These days, whenever you ask someone about what they plan to do on their weekend, the most common reply you will get is “Watching Netflix at home”. That is because Netflix has become a big part of our entertainment world from the mid-2000s and still ruling many people’s hearts with a large amount of content. However, before Netflix entered the entertainment world, there was something else which was ruling the 90s. Yes, it’s Blockbuster, a giant video rental company that was also known as Blockbuster Video.
At the early age of Blockbuster, it had a great peak on its profit graph with 9000+ stores and 65 million customers. But in the mid-2000s, the Blockbuster graph started going down. and people were going for Netflix to rock their weekend with movies.
Everyone thinks of “Netflix” as the main reason behind Blockbuster’s death. But in reality, the decline of Blockbuster started years before Netflix came popular. So what actually caused the decline of Blockbuster? Was it the technology or their business strategy? Let’s find out.
Rising Days of Blockbuster Video
The journey of Blockbuster video started in 1985 under the company named Blockbuster Video Inc. The company was owned by David Cook, a software supplier in the oil and gas industry, and his wife, Sandy Cook. It was actually the idea of Cook’s wife to enter the video business, and Cook used his data knowledge to study the business. And after seeing a potential future, Cook opened the first Blockbuster store in Dallas, Texas, with an inventory of 8,000 VHS and 2,000 Beta tapes under the blue and yellow logo.
That logo was designed by his wife and became the attraction point for the nearby customers. However, the database experience that Cook had, was the biggest contributor to Blockbuster Business, and it was a massive hit in just a few months. After this huge success, Cook built a $6-million worth warehouse in Garland, Texas, to support his new Blockbuster stores opening quickly. In this mission of opening new Blockbuster stores, Cook got an investment of $18.5 million from a trio of investors, including Wayne Huizenga, John Melk’s, and Ray Kroc.
Ray Kroc’s expansion model and Huizenga and Melk’s waste management business techniques were the significant reasons behind expanding Blockbuster stores rapidly. It eventually helped Cook to open a new store almost every single day. But unfortunately, Cook was not part of this success as he left the blockbuster in two months of Huizenga’s entry.
However, Huizenga proved his ability in this business and made blockbuster the No. 1 video chain of America in 1988 with 400 stores nationwide. There were times when Blockbuster had to lock its door to control overcrowding. With that, they had a huge range of titles and an innovative bar code system that no other video stores had. While local video stores could only track 100 videos, Blockbuster could track up to 10,000 VHSs in their stores for each registered customer. Furthermore, in the early ‘90s, Blockbuster also added music videos and video games to their stores, which ultimately caused it to become a multi-billion dollar company.
The Fall of Blockbuster
Though Blockbuster was a multi-billion dollar company, Huizenga was worried about the growth of new technologies like cable television and video-on-demand. Even just the announcement of an upgraded cable system from Time Warner in 1991 had dropped Blockbuster shares by 10 percent. So in 1993, Huizenga invested in Viacom, an American media conglomerate, and considered buying a cable company. With that, Huizenga also had an idea to build a Blockbuster sports and amusement park in Florida, getting approval from the Florida Legislature. But as it was a completely different territory for Huizenga and the growing threats of the video business were overwhelming. So, Huizenga offloaded his burden on Viacom and left Blockbuster in 1994. At that time, Blockbuster was worth $8.4 billion and fully owned by Viacom.
It was a huge shock for Blockbuster. In just two years, the company lost half of its value and was worth only $4.6 billion. Right after that, Viacom merged Blockbuster with its parent company Blockbuster Entertainment Inc. and renamed Blockbuster Video to Blockbuster. The logo was also slightly changed, and they had a new CEO John Antioco, a former Taco Bell President, on the row. Interestingly that was the starting time of the DVDs era, and Warner Bros offered Antico an exclusive rental deal. But Antico ditched the offer and stayed with VHSs video rental. But the DVD studios answered by dropping the DVDs price, and Walmart seized that opportunity to sell DVDs in their stores. That turned Walmart’s profits greater than Blockbuster’s, and other retail shops also started selling DVDs.
It eventually impacted Blockbuster, but Antico kept increasing the store numbers in international locations and launched offers like Blockbuster Rewards for customers to earn free rentals. But while Blockbuster was still coping with the DVDs blunder, another threat was growing on the edge. Reed Hastings, a former customer of Blockbuster, founded Netflix in 1997, being frustrated with the $40 late fee of Blockbuster. He introduced a new and easier way to rent DVDs by mail rental service, and people started switching from Blockbuster to Netflix. However, in 2000, Reed offered Antico to take over Netflix for 50 million dollars, but again Antico made the same mistake. And in mid-2000, Blockbuster tried to create a video-on-demand service with Enron which eventually failed in 2001. After that, in 2002, Blockbuster bought Arizona’s father-and-son online DVD-rental company a DVD Rental Central for $1 million, with about ten thousand subscribers.
That company was eventually rebranded as Blockbuster Online and later introduced Online DVD subscriptions in 2004. But by then, Netflix had already taken over the online DVD rental service and was gradually wiping out Blockbuster’s profits. To stop that decline, Blockbuster came up with a campaign, “Total Access” in 2007. The campaign offers customers to rent DVDs online and get a new free movie when they return DVDs to a Blockbuster store.
Eventually, that idea worked, and the Blockbuster profit line slightly went up. Therefore, Netflix started feeling threatened and offered Antico to sell Blockbuster Online to Netflix. But before the deal could happen, Antico left Blockbuster, and James Keyes took over. He refused Hastings’s proposal and also put an end to the free movie deal. Also, the subscription price of online DVDs rental was increased, which pushed customers to go back on Netflix and stream movies online. Blockbuster started going down again, and no strategy could have stopped that decline.
It’s not like Blockbuster didn’t enter the online streaming world. Blockbuster did that exactly when Netflix started streaming. But instead of considering Netflix and Redbox as their rival, Blockbuster considered Walmart and Apple as their primary competition. Eventually, Blockbuster filed for bankruptcy in 2010 with a debt of 900 million dollars and considered Netflix and Redbox as strong competitors. Soon after Blockbuster was sold to Dish Network, they announced a new service called Blockbuster Movie Pass to compete with Netflix.
This service includes a $10 per month subscription allowing customers to access both streaming and video by mail service. But franchisers eventually closed the physical stores, causing trouble for Dish to continue with video-on-demand service. Still, they work on the online streaming service and video on-demand with the remaining stores. But the stores kept closing day by day, and now there is only a Blockbuster store left in Bend, Oregon. And the online service also has only one homepage that creates no excitement between customers.
Who Actually Killed Blockbuster?
For decades, many of Blockbuster’s consumers and staff had lamented the company’s slow and steady demise. Blockbuster was not just a store for those 90s or 2000s people; it was an experience and excitement that made many peoples’ movie nights. Still, many people just visit the last Blockbuster on the earth to feel that experience of walking between thousands of movies. But for service, they choose only digital media like Netflix, Hulu, YouTube, or Amazon Prime.
That’s where Blockbuster actually falls apart. The late adoption of new technology and taking the wrong decisions by different leaders had slowly killed the giant video rental service on earth. However, the remaining website service can still re-enter the entertainment world with online streaming. But that also needs a proper and modern business model.