Sunday, September 5, 2010

Blockbuster Blunder

A Blockbuster location in MonctonImage via Wikipedia
According to an article in the movie rental mainstay Blockbuster will file for Chapter 11 around the middle of September. This is because of their growing competition from Netflix and other online streaming companies. Also the heavy load of their $920 million dollar debt. 
Blockbuster opened their first store in Dallas, Texas on October 26, 1985. The idea blossomed and became a real success. In stepped, millionaire Wayne Huizenga, the company then enjoyed blockbuster growth. When it was all said and done they sold the company to Viacom for a cool 8.4 billion dollars. After that the troubles began. 
Viacom influence on the company never really kept it flying. They were late in embracing the new technology's inspired by Netflix, their closest competitor. Online streaming of movie rentals never was on the drawing board. They were left in the dust by the new upstarts. 
The bankruptcy is trying to accomplish many things. Primarily they need to dump 500 to 800 store leases. Last year alone they closed 1000 stores. They need to become a lean company. Probably to many years of the corporation trying to milk a good thing till they drove it into the ground. 
With consumers demanding more 21st century ways of delivering video content, blockbuster was to much old tech. People wanted the kiosk convenience of their Redbox in the Wallmart to get their movies. Paying $1 dollar to Blockbusters $5 dollar rental fee was clearly the better choice. Already, Blockbusters only store front competitor, "Hollywood Video" closed up shop in April of this year. 
There is always something to learn from watching the big boys crash and burn. Blockbuster was late in adapting to the new business model of a subscription fee with at home rentals Ala, Netflix. They never saw the trend of online purchases, rentals and streaming of content Ala, Itunes and others. These two mistakes alone will push back the company so far it may never catch up. Blockbuster became complacent and stagnant in their business practices. 
Our we, in our own businesses and jobs, becoming complacent and stagnating. Our we, diversified and growing like Netflix and Itunes. I can see in my own business if your not paying attention to new ways and ideas' you may someday be out of business. The recession has shone the light on a lot of our old school ways of doing things. Telling us if we want to stay alive in our business, we have to constantly be innovating. 

Graph by Finance.Yahoo.Com

1 comment:

  1. No doubt blockbuster and hollywood video were asleep at the wheel. Sometimes as technology changes companies have to cannibalize their existing businesses to remain a viable enterprise. These companies failed to see where their industry was headed.


Join 1000's of People Following 50 Plus Finance
Real Time Web Analytics