The Rise And Fall Of Blockbuster
Summary
TLDRBlockbuster, once a video-rental giant with over 9,000 U.S. stores and 65 million customers, peaked in the late '90s but failed to adapt to digital advancements. Despite an innovative barcode system and aggressive expansion, the company missed opportunities to acquire Netflix and develop its own streaming service. Overshadowed by digital competitors like Netflix, which offered a modern, mail-based and eventually streaming service without late fees, Blockbuster filed for bankruptcy in 2010, leaving a single franchise as a relic of its past dominance.
Takeaways
- π Blockbuster was a dominant force in the '90s, with over 9,000 stores, 84,000 employees, and 65 million customers, earning $800 million in late fees in one year.
- π Founded by David Cook, Blockbuster's success was fueled by its franchise model and innovative barcode system for inventory management.
- πΈ After disagreements, Cook left the company, and Wayne Huizenga took over, leading to rapid expansion and making Blockbuster America's top video chain.
- π Despite early success, Blockbuster failed to adapt to emerging technologies like cable TV and the internet, which eventually led to its downfall.
- π‘ Netflix, founded by Reed Hastings, was a direct response to Blockbuster's business model, offering a mail-order DVD service without late fees.
- π€ Blockbuster had the opportunity to acquire Netflix for $50 million but missed the chance, which later became a significant competitive advantage for Netflix.
- πΊ Blockbuster's partnership with Enron to create a video-on-demand service was abandoned due to a lack of commitment, allowing Netflix to innovate in the streaming space.
- π¦ Netflix's DVD-by-mail service and eventual streaming service disrupted Blockbuster's business model, while Blockbuster was slow to respond with its own services.
- π Blockbuster's identity crisis in the mid-2000s, with attempts at in-store concepts and partnerships, failed to save the company from financial troubles.
- π Blockbuster's bankruptcy in 2010 marked the end of an era, with the company eventually closing all but one franchise location.
- π₯ The last Blockbuster movie rental, fittingly titled 'This Is the End,' symbolized the end of Blockbuster's dominance in the home video market.
Q & A
What was the peak status of Blockbuster in the late '90s?
-At its peak in the late '90s, Blockbuster owned over 9,000 video-rental stores in the United States, employed 84,000 people worldwide, had 65 million registered customers, and was once valued as a $3 billion company.
How much did Blockbuster earn in late fees in just one year at its peak?
-Blockbuster earned $800 million in late fees alone in just one year at its peak.
Who founded Blockbuster and when was the first store opened?
-Blockbuster was founded by David Cook, and the first store opened in Dallas on October 19, 1985.
What was the innovative feature of Blockbuster that set it apart from other video stores?
-Blockbuster had an innovative new barcode system that allowed them to track up to 10,000 VHSs per store, which also enabled them to monitor late fees effectively.
How did Blockbuster expand its business after its initial success?
-After its initial success, Blockbuster's founder, David Cook, built a $6 million distribution center to support the quick expansion of new stores and to manage a large inventory tailored to local demographics.
Who took over Blockbuster after David Cook left, and what was the outcome of this change?
-After disagreements with the investors who provided $18.5 million, David Cook left Blockbuster, and Wayne Huizenga assumed control. Under Huizenga, Blockbuster embarked on an aggressive expansion plan, becoming America's No. 1 video chain with over 400 stores nationwide by 1988.
Why did Blockbuster sell to Viacom, and for how much?
-Worried about the impact of emerging technologies like cable television, Wayne Huizenga offloaded Blockbuster to media giant Viacom for $8 billion in 1994.
What was the turning point for Blockbuster when it came to competition from new technologies?
-The turning point was when Blockbuster passed on an opportunity to buy Netflix for $50 million and instead teamed up with Enron to create a video-on-demand service, which they eventually abandoned due to lack of commitment.
How did Netflix's business model differ from Blockbuster's, and what advantage did it give them?
-Netflix introduced a DVD-by-mail rental service without late fees, which was a significant departure from Blockbuster's model. This allowed Netflix to amass almost 3 million customers without the overhead of physical stores.
What was the financial situation of Blockbuster in 2009, and how did it compare to Netflix's earnings?
-In 2009, Blockbuster lost $518 million due to ongoing business problems and legal battles, while Netflix posted earnings of $116 million.
What was the final fate of Blockbuster, and what was the last movie rented?
-Blockbuster eventually filed for bankruptcy, ceased to exist, and was delisted from the New York Stock Exchange. The last-ever Blockbuster movie rented was fittingly titled 'This Is the End' on November 9, 2013.
Outlines
πΊ The Rise and Fall of Blockbuster
Blockbuster, founded by David Cook, experienced a meteoric rise in the late '90s, boasting over 9,000 stores, 84,000 employees, and 65 million customers. The company was valued at $3 billion and earned $800 million in late fees in a single year. Cook's innovative barcode system allowed Blockbuster to track a vast inventory, catering to local demographics. After an aggressive expansion led by Wayne Huizenga, who took over from Cook, Blockbuster became America's leading video chain. However, the advent of new technologies like cable TV and the internet posed a threat, leading to Blockbuster's sale to Viacom for $8 billion in 1994. Despite this, Blockbuster failed to adapt to the changing market and eventually filed for bankruptcy with over $900 million in debt.
π Netflix's Innovation and Blockbuster's Demise
While Blockbuster clung to its traditional video-rental model, Netflix, founded by Reed Hastings in 1997, innovated with a DVD-by-mail service, later evolving into a streaming service. Blockbuster's slow response to market changes, such as introducing its own DVD-by-mail service and scrapping late fees, came too late. Netflix, with no physical store overheads, quickly amassed millions of customers and prepared to launch its streaming service. Blockbuster's identity crisis in the mid-2000s, legal battles, and failed attempts at innovation like rental kiosks, contrasted with Netflix's foresight and adaptation to digital media consumption habits. Blockbuster's final chapter saw its once vast chain reduced to a single franchise, and its last movie rental, fittingly, was 'This Is the End' on November 9, 2013.
Mindmap
Keywords
π‘Blockbuster
π‘Video-rental stores
π‘Late fees
π‘Franchise
π‘Barcode system
π‘Expansion plan
π‘Cable television
π‘Netflix
π‘Video-on-demand
π‘Digital age
π‘Identity crisis
Highlights
Blockbuster had over 9,000 video-rental stores in the US at its peak, employing 84,000 people and serving 65 million customers.
The company was once valued at $3 billion and earned $800 million in late fees in a single year.
Blockbuster was founded by David Cook, who saw potential in a franchised video store model.
The first Blockbuster store opened in Dallas in 1985 and was an immediate success, needing to lock doors due to overcrowding.
Blockbuster innovated with a barcode system that allowed tracking of up to 10,000 VHS tapes per store.
Cook built a $6 million distribution center to support rapid store expansion and inventory tailored to local demographics.
After receiving $18.5 million in investment, Blockbuster expanded aggressively, buying out competitors and opening new stores.
Wayne Huizenga took control of Blockbuster and made it the No. 1 video chain in America within three years.
Huizenga sold Blockbuster to Viacom for $8 billion in 1994, but the company lost half its value under Viacom's management.
Blockbuster missed opportunities to innovate, passing on a chance to buy Netflix for $50 million.
Blockbuster walked away from a video-on-demand partnership with Enron, choosing to focus on its physical stores.
Netflix, founded by Reed Hastings, offered a disruptive DVD-by-mail service, challenging Blockbuster's model.
Blockbuster was slow to respond to digital competition, taking years to introduce its own mail service and eliminate late fees.
Netflix's success with streaming services further eroded Blockbuster's market share as they failed to adapt to digital trends.
Blockbuster's identity crisis in the mid-2000s led to financial losses and a delisting from the New York Stock Exchange.
Blockbuster's attempts to innovate with rental kiosks and other concepts were too little, too late, and based on outdated models.
Netflix's strategic vision and innovation allowed it to thrive, while Blockbuster's failure to adapt led to its demise.
The last Blockbuster movie rental was fittingly the film 'This Is the End', rented on November 9, 2013.
Transcripts
Irene Kim: At its peak in the late '90s,
Blockbuster owned over 9,000 video-rental stores
in the United States,
employed 84,000 people worldwide,
and had 65 million registered customers.
Once valued as a $3 billion company,
in just one year, Blockbuster earned
$800 million in late fees alone.
βͺ Blockbuster Video, wow! βͺ
But fast-forward a decade,
and Blockbuster ceased to exist,
having filed for bankruptcy
with over $900 million in debt.
So, what happened?
Blockbuster was founded by David Cook,
a software supplier in the oil and gas industry.
After studying the potential of a video-store business
for a friend, he realized that a well-franchised chain
could grow to 1,500 units.
And so the first Blockbuster store
opened in Dallas on October 19, 1985.
Andy Ash: According to David Cook, the opening night
of that first Blockbuster store was a huge success.
The story goes that they actually had to lock the doors
because of overcrowding.
The thing that really set Blockbuster apart at that time
was their huge range of titles.
Other independent video stores
could only keep track of 100 or so movies.
Blockbuster had an innovative new barcode system,
which meant that they could track up to 10,000 VHSs
per store to each registered customer,
which also meant that they could keep an eye
on those lucrative late fees.
Kim: Off the back of this success,
Cook built a $6 million distribution center,
not only so that new stores could pop up quickly,
but also to house a huge range of titles,
so that each store's inventory
could be tailored to local demographics.
Commercial: Wow! Wow!
Wow!
Kim: In 1987, Blockbuster received
$18.5 million from a trio of investors,
including Waste Management founder Wayne Huizenga,
in return for voting control,
but after two months of intense disagreements,
Cook left Blockbuster and Huizenga assumed control.
Under Huizenga, Blockbuster embarked
on an aggressive expansion plan,
buying out existing video-rental chains
while opening new stores at a rate of one per day.
By 1988, just three years after the first store opened,
Blockbuster was America's No. 1 video chain,
with over 400 stores nationwide.
But as Blockbuster became a multibillion-dollar company
in the early '90s,
adding music and video-game rental to its stores,
Huizenga was worried about how emerging technology
like cable television
could hurt Blockbuster's video-store model.
After briefly considering buying a cable company
and even receiving approval from the Florida Legislature
to build a Blockbuster amusement park in Miami,
Huizenga offloaded Blockbuster to media giant Viacom
for $8 billion in 1994.
In only two years under Viacom,
Blockbuster lost half of its value.
Commercial: You can go one of two ways.
Kim: While Blockbuster and its new boss, John Antioco,
focused on brick-and-mortar video stores,
technological innovations
meant that competition was on the rise.
In 1997, Reed Hastings founded Netflix,
a DVD-by-mail rental service at the time,
in part after being frustrated
with a $40 late fee from Blockbuster.
Two years later, having passed on an opportunity
to buy Netflix for $50 million,
Blockbuster teamed up with Enron
to create a video-on-demand service.
In a deal that saw Enron do most of the work,
a robust video-on-demand platform was successfully built
and tested with customers.
But it soon became clear to Enron
that Blockbuster was so focused
on its lucrative video stores
that it had little time or commitment
for the video-on-demand business.
As a result, in 2001,
Blockbuster walked away from the first
major development of wide-scale movie streaming.
Within a few years, Netflix and other competitors
began to eat into Blockbuster's profits,
not by undercutting it,
but by reimagining video rental in the digital age.
Commercial: There's a better way to rent movies.
Go to Netflix.com,
make a list of the movies you wanna see,
and in about one business day you'll get three DVDs.
Keep them as long as you want, without late fees.
Then, when you're done, look: prepaid envelopes.
Return one and they'll send you
another movie from your list.
Netflix. All the movies you want,
20 bucks a month, and no late fees.
Kim: It took Blockbuster almost five years
to introduce its own DVD-by-mail service
and even longer to scrap late fees.
Commercial: No more late fees!
No more late fees!
No more late fees?
Kim: By that time, Netflix had amassed
almost 3 million customers,
had no store overheads,
and was preparing to launch
its revolutionary streaming service.
Blockbuster's troubles continued through the mid-2000s.
After parting from Viacom
and experimenting with in-store concepts
such as DVD and game trading,
Blockbuster was in the midst of an identity crisis.
In 2009, Netflix posted earnings
of $116 million.
Meanwhile, Blockbuster,
with its continuing business problems
and legal battles, lost $518 million.
On July 1, 2010, Blockbuster was delisted
from the New York Stock Exchange.
Its foray into video-on-demand streaming
came too late, and over the next three years,
Blockbuster died a slow and painful death.
DVD-by-mail services stopped,
its various partnerships folded,
and stores worldwide
were rapidly plunged into administration.
Commercial: We're closing early.
Kim: Its 9,000-strong chain
had been reduced to one single franchise
in Bend, Oregon.
As a result of Blockbuster's complete shutdown,
one can only speculate about what could have been
for the once home-movie giant.
Ash: They were too busy making money
in their video stores
to imagine a time when people
would no longer want or need them.
And in a bid to rescue their business,
their answer at the time was to fight fire with fire.
At one point they even opened up rental kiosks,
a little bit like a vending machine,
but all of these attempts were based
on either outdated technology
or outdated business models,
whereas Netflix at the time,
they did the opposite; they streamlined,
they were able to see the future of video rentals
and then innovate for that future.
Blockbuster, they didn't seem to understand
how the next generation, particularly millennials,
who grew up in a world without hard-copy media
like DVDs and CDs, how they would react
to video-on-demand as technology improved.
And that's why Netflix,
Amazon Prime, YouTube, and Hulu,
they're still all in business,
whilst Blockbuster got left behind.
Kim: According to Netflix's former
Chief Financial Officer Barry McCarthy,
as part of the failed 2000 Blockbuster-Netflix buyout,
Reed Hastings proposed that Netflix
would run the Blockbuster brand online.
If that deal had been successful
and Hastings had replicated
Netflix's innovation for Blockbuster,
the face of home video
would likely still be blue and yellow.
The last-ever Blockbuster movie
was rented on November 9, 2013.
Fittingly, the film in question was "This Is the End."
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