Blockbuster: A Look at Assumptions and Failure

Mike Berina
3 min readApr 7, 2018

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A closing Blockbuster store, obsolete in the new online market.

My family had a weekly routine every Friday night to drive down the street to the local Blockbuster to rent out a couple of new movies for the weekend. It was a fun ritual we had. My dad and I would walk through the latest action movies while my sister would browse through the Rom Com and Drama aisles. After going through the endless DVD covers, we would meet near the register and come to a consensus on which two movies we would rent for the weekend. We kept this routine going for a couple years, like many other customers visiting its 9,000 stores in the late 90’s and early 2000's.

Blockbuster was a video rental chain widely recognized across the U.S., raking in close to $6 billion in 2004. Blockbuster specialized in new releases comprising about 80% of its business, and 70% of profits came from late fees incurred by customers returning their movies beyond the agreed upon return time. However, six year later in 2010, Blockbuster filed for bankruptcy, and the once behemoth brand fell to its competitors in the rapidly changing market.

Assumption 1: Stick to our guns

When Netflix appeared on the scene in 1998 with an opposing business model of a monthly subscription DVD mail service (and later digital streaming in 2007), Blockbuster considered the online rental service a niche market, not worth much attention with no known comparable, profitable business models, which more likely served as an advantage for Netflix. Blockbuster even declined an acquisition offer of Netflix for $50 million in 2000. Blockbuster decided to stick to the money-makers they knew best, rather than looking ahead to the changing market.

Assumption 2: What worked in the past will work in the future

While Netflix was painted as Blockbuster’s primary rival, other streaming and on-demand services were budding in the early 2000’s, further expanding the ease and convenience of movie access to customers with Redbox, Apple, Amazon, Comcast, and Hulu. With Blockbuster’s business and revenue heavily based in retail stores renting physical copies of movies, the quick and drastic change in emerging technologies and services and the indecision to move forward without past data left Blockbuster vulnerable in the dust, playing catch up with all of its competitors. Blockbuster eventually created products and services to compete in the market (DVD mail, kiosks, online streaming), but by the time Blockbuster was forced to change with the times, it was already too late. Blockbuster had failed to innovate and seize the moment.

Don’t rest on your laurels

Blockbuster’s failures can be a great learning tool for businesses. Relying too heavily on one’s past success can jeopardize future success, especially when past success blinds you from what’s going on now and what will happen in the future. Change is inevitable, and businesses must learn to adapt. While drastic change can seem daunting and expensive, in the end, there’s always a price to be paid. For Blockbuster, it could have been a $50 million acquisition of Netflix or bankruptcy. It chose the latter. Furthermore, timing is everything. Had Blockbuster sought to be an innovative leader in the market rather than playing catch up with its competitors, it’s possible we could be watching Black Mirror when we “Blockbuster and Chill”. However, a business playing catch up can find itself in a losing position, while bold leaders are often seen reaping the fruits of their labor.

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