Blockbuster — A failed business

Tim Myers
2 min readAug 6, 2019

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The rise and fall of home movie service titan.

We all remember it, we all loved it, so what happened to Blockbuster? How did the home movie giant go from dominating a market to declaring bankruptcy by 2010?

Throughout the early 2000s, Blockbuster had thousands of locations across the world with millions of customers. They were dominating the market without much competition in sight. The business model was simple, provide video entertainment and video games to consumers. But, hidden within their business model were late fees, that’s where Blockbuster made a lot of its money. So much so it became an integral part of the business revenue, I think we all recall clearly, show up 5 minutes past the due back time and you were smacked with a late fee!

That is exactly where the business model failed, Blockbuster didn’t make their money renting out movies and video games, they made their profit on late fees. For a time it worked, if you wanted to keep a movie for a little while longer you paid a fee until you felt like bringing back. Mom might get mad but no skin off of Blockbusters back! That is until the eventual rise of competition, Netflix to be exact.

Although there were no physical locations, the streaming service made it convenient to watch movies without ever having to leave the comfort of your home. Oh, and of course, no late fees. Fun fact, in 2000, Reed Hastings, the founder of Netflix, offered a partnership opportunity with Blockbuster. Needless to say, Netflix now sits at a valuation of about $30 million and Blockbuster has, well, one location left in the entire world.

Getting to the whole point of this, Netflix was able to see how a current service failed to innovate. Blockbuster, rather than adapting, stuck with their guns and lost the battle. Netflix and others like it were able to see how a service could be improved. Remove late fees, offer an online, streamable service that consumers could enjoy without leaving the house. Blockbuster was so good at what they did, the business never expected to be overrun.

Long story short, in today’s world, it is imperative as a business to keep up with market trends. Know your competition, do the research and adjust accordingly.

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