Tuesday, September 26

Declining Blockbuster now a target for comedy

The decline of the once-dominant US video rental chain, Blockbuster, is now so obvious to the general public that it's the subject of gags such as this item in The Onion, where a struggling Blockbuster eliminates rental fees entirely and lets customers help themselves to whatever they want in the store - even the candy bar.

The company which once enjoyed total domination over a multi-billion dollar video rental industry, with stores as far afield as here in Australia, has been completely transformed in less than ten years by the advent of online media, led by the new giant in video entertainment, Netflix.

How desperate has Blockbuster become to survive against the combined pressures of on-demand movie content delivered by digital cable and Netflix? The Onion piece says it all:

"Please, we’re just asking for one more chance," added (vice president of marketing) Waters as she dropped to her knees and extended her arms out to the assembled crowd.
When the zeitgeist says you're dying, how to you save your business? You really can't - all you can do is delay the inevitable for as long as possible, or try as rapidly as you can to transform your business into something else. Blockbuster has been doing both - giving massive discounts to customers still prepared to walk into their stores and rent a DVD - and putting so much behind the company's DVD-by-mail service that it is now the official Blockbuster website, not just a button off the home page.

Too little, too late, unfortunately. Blockbuster had more market intelligence than anyone in the early 90s and should have known that when DVD replaced VHS it would change the rental business forever. It should have seen that, with a lower risk of piracy, more robust construction and smaller size, it would be possible to get DVDs to customers in innovative ways - like in the mail. It should have seen digital on-demand delivery coming and invested in it heavily, since in the US, postal delivery is only a stop gap - the US has the broadband infrastructure and high-density population to comfortably deliver on-demand content now, a decade after this trend should have been apparent.

And when the little plucky web startup which was Netflix didn't go 'pfffft' along with the likes of other online/home delivery startups like WebVan and petstore.com, Blockbuster should have acquired Netflix as early as possible, for whatever it cost. By the time Blockbuster decided on a strategy - to compete rather than acquire - Netflix had five years of almost no competition from an established market player. It had five years of customer relationships, rental history, and smart guerilla marketing.

By the time the sleeping giant woke up and launched its own hybrid in-store/mail service, it was already too late for Blockbuster. Netflix had the zeitgeist behind it, and now the zeitgeist generally agrees that Blockbuster can't compete, and that it will go out of business. You can't beat popular opinion.

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