I think this was more a perfect storm of problems: Netflix coming on the scene, Blockbuster having terrible customer service/fees, and the wishy-washy corporate leadership.
I always get frustrated when I hear people describe a failure as the result of a "perfect storm," because it lets the people behind the failure off the hook. "Nothing we could have done! Perfect storm!"
The article cites problems with Blockbuster's management that go all the way back to 1996, before Netflix even existed. And if anything, it sounds like the various cadres of corporate leadership weren't "wishy-washy" so much as they were laser-focused on a single idea -- the one-stop retail "7-11 for the mind" concept. It's just that the idea they were focused on was terrible.
The amazing part is that they had a CEO who really understood that and turned Blockbuster around, who was then ousted for stupid political reasons by Icahn and replaced with a fool.
Especially given how he was ousted because Icahn thought he was being given too large of a bonus, and then end up paying him nearly 5x that amount in severance.
For Carl Icahn, who had used the CEO’s compensation as a cause célèbre in his proxy battle, this was a chance to take a stand. He instructed the board not to pay the bonus and informed Antioco that he could take $2 million or nothing. When the dust cleared from the ensuing fur fight, Icahn was holding Antioco’s resignation and a contract requiring him to pay $24 million in severance.
No, no, no, listen, all of these people knew exactly what they were doing, and made great decisions. They must have done - why would they be CEOs and investors paid telephone number salaries otherwise? You'd have to live in a pretty crazy world for that to be the case!
They are paid what they are because most people can't do it and the work is valuable. Not surprising that there are some people that get in there that don't work out.
I'm not sure there was a way forward for Blockbuster. Netflix and Redbox replaced it's core market with alternatives that were both better and more efficient by an order of magnitude.
A massive nationwide retail chain can't just pivot like a startup can. Blockbuster's retail footprint was massive. It had 9,000 stores. Worse, it had franchise stores which it owed a duty to.
Even if Blockbuster could have had a profitable online rental business, it would have been brought down by the retail failure. It would have gone bankrupt anyway.
Did you read the article? It claims that Blockbuster had Netflix on the ropes with their "Blockbuster Total Access" thing, which was basically Netflix but better due to the physical stores and 10x more customers. Then they decided not to pay the CEO what he was due, he quit, the whole leadership team left, they brought in a new CEO who was terrible, and they abandoned the Total Access plan and were bankrupt within 2 years.
Actually I didn't see the next segment button, so thanks for letting me know.
But Total Access isn't the 800 lbs Gorilla that the author believes it to be. I actually subscribed to total access. It is certainly a cool feature, but I'm not sure it was very profitable. For essentially the same price as netflix, I could also get 2-3 instore rentals a month. All for what blockbuster used to charge for 3-4 rentals total.
But blockbuster could have survived Netflix. What it couldn't survive was netflix, redbox, and instant streams. Netflix took away the heavy movie fans. Redbox took aware the family movie night segment. Blockbuster couldn't survive on 1-1.50 a night, but Redbox could.
I think if you're a dinosaur in any space being devoured from the ankles by smallfry startups, the least you can do is build up some skunkworks projects to protect yourself somehow.
The dinosaurs more often than not try to protect their declining fortunes rather than cannibalise their sales, but often they could be doing both and doing it more effectively.
In this case there was a bit more going on, obviously.
They were competitive enough to wipe-out the mom and pop movie rental places that were common before them, but that was about it. They created a monopoly of sorts and then they milked it. The market was hungry for replacement.
It was a long time ago so some of the details are out of focus in my mind, but the one constant I can remember throughout the 6-9 year time span where by my family and I patronized Blockbuster video (wow, like 20 years ago) was that it was quite a bit more pricey than the independent stores we went to before BB crushed them. I know for fact that the local grocer has a video section and charged $1 a video, I want to say Blockbuster charged $4-$5, like in 1992 to 1995, very nearly as much as a movie ticket of the day cost. I'm sure people can tell tons of stories about how terrible they were but it wasn't a great experience and they charged a lot for it.
If you were a real cinemaphile type too, they had what looked like a large collection, but it wasn't as large as it looked, they sometimes had censored versions of movies.
