How Do You Avoid Being The Next Blockbuster?

A few years ago it seemed Blockbuster Video was as popular as Disney and on the verge of joining the hamburger giant  McDonald’s on every corner of the globe. And now…..

As someone who studies business and business trends you can’t help but look in awe at the Collapse of Blockbuster Video. The video giant was at the top of the video and gaming rental world just a few years ago.  When I read that the company that started in 1985 and was bought by Viacom ten years later for $8.4 Billion was on the verge of bankruptcy I couldn’t believe it. But, just like with any story the is a lesson to be learned there. 

Fast Companyhad a great article that chronicled the begining and the end of the media giant. As you read through this think about your business..are you on the top today with seemingly no competition?

1985: First Blockbuster store opens in Dallas.

1994: Viacom acquires Blockbuster for $8.4 billion.

1997: Reed Hastings returns Apollo 13 to Blockbuster six weeks overdue, and is dismayed by the $40 late fee.

1998: Reed Hastings founds Netflix.

1999: Viacom holds Blockbuster IPO, valued at up to $4.8 billion.

2000: Blockbuster declines several offers to purchase Netflix for a mere $50 million. Instead, the company inks a 20-year deal to deliver on-demand movies with Enron Broadband Services, a subsidiary of energy trading giant Enron.

2001: Enron files for bankruptcy amid accounting scandal.

2002: Blockbuster debuts Super Bowl ad starring the voices of Jim Belushi and James Woods, as a rabbit and a guinea pig. The company posts a $1.6 billion loss.

2003: Netflix posts first profit, earning $6.5 million on revenues of $272 million. Redbox launches a kiosk rental service.

2004: Blockbuster enters online DVD rental market. Netflix CEO Reed Hastings tells analysts in an earnings call, “In the last six months, Blockbuster has thrown everything but the kitchen sink at us.” The following day, Hastings receives a package from Blockbuster. Inside: a kitchen sink.

2005: Blockbuster launches a marketing campaign touting its new “No Late Fees” policy. Subsequently, 48 states launch investigations into the program, charging Blockbuster with misrepresenting its late fee policy to customers. Blockbuster settles for $650,000.

2006: Blockbuster, now valued at $500 million, surpasses its goal of two million subscribers for its online platform. Netflix reaches 6.3 million subscribers by December.

2007: Blockbuster hires new CEO Jim Keyes, formerly of 7-Eleven. Keyes decides to roll back the company’s Total Access plans. “Clearly our spending on that one channel was exceeding our returns,” he said during a company earnings call. After losing a half-million subscribers in the third quarter, Blockbuster announces it will no longer report its subscriber count.

2008: Blockbuster proposes buying struggling electronics chain Circuit City. Blockbuster soon withdraws its offer after it’s universally panned. Circuit City files for bankruptcy in November. Keyes also expresses doubt about Netflix in an interview: “I’ve been frankly confused by this fascination that everybody has with Netflix…Netflix doesn’t really have or do anything that we can’t or don’t already do ourselves.”

2009: Blockbuster rolls out Blockbuster Express, its kiosk system designed to compete with Redbox.

March 2010: Blockbuster touts 28-day exclusive window over Netflix for new releases. The company also reintroduces late fees, which had been costing the company $300 million in revenue annually.

May 2010: In an interview with Fast Company, Jim Keyes is asked whether Blockbuster’s financial troubles were due in part to Netflix’s success. “No, I don’t know where that comes from,” he says. Keyes denies his company is going bankrupt.

June 2010: Keyes compares Blockbuster to Apple, claiming that its On Demand service is the equivalent of the iMac.

July 2010: Blockbuster launches Droid X app. Blockbuster is de-listed from the New York Stock Exchange after shares hit all time lows.

August 2010: Though ailing from a debt of $900 million, Blockbuster’s head of digital strategy explains, “We’re strategically better positioned than almost anybody out there. Never in my wildest dreams would I have aimed this high.” Blockbuster adds video games to by-mail subscription plans for no additional cost, but neglects to mention that new releases will not be available for three months.

September 2010: Drowned in revenue losses of $1.1 billion, sources say Blockbuster plans to file for bankruptcy. The company is valued at just $24 million

From $4.8 Billion to $24 Million …..

What lessons can you learn and apply to your business?

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11 Responses to "How Do You Avoid Being The Next Blockbuster?"

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