Blockbuster was once the king of video rental, with thousands of stores worldwide. However, within just a couple of decades, it went from boom to bust. So what happened to this former retail giant?<\/p>\r\n
After being acquired by Dish Network in 2011, Blockbuster’s remaining corporate-owned stores were gradually closed down over the next few years as the business was wound down. By 2014, all corporate-owned Blockbuster stores had shut their doors for good.<\/p>\r\n
A handful of franchised Blockbuster stores managed to hang on for a few more years by operating independently. However, by 2018 the last remaining franchised Blockbuster store had closed its doors, marking the end of an era for the iconic brand.<\/p>\r\n
Dish Network continued to operate the Blockbuster On Demand streaming service for a few years after acquiring the company. But it was shut down in 2018 as well, as Dish focused on its core satellite TV business.<\/p>\r\n
\u00a0Here are 10 key reasons why Blockbuster failed:<\/p>\r\n\r\n\r\n\r\n
When Netflix started offering DVD rentals by mail in the late 1990s, Blockbuster laughed off the competition. The giant\u2019s executives didn\u2019t see how Netflix\u2019s small rental selection could disrupt their massive brick-and-mortar empire. However, what they didn\u2019t anticipate was how quickly streaming technology would advance. By the time Blockbuster tried entering the online space with Blockbuster Online in 2004, it was too little too late. Netflix and upstarts like Redbox were already poised to eat their lunch.<\/p>\r\n\r\n\r\n\r\n
Related to the above, Blockbuster failed to adopt new technologies quickly enough. The world was shifting from physical to digital media rentals, yet Blockbuster was still focused on its traditional in-store model. Competitors like Netflix and Redbox embraced on-demand streaming and kiosk rentals much more rapidly. Blockbuster found itself several steps behind the tech curve – a place it could never recover from.<\/p>\r\n\r\n\r\n\r\n
Blockbuster\u2019s traditional retail stores came with massive fixed costs. They had to lease thousands of large spaces, hire many staff to man locations, and maintain a huge inventory across multiple sites. This made the Blockbuster rental experience more expensive and cumbersome than leaner tech-based solutions from disruptors.<\/p>\r\n\r\n\r\n\r\n
One of the biggest complaints people had about Blockbuster was their excessive late fees. You could end up paying more in fees than it cost to just rent or buy a movie! This frustrated millions of customers who then eagerly jumped ship to Netflix or Redbox – both of which had no late fees. The fees became so hated that even the term \u201cBlockbuster late fee\u201d entered common lexicon. The brand shot itself in the foot by angering its customer base.<\/p>\r\n\r\n\r\n\r\n
During its heyday, Blockbuster had exclusive rental deals with major Hollywood studios. This gave customers access to new release titles before competitors. However, by the 2000s, studios were looking to sign digital distribution deals with Netflix and Amazon instead. Blockbuster had less leverage over studios because its customer base was fleeing. The loss of exclusive studio relationships was another nail in Blockbuster\u2019s coffin.<\/p>\r\n\r\n\r\n\r\n
Here\u2019s an interesting \u201cwhat if\u201d of history. In the early 2000s, when Netflix was still a fledgling DVD-by-mail business, they approached Blockbuster about a potential acquisition or partnership. At the time, Blockbuster still dominated the rental market and could have acquired Netflix for a song. However, Blockbuster thought Netflix wasn\u2019t a threat and declined the offer. Imagine how different the rental market would be today if Blockbuster had acquired Netflix!<\/p>\r\n\r\n\r\n\r\n
In the 1990s, Blockbuster expanded aggressively, opening thousands of stores per year at its peak growth. However, this left them overstored when the rental market began shifting online. They then closed hundreds of stores per year in the 2000s, but not quickly enough to stay solvent in the digital era. Expanding too fast, then shrinking too slowly – another strategic misstep.<\/p>\r\n\r\n\r\n\r\n
Blockbuster relied on antiquated, disconnected in-store software systems that made running their retail outlets inefficient. Tasks like tracking inventory and customer reservations were manual and friction-filled. On the other hand, Netflix and other disruptors were using modern cloud-based software to power frictionless digital experiences. Blockbuster\u2019s outdated backend tech made competing in the online rental era even harder.<\/p>\r\n