Blockbuster – Monopoly to Bankruptcy

One of the most fascinating demises of a company in my lifetime was that of Blockbuster. I remember as a child going to my local Blockbuster just a few minutes from my house and renting Indiana Jones for the hundredth time. I would still pace up and down the aisles pretending I might get something else. Unless I were to buy a physical copy of the film for my house, I would have to pick it up on our weekly trips to Blockbuster. Now with just a few clicks, I can access Indiana Jones and a large variety of other films right on my laptop.

The shift in demand from physical media to digital media was a rapid change. Now that Blockbuster is all but extinct, it’s easy to forget it completely dominated the industry in the 1990’s. The rise and fall of this company has a history spanning only two decades. Founder David Cook’s business model involved a video store where all titles were out for the customers to view, and that they remained family friendly spaces, refraining from the sale of adult films. This was a major success, becoming “the world’s largest video retailer with 3,600 video stores in forty states and nine countries, 500 music stores, concert venues, and over $2 billion in annual sales” (Holt 152). Blockbuster was so completely dominate in the video retail industry that it essentially held a monopoly on an increasingly profitable industry.

Blockbuster was founded in 1985.

The late eighties and early nineties saw an uptake in the amount of physical media purchased. In fact, “the video store business was three times what the theater business was in North America” (Holt 152). Studios and production companies sought to find the most efficient way to distribute their content on home video because it was the future of consuming entertainment. A media company Viacom bought Blockbuster for $8.4 billion in 1994. The company was in the best shape it had ever been and stood as America’s primary source for home video entertainment.

At the turn of the century, Blockbuster was given the chance to buy a new video rental company called Netflix for just $50 million. They declined, seeing no financial gain from acquiring such a relatively unknown service. Ironically enough, Netflix was instrumental in Blockbuster’s demise. Netflix started as a mailing service where the customer received DVD’s in the mail and could only receive their next disc after returning their current rental. Blockbuster was slow to keep up. It took them years to fully embrace the switch from VHS to DVD, and by then there was even more to worry about. Small video kiosks such as Redbox and Coinstar were popping up in local shopping centers. Again, Blockbuster was late to the party.

Blockbuster Express arrived late to the scene, establishing nearly 10,000 kiosks in the US by 2011.

Eventually, Netflix blossomed into a digital streaming service where hundreds of movies and TV shows were available to stream on your personal device through a monthly payment. The future of media was online, with streaming emerging as a much more convenient method of renting a film. There were too many factors going against Blockbuster, highlighted here in a funny Stephen Colbert skit (skip to 2:28). Physically driving to the store became a hassle, stores didn’t always have the title you wanted in stock, and a number of other reasons made the switch to Netflix enticing for millions of Blockbuster customers.

At the height of its power, Blockbuster was the most convenient option for renting films. The company’s failure to successfully adapt to a changing landscape where the future was digital ended up being their demise. At the end of the day, this boils down to convenience. People will always choose the more convenient option for them, and this was the key to Netflix’s success. The reading states that the backbone of media industries is “the public interest, convenience or necessity” (Holt 54). Meeting consumer demand as it evolves over time is the key to maintaining a successful business. There was once a time where Blockbuster was a cash cow. Today, only one Blockbuster exists as a nostalgic reminder of the days before the death of brick and mortar video stores.

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