/s?
They knew its coming and they didn’t do a thing about it. They thought they can’t be toppled with their huge size. If only they had sit and planned on going online, they could have been on a better position than to wage the war against Netflix and others.
….Well….they still go games because, Lets be honest, Gamefly is too rich for my blood and I hate to wait…
PC's have Steam, the Wii has an online store. There is also PSN, but AFAIK, you can't buy new games from it yet. If Sony, Microsoft, and the game developers put their minds to it, games disks might just go the way of Blockbuster. Better internet speeds for downloading 6+ GB games wouldn't hurt either.
PSN also allows you to buy full new games, as does the Xbox 360 Marketplace. The 'big three' (Nintendo, Sony and Microsoft) have all claimed that they don't expect games on physical media to disappear for a while, though.
Their prices have gone up too. 1 vid for half the price a Netflix subscription.
I don't get it: Blockbuster has an almost identical mail-in program like Netflix (except you can rent at the store OR by mail, and even return mail videos at the store for immediate receipt status). Also they have $1 kiosks identical to Redbox. So how can you say Netflix and Redbox have the winning strategy??
It's probably too late. Netflix already has the recognition as the primary DVD-by-mail service. They also have the streaming option, which is usable through the PS3, Xbox, Wii, and PC and will very likely be integrated into set-top boxes and DVRs such as the Apple TV and Google TV.
They both have negatives – Blockbusters cheapest unlimited plan includes in store exchanges with mailers – not helpful if all the BB’s in your town have closed down.
Netflix should offer a streaming only plan. I only have time to watch bits and pieces of movies or TV shows from my iPhone (THANKS FOR THE NETFLIX APP – AWESOME!!) and some from my PS3. I feel like when I have a DVD I have to sit and watch the whole thing at once and so I sit on a DVD for weeks!
Netflix and Redbox kept up with peoples changing tastes and desire for convenience. Netflix and Redbox will start facing competition more and more from iTunes and AppleTV. I don’t want to pay a monthly subscription and manage queues so I use my Apple TV to buy movies when I want to watch something.
Good decision for blockbuster thinking that soon, Netflix and Hulu will have a real competitor coming from the new Youtube-Movie section.
Block Buster treated customers like shit for years. They made it too easy for Netflix and others.
My prediction, Blockbuster will go out of business by Christmas, or early next year.
BlockBuster never responded to any changes in the industry. With the splintering of pop culture and the rise of cult movies that followed the rise of the Web, BB refused to expand its horrible selection. When letterbox became the go-to standard, BB still kept pan-and-scans prominent. They've been a dinosaur for years in many respects.
http://proposition13.blogspot.com/2010/09/verint-systems-scenarios.html
Die! Blockbuster! Die!!
mmm i loooove my netflix stock :)
Blockbuster's key source of revenue was not renting DVDs, it was charging late fees. A DVD by mail service or an on demand service does not have “late fees” as part of the business model, and this was something that Blockbuster simply could not process.
When Netflix started to become available in 2002, I remember the first thing that happened with me was that I never bothered to renew my blockbuster membership. The prospect of having DVDs without worrying about late fees was good enough for me, and I've never walked into a video store since, with the exception of a wonderful locally-owned store, Le Video, which has a lot of things Netflix won't have.
So long Blockbuster and your endless bullshit and censorship!
Amen! I almost forgot about the late fees.
I remember reading an article in the days of VHS rentals, that the biggest problem that Blockbuster had was what to do with their profits. At the time they were making deals with the studios on high volume purchase prices on tapes so they could undercut the Mom & Pop video rental shops. They were unstoppable. Well… problem solved.
Blockbuster U.S. is undertaking financial recapitalization via Chapter 11. For more information on Blockbuster (U.S.) Inc.’s announcement, see http://www.blockbuster.com/recapitalization.
Blockbuster Canada (@BlockbusterCAN) is not affected by this legal process.
If Blockbuster is the dinosaur of media consumption, then Final Cut and even iMovie are dinosaurs of media creation – at least by “average” users. The whole process is ready to get disrupted!