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How Blockbuster Could Have Owned Netflix
schnell writes "Your age probably determines whether you think of Blockbuster Video as a fond memory or a dinosaur predestined for extinction. While the last Blockbuster rental at the last remaining Blockbuster video store took place last week, Variety retells a now-classic story of how Blockbuster could have bought Netflix for a song, but didn't because it failed to take the new DVD-by-mail and video streaming markets seriously. Who is next to join Blockbuster, Polaroid, Borders and Best Buy on the ash heap of superseded retail business models?"
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I remember when netflix first started out, it took blockbuster YEARS to FINALLY get a dvd by mail system, and it was still overpriced as hell.
They continued to make moves acting as a monopoly, refusing to believe they could ever have any competition.
This was a fatal mistake.
Some business people look inwards to optimize their existing business in search of profits. Others look at how the market around them changes. Changing ones business model is stressful and not something everyone can do.
Besides, as an investor, I'd rather put my money where I think the market is going. If management keeps changing focus, I never know what I'm pursuing. Let the Blockbusters of the world rise and fall. I'll buy in or cash out of the trends as I see them.
Have gnu, will travel.
Followed shortly thereafter by the USPS, unless Amazon just outright buys them.
They'd have tried to shoe-horn late fees into Netflix. That's where all Blockbuster's money came from. Renting videos was just a loss leader for late fees. They didn't take Netflix seriously because they didn't have late fees and Blockbuster didn't see how anyone could make money just renting videos.
I'm trying to teach myself to set people on fire with my mind... Is it hot in here?
Polaroid is already gone. For the last few years, ever since they stopped making instant film, Polaroid has been nothing more than a brand name to be licensed out (presumably, to attract folks who still have fond memories of instant film.) For example, all those cheap portable Polaroid-brand DVD players are made by somebody else. That's in contrast to Best Buy, which is a real corporation, and Borders, which is at least a division of a real corporation, Barnes & Noble.
It's not dead yet.
http://blogs.wsj.com/moneybeat/2013/11/11/best-buy-sp-500s-best-performer-getting-still-more-praise/
They are not out of the woods, but things like price matching amazon have helped a lot. I've personally not bought from Best Buy in a long time, but recently after buying something on Amazon I checked how much it would of cost at Best Buy and realized for a little more I could of had it that day for about the same price.
Polaroid? Borders? That's old news.
How could Blockbuster have eaten Netflix's Breakfast, Lunch, and Dinner? Easy: take all the same risks Netflix took, invest more capital (which Blockbuster had at the time), and abandon their proven business models earlier than they did.
The buggy whip makers could have beaten AC/Delco to the punch if they only followed this same crystal ball strategy.
What everybody forgets is: Pets.com et. al. Sure, they look silly today, but there was a time that they attracted investment dollars that Netflix didn't get.
"I'm not dead."
...
"What?"
"Nothing. There's your ninepence."
"I'm not dead."
"'Ere, he says he's not dead."
"Yes he is."
"I'm not."
"He isn't."
"Well, he will be soon, he's very ill."
"I'm getting better."
"No you're not, you'll be stone dead in a moment."
"I feel fine!"
Do not look into laser with remaining eye.
If Blockbuster had purchased them, they never would have made the leap to delivering over the Internet.
They could have killed/bought redbox and netflix easily. But the Executives at Blockbuster are still too stupid to realize that they had to change models. I guarantee they still deny they did anything wrong.
If you are only looking at next quarter, then as an executive you are a complete and utter moron.
Do not look at laser with remaining good eye.
...for me when they claimed they could not stop the computer from charging a fine to my credit card when I returned a movie 2 hours late. I cut my BB card in half in front of the cashier. Circa 2002.
Folks automatically assume that if Blockbuster bought Netflix that Blockbuster would be sitting on top of the streaming video world. More likely Blockbuster would have either killed the business either intentionally or through incompetence. When you have an entrenched management team that only understands one way of doing business and whose careers are based on a traditional distribution model, you will find that they don't adapt well to a new distribution model. My bet is that a new competitor would have eaten Blockbuster/Netflix' lunch.
Odds are Blockbuster was better off not making the purchase.
See my journal for slashdot ID's by year. Mine created in 2005. http://slashdot.org/journal/289875/slashdot-ids-by-year
The next retail model to go belly up are GameStops and the like. When Steam is fully up and running there will be no reason to buy your own copy any more, which means the lucrative secondary market many game stores rely on for profit margins will go away.
Incidentally when Steam is fully transitioned to Linux it will have an effect on prevalence of MS in the home, too.
Do what you can, with what you have, where you are.
I think the big shopping mall anchor stores (Macy's, JC Penney, etc) are all likely to fail in the next 20 years.
Department stores have one big advantage over online stores: fitting rooms.
I hear this argument every time for companies that fail to shift to a new market reality. Examples are Xerox (with their PARC stuff), Polariod, Blackberry, IBM back in the day, record companies, etc. That's a complete misreading of the issue. It isn't about having some misguided sense of humor, its about fear.
The problem entrenched companies have is that while they have a market that they dominate that is acting as the company gravy-train, all the incentives in the world are acting upon them to protect that gravy train. This works well for them with normal competitors, but if someone finds a way to undermine the entire system (eg: online distribution for music), no matter how inevitable the coming change may be, it is a direct attack on their gravy train, and they will attack it back. If they tried to do the same thing themselves, at best they'd only cannibalize their own sales. What good is that?
Yes, it may be short-sighted. But we are a short-sighted species. A company's employees don't take their salary "in the long run", and their families don't eat "in the long run" either.
Likewise, when streaming video became a ubiquitous thing, it should have been obvious that video disc rental was going away.
Going away, not quite gone away. Streaming releases on Netflix, as I understand it, happen several months after the DVD release. Streaming is still impractical among people who can't yet move out of an area where nobody offers cable or fiber Internet. And how well is streaming doing in Europe and Australia/New Zealand, which have fewer potential customers per country and per language market than anglophone North America?
No, I don't know how. But then again, neither do they. They won't even see it coming.
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Prisencolinensinainciusol. Ol Rait!
Best Buy got rid of the C level staff that were associated with the old CEO/founder. The new CEO made a number of hard choices and focused on the fundamentals. That has lead to a significant recovery. The stock price has more than tripled and they are one of the best performing companies on the S&P500 right now.
Major point, the online pick-up is now part of check out area and not customer service. For years I hated using online pick-up because without fail I would be stuck waiting behind someone making the financial transaction of the century. I used to use Circuit City pick-up all the time because it was always ready when I got their. I found it less frustrating to use Amazon and wait the extra day instead of waiting in line. So it's a great change.
They making some good changes to the loyalty program. It's one of the easier ways of getting money back on purchasing rarely discounted Apple Hardware.
They got out of some really badly done deals internationally. The Cellphone Warehouse deal for UK expansion gave Cellphone Warehouse a cut of BB's US cell sales.
Certainly there is risk for them. If all the changes don't turn into great numbers for the holidays it could spell disaster. We'll know in a couple months.
While working at Enron Broadband Services in 2000, we had partnered with Blockbuster to create a video on demand service, and had all the main/regional CLEC/ILECs as partners to provide last mile connectivity. We were able to stream better than VHS, but slightly worse than DVD quality video over a 1Mbps Internet connection that required you to have a set top box. We had successfully demonstrated the technology in the lab and were going into the first run trials to beta customer homes when Blockbuster pulled the plug. So they could have beat Netflix to the punch by bypassing the DVD rental business entirely and going straight to VOD, but they decided not to. Also, a little known fact is that it was the pro-forma $150 million Enron booked as earning on that VOD project before it ever hit a customer home that brought increased scrutiny to their financials before they ultimately went out of business a year later.
Remember the Alamo, and God Bless Texas...
I'm old enough to remember when people were complaining on SlashDot how Blockbuster was driving all the mom and pop video stores out of business.
"Think about how stupid the average person is. Now, realise that half of them are dumber than that." - George Carlin