The last time I heard Sheryl Crows “A Change would do you good,” was walking through the closing sale of my local Blockbuster.
Looking back at that day, I remember it for not feeling at all bad that Blockbuster was closing its doors for good, and that I used it to clean them out of all the Merchant/Ivory period pieces that I could. Oh, it’s that Remains of the Day for 3 dollars? Sold.
The Blockbuster chain was truly an MNE, with stores all over the world, it changed the movie business entirely; making the video rental market thrive, it was blamed for the fact that summer blockbusters had to become bigger and badder by the summer or lose business to rentals, and tv networks panicked pushing the boundaries of television stories.
And yet, the company did not see a reason to change after all they held control of the market.
That is until a year 2000 when Reed Hastings, took a proposal to Dallas, in hopes of saving his fledgling company. Blockbusters would offer to buy his company, a company that was being done in by the price of postage and the replacement of broken DVD’s.
Blockbuster turned Netflix away at the door. But then Netflix saw something that it adapted to its business model, by creating something akin a professional and private YouTube in which people would pay to stream the videos directly into their homes. It turned the entertainment business on its head.
Blockbuster had also seen YouTube, but thought nothing of it but an innovation for sharing cat videos.
The last Blockbuster closed on January 12th 2014.
If there is a company that exemplifies this week’s chapter on change, adaptation and learning is the story of Blockbuster.
Netflix now is worth 28 Billion dollars, which is about “Ten times what Blockbuster was ever worth.” (Satell, 2014)
And one of the things that brought down Blockbuster was their own business model. Its growth had been so vast, at one point, that when growth slowed, rather than looking around for the reason and tackling it, they turned to late fees to carry their business.
“Netflix had certain advantages. By eschewing retail locations, it lowered costs and could afford to offer its customers far greater variety. Instead of charging to rent videos, it offered subscriptions, which made annoying late fees unnecessary.” (Satell, 2014)
Blockbuster, rather than gathering outside data, looked inside to solver their problems, but the world was changing a clipped pace and their technology was quickly becoming obsolete. They had gone through such a change before however, when VHS, their bread and butter, gave way to DVD’s, why did they believe that it couldn’t happen again?
By the time Blockbuster started their own DVD subscription business, they were in crisis change, “a situation where a company’s performance has declined substantially either because of poor products and or services, a poor competitive strategy, or an inability to drive the strategy because of inconsistency between strategy and the company’s internal capabilities.” (Moran, Abramson, & Moran, 2014)
But Blockbuster had warning, even Hastings, in the conference in Dallas told them this was the way of the future. That while he didn’t have the resources to carry the weight on his own, someone would see this was the way to go. Someone did, but it was not Blockbuster.
Let that be a lesson to all business people, to always stay curious, always be on the lookout, always be “reinventing,” your business and yourself; and if someone comes to your door with a creative opportunity, do not turn it away so easily, question it, is this a solution to a problem you haven’t thought about yet. If the answer is YES, adapt it quickly to your business, or someone else might.
Works Cited
Moran, R. T., Abramson, N. R., & Moran, S. V. (2014). Managing Cultural Differences. London: Routledge.
Satell, G. (2014). A Look Back At Why Blockbuster Really Failed And Why It Didn’t Have To. Forbes, 23-26.
Hey,
I like your post about the demise of Blockbuster. I remember going to my first Blockbuster when I was 15. It was surreal, all these movies right here in one room. Whereas so many Blockbusters have been closed, there are still 50 franchises that have survived. Most of them are in Alaska and Texas. I’d be curious to know how these 50 franchises keep their doors open.
But as a whole, the company seems to have been cocky about their model, to think that they don’t have to change with the times, that others will follow along. But in a fast past world, where people seem to constantly reinvent what convenience looks like, a physical space may no longer be what’s needed. I think that bookstores see similar challenges with the influx of electronic books (eBooks). And thus, the ones that are able to adapt are the ones who will turn a profit.
Joshua,
I agree, and I recently have become obsessed with a new innovation, Virtual Reality, that a lot of people are treating like a FAD. But I own the technology, Occulus, and it is unreal, the way entertainment comes to you feels brand new. And It’s exciting. Right now China, is adopting this technology and developing for it at twice the speed as the rest of the world, and I believe this is going to give them a huge edge in the future of entertainment. But because Virtual Reality brings together all things, tv, film, social media into one to be lived in hub, it will become a way to interconnect the world.
The technology right now it’s a little clunky, but in five years it will be simple, elegant and by 2025, it could be in every home. I just find it ridiculous that more companies are looking at VR the same way that Blockbuster looked at Netflix.
Big Mistake. Huge. 😉
Hello Lourdes,
I really enjoyed your post. What is crazy is that I was just thinking of Blockbuster and how a whole sector of industry fell victim to a disruptive innovation. Innovation and disruption come to mind when I think of this situation. There can be some confusion between the two, it is not exactly black and white when it comes to this subject. One way to think about it is that disruptors are innovators but not all innovators are disruptors. According to Clayton Christensen a disruption guru interviewed by Carolina Howard from Forbes magazine said: “disruption displaces an existing market, industry, or technology and produces something new and more efficient and worthwhile. It is at once destructive and creative.” I would personally consider Netflix and Hulu a disruptive innovation. It turned the DVD rental business on its head by using the postal system to start a mail order DVD rental model. Late fees were a thing of the past. Ironically now streaming content threatens the mail order business. I suppose the good thing is that the companies it threatens are the same companies that stream content as well.