Movie Rental Business: Blockbuster Video

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Introduction

In the year 1985, at the time Blockbuster developed into a business, it was the only movie leasing firm in the region. In the twentieth century, the company became the highly successful movie retail shop in the USA. In 2000, Netflix, one of the most popular and successful online video streaming platforms, proposed to Blockbuster video for a partnership contract (Saini, 2019). The intention was that Netflix would be running Blockbuster’s brand image on its online platform while the latter would promote Netflix in its outlets (Saini, 2019). Blockbuster declined to sign the agreement, instead opting to work on its own. There still exist many concerns about why the prominent and popular corporation with branches all over the United States of America has ceased to exist.

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Bankruptcy

In 2010, Blockbuster went into bankruptcy with nearly $1 billion in debt as it struggled to cope with rivals, including Netflix, which developed a DVD-by-mail service. The rental shop had rejected various offers to buy Netflix for $50 million back in 2000, which has been the primary cause of its collapse (Saini, 2019). They did not see the relevance at that time, but they later hoped they had accepted the proposal. Subsequently, up after Netflix in the industry, there was Redbox, which emerged in 2004, and Apple and several other cable and mobile phone firms. Over time, all these entities had become a part of the movie rental business.

After Blockbuster’s failed bid to purchase Hollywood Video, the other competing company, Movie Gallery, took it over, and later both stores went out of business. Most notably, consumers were willing to buy movies online rather than going to a physical store, a procedure that Netflix were already using. Unfortunately, Blockbuster did not have such an idea, even though its old-fashioned film-rental method had become outdated. The business began to lose both its sales and even its reputation, and eventually, it was unable to handle the competition and ultimately collapsed.

Missteps

Competition

Blockbuster was unaware of the rivalry surrounding it and was unprepared for the impending turbulence of Netflix, one of its main competitors. The latter had more choices, better-managed subscriptions, and customers could keep a video for as long as they wanted without having to return it (Walker et al., 2017). Blockbuster’s weakness stemmed from the fact that it made a lot of money by charging late fees to its consumers, which accounted for the bulk of their earnings. Therefore, when they started to strategize about how to combat the rivalry, it was too late because they had already lost $200 million (Saini, 2019). On the one side, Netflix provided clients with the option of having movies brought to their homes, as well as digital video streaming. Apple, on the other hand, offered movie rental services to its customers via iTunes. In addition, Netflix had designed an algorithm that permitted clients to rank movies and then collect feedback for other films they could enjoy, including those they had not heard of before. As a result, these enterprises drew away more customers from Blockbuster, causing the latter to run in losses.

Customer Preferences

Convenience has always been a means of attracting clients, and in 1997, Netflix became one of the Blockbusters’ rivals, giving consumers a more reliable place for renting movies digitally. Blockbuster on its part, relied on their physical retail outlets, and consumers still had to cope with long queues waiting to get their video cassettes and DVDs. The other rival was Redbox, which arrived in 2004; they billed only $1 to rent DVDs from vending machines they had placed in locations such as grocery stores, supermarket establishments, and fast-food franchises (Chopra & Veeraiyan, 2017). The move made it convenient for everyone to access services everywhere and anywhere. As well as several other cable and phone providers, Apple became involved in the movie rental industry over time, which was a big blow to Blockbuster Video.

Technology

Blockbuster chose to stick to their old methods and not adapt to future social changes, particularly with technology; then, over time, videos were becoming smaller. Rather than huge and bulky cassette tapes, DVDs were now being utilized since they were much smaller. Moreover, the emergence of digital video streaming platforms, such as Netflix, rendered the old-fashioned Blockbuster ineffective in the film industry. Movies could be transmitted within seconds on computers, laptops, televisions, and even smartphones. It was now easier and more comfortable to get a movie, so the desire for a tangible commodity that could be touched, felt, and absorbed disappeared. Thus, it was not long before technology placed Blockbuster out of operation.

Pride, Ignorance, and Late Fees

Blockbuster started the business hoping that hardcopy movies would be an indefinite thing. Still, as seasons elapsed and technology became more sophisticated, there was ultimately no use about what the firm had to sell to the public (Saini, 2019). Out of ignorance, they declined to modify to appease consumers and, in exchange, lost clients in significant numbers. Consequently, pride led Blockbuster to go out of existence because, as per Business Insider Newspaper, the company rejected several offers to buy Netflix for $50 million back in 2000 (Saini, 2019). The deal did not seem necessary at the time, but eventually they suffered because they did not accept the proposal when they had an opportunity. As an alternative, they sought to counter by stocking more items to their shops, such as sweets, toys, books, as well as other goods, which emerged challenging to handle and sustain. Furthermore, clients despised late fees; when compared to their main rival, Blockbuster imposed these charges, while the Netflix enabled customers to keep videos as long as they liked, with no extra payment and just a standard monthly charge.

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Changes to Implement as the CEO

If I had been the CEO of Blockbuster back then, I would have done things differently. Firstly, it is evident that technology will keep on changing and become more advanced over time. As these innovations develop, so would I transform and embrace the new knowledge. One way of keeping customers engaged in specific services is for the product to continue improving over time. Blockbuster struggled to adjust to change and to keep things in the same shape which was not appropriate for business. Secondly, I would also have devised easy ways to serve consumers by introducing services such as delivering movies to front doors and enabling online multimedia streaming. The company would have avoided charging late fees but instead seek alternative ways of giving discounts to the customer base.

Conclusion

Blockbuster Video used to be the most successful movie rental agency, but it does not exist anymore. In this situation, it is commonly seen that the company’s main problems, which hindered its sustainable growth and continuation, were weak leadership, low corporate culture, and, to a smaller extent, poor decision-making by the top management. Moreover, the company was trapped in the past and mostly unaware of how the world was shifting around it. In return, they paid a hefty price for their ignorance and pride. Therefore, this serves as an excellent lesson to companies who are not keen on the ever-changing business environment.

References

Chopra, S., & Veeraiyan, M. (2017). Movie rental business: Blockbuster, Netflix, and Redbox. Kellogg School of Management Cases, 1-21.

Saini, L. (2019). How Netflix destroyed Blockbuster in just 6 years. BetterMarketing.

Walker, R., Jeffery, M., So, L., Sriram, S., Nathanson, J., Ferreira, J., & Feldmeier, J. (2017). Netflix leading with data: The emergence of data-driven video. Kellogg School of Management Cases, 1-19.

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