Blockbuster: The Rise and Fall
Blockbuster Video, once a recognised high street brand and household name, and a dominant force in the entertainment industry, has now become a cautionary tale of failure in the face of technological advancements and changing consumer preferences. This article explores the rise and fall of Blockbuster, its crucial decision not to acquire Netflix, and the marketing lessons that can be learned from its demise.
The Rise of Blockbuster:
Blockbuster Video was founded in 1985 by David Cook in America. It revolutionised the way people consumed movies by offering a vast selection of films for rent. Its business model was simple but effective - customers could rent movies for a fixed period, and the late fees became a significant source of revenue for the company.
By the early 1990s, Blockbuster had expanded rapidly and established itself as the dominant player in the video rental market. With its extensive network of stores, aggressive marketing campaigns, and exclusive deals with major film studios, it asserted its dominance in the industry. At it’s peak Blockbuster had 9,000 video-rental stores in the United States, employed 84,000 people worldwide, and had 65 million registered customers (according to Business Insider).
The Size of the Market and Technological Changes:
During the 1990s, the video rental market was booming, with millions of people renting movies every week. However, the landscape started to change rapidly with the advent of new technologies like DVDs and, later, digital streaming.
As the adoption of DVDs and home internet connections increased, consumers began shifting away from physical rentals to more convenient and affordable alternatives like buying DVDs or subscribing to online streaming services.
The Netflix Disruption:
In the early 2000s, a new player, Netflix, emerged with a disruptive business model. Founded by Reed Hastings and Marc Randolph in 1997, Netflix offered DVD rentals by mail with no late fees, providing a more customer-friendly experience than Blockbuster's model.
In 2000, Netflix approached Blockbuster with an offer to be acquired for $50 million. Blockbuster, under CEO John Antioco's leadership, turned down the offer, considering it a "niche business" that wouldn't pose a significant threat. This decision would later come back to haunt them.
Netflix and Blockbuster - Differing values:
At its peak, Blockbuster was focused on revenue generation through late fees and expansion of physical stores. Netflix, on the other hand, valued customer satisfaction and convenience. Their dedication to providing personalised recommendations and investing in digital streaming technology set them apart.
However, both companies faced challenges during their lifetimes. Blockbuster's values seemed to lose relevance as technology advanced, and Netflix had to overcome the difficulties of transitioning from a DVD rental service to a full-fledged streaming platform. Looking back now, the adoption of technology was a clear winner.
The Failure of Blockbuster:
The decline of Blockbuster was a gradual process. As streaming services gained traction, Blockbuster struggled to adapt and pivot its business model. The increasing debt burden from physical store maintenance, coupled with a failure to capitalise on digital streaming, led to a downward spiral.
By the mid-2000s, Blockbuster's market share had significantly dwindled, and in 2010, the company filed for bankruptcy. Its once-dominant position had crumbled in the face of more agile and innovative competitors.
Avoiding Failure - our lesson:
To avoid failure, Blockbuster should have recognised the potential of digital streaming technology and invested in building an online platform early on. Embracing customer-centric values and focusing on convenience would have been crucial. Moreover, they should have considered the opportunity to acquire Netflix, which could have been a game-changer in their favour.
Marketing Lessons and the Need to Adapt:
The Blockbuster saga holds essential marketing lessons for businesses in any industry. The most critical lesson is the need to adapt continually and to be aware of market factors including competition and possible competitors. Markets evolve, consumer preferences change, and technological advancements disrupt traditional business models. Companies must be agile and open to innovation to stay relevant. We’re seeing significant changes in the markets we support clients with namely, legal, financial services, B2B service provision and of course - the high street’s impending demise.
Furthermore, understanding the value of customer-centricity cannot be overstated. Listening to customers, anticipating their needs, and delivering personalised experiences are essential aspects of maintaining a competitive edge. Amazon are a perfect example of this. The homepage changes for each and every client as it’s tailored to their needs. Amazon have also changed the way consumers purchase. We buy more online now than ever before and we’re far more impatient. We buy based on convenience and trust and more businesses are adapting to this changing buying model.
The end of the Blockbuster:
The rise and fall of Blockbuster Video illustrates the importance of staying adaptable and attuned to the changing times. As technology continues to evolve, businesses must remain agile, continuously innovating, and place customer satisfaction at the heart of their strategies to avoid falling into the same trap that led to Blockbuster's demise.
Lincolnshire Marketing’s role in all of this…
Whilst we had no part to play in the demise of Blockbuster (obviously), we do help clients learn from their lessons and regularly hold quarterly meetings with executive teams, marketing departments and marketing operatives to ensure that they’re delivering effective marketing strategies. We also help small businesses with marketing strategy planning.
