Blockbuster was the national leader in the video rental business for nearly two decades. Now it is contemplating Chapter 11 to eliminate debt. The company lost $65 million last quarter. Its revenue continues to fall rapidly as firms such as Redbox and NetFlix (Nasdaq: NFLX - News) siphon off its revenue. Blockbuster has more than 6,000 stores, so it is hard to imagine that the company could disappear. But, there is some precedent, even if it is on a smaller scale. Blockbuster rival Movie Gallery said in February that it would close all of its 2,400 U.S. stores. Blockbuster's model of renting movies through physical locations has been destroyed by cable and satellite video on demand, DVDs via mail and dispensing machines. Blockbuster may still be around as a company that has movie kiosks and a small mail and Internet-delivered content business. But its brick and-mortar business is dead.
Wrong. Cable and satellite didn't kill Blockbuster. And for that matter, neither did Netflix or Redbox. Blockbuster killed Blockbuster. Blockbuster grew to prominence with cable as a competitor, and satellite offers little real choice. "727 channels, and nothing's on... " Since way before Netflix or Redbox, Blockbuster's overpriced rental structure and its abusive (and confusing) late policies are what killed Blockbuster. Had they simply lowered their prices across the board - not with a half-hearted "some things are a dollar and some things aren't" model they tried a couple of years ago - and simply did away with late fees, they would still be the industry leader. Redbox's success is a direct result of people actively boycotting Blockbuster's prices.
I don't buy the notion that people are done with brick-and-mortars, either. After all, people still have to physically get in the car and drive to the nearest Redbox. But people are willing to do it because the price is right. With Blockbuster's overwhelming selection advantage, imagine what kind of business they would be doing if they would simply adopt Redbox's pricing model.
Competing on price isn't easy. But if you're going to compete on something other than price, you'd better have something that people will pay extra for. An in-stock guarantee, for instance. Or a by-mail order system. Or a digital delivery system. Or rent one-get one free. Or something.
But no. Blockbuster said "we're Blockbuster. This is the way we do things. This is the way we price our movies. Take it or leave it."
And people have been leaving it in droves. RIP, Blockbuster. I won't miss feeling beaten up every time I walked out of one of your stores.
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