I'm sure you've heard by now that Blockbuster filed for bankruptcy protection this week. This really doesn't come as a shock to me (or to a lot of other people, I'm sure); it was more a question of "when" than "if".
Founded 25 years ago in Dallas, Blockbuster has seen some amazing highs and lows over the years. In the heyday of VHS, the place to go to rent movies was the nearby Blockbuster... you could rent tapes elsewhere (anyone else remember the video section at the old Delchamps grocery stores?) but no one had the big selection Blockbuster had. At one point in the '80s, there was one new store being opened a day in the US. At the time, buying a copy of a movie was not in everyone's budget (some titles sold for $70 or more when they were new), so renting made good sense. A few years later there was Blockbuster Music, and even the Blockbuster Bowl in Miami. Yes, things were going well for Blockbuster: flying high, growing by leaps and bounds, and making huge profits... it seemed like the sky was the limit. Behold, a 1988 commercial (check out the crazy late '80s fashions!)
On September 23, 2010, Blockbuster filed for Chapter 11 Bankruptcy protection, due to growing losses and $900 million dollars in debt.
So, what happened? There are a ton of factors that have led to their near-demise. No doubt the biggest is competition from Netflix and Redbox. Netflix offers a $9 monthly membership that includes one DVD rental at a time (that can work out to 8 rentals a month if you mail them back quickly), as well as unlimited streamimg movies and TV shows from a growing library. The availability of high-speed internet has made Netflix streaming even more enticing. Redbox has kiosks all over the place, in convenient locations so you don't have to make a special trip to a store just to rent a movie. Redbox charges 99 cents a night for rentals, which Blockbuster can't match. And Redbox doesn't have to operate a retail location, which keeps their operating expenses way down.
There's also on-demand movies on cable and satellite, streaming on PCs, and DVDs can now be purchased for as little as $5 at WalMart (around the cost of a Blockbuster rental). Where blockbuster once had little competition, they now find themselves struggling to survive.
And then there's the old business model built around something that everyone (except Blockbuster) despised: late fees. At one time, a large portion of Blockbuster's profits came from the fee charged if a movie was returned late. Many times, it was inconvenient to get a video back on time, and you paid the price for being late. This worked to Blockbuster's advantage for many years, but as competition began to emerge, they had to do something. And for a short time, they did. Remember this commercial?
Will they survive? Blockbuster already has closed more than 1,000 stores in the past two years because so many of them weren't making money. They plan on liquidating debt and opening more kiosks (I still haven't seen a Blockbuster kiosk, but I know they're out there). There's Blockbuster Online (now called "Total Access") that was designed to compete with Netflix, but so far it hasn't been a huge success. Blockbuster says they will keep their 3,300 stores up and running for the time being. Some new Android smartphones have a pre-installed Blockbuster application for watching rented or purchased videos. (Netflix already has an iPhone app that works in conjunction with their $9 a month unlimited streaming plan.)
Only time will tell if Blockbuster can emerge from Chapter 11, or if they will face the same fate as Hollywood Video... whose parent company Movie Gallery (once the second-largest U.S. movie rental chain behind Blockbuster), filed for bankruptcy protection in February of this year before liquidating in August.
Founded 25 years ago in Dallas, Blockbuster has seen some amazing highs and lows over the years. In the heyday of VHS, the place to go to rent movies was the nearby Blockbuster... you could rent tapes elsewhere (anyone else remember the video section at the old Delchamps grocery stores?) but no one had the big selection Blockbuster had. At one point in the '80s, there was one new store being opened a day in the US. At the time, buying a copy of a movie was not in everyone's budget (some titles sold for $70 or more when they were new), so renting made good sense. A few years later there was Blockbuster Music, and even the Blockbuster Bowl in Miami. Yes, things were going well for Blockbuster: flying high, growing by leaps and bounds, and making huge profits... it seemed like the sky was the limit. Behold, a 1988 commercial (check out the crazy late '80s fashions!)
On September 23, 2010, Blockbuster filed for Chapter 11 Bankruptcy protection, due to growing losses and $900 million dollars in debt.
So, what happened? There are a ton of factors that have led to their near-demise. No doubt the biggest is competition from Netflix and Redbox. Netflix offers a $9 monthly membership that includes one DVD rental at a time (that can work out to 8 rentals a month if you mail them back quickly), as well as unlimited streamimg movies and TV shows from a growing library. The availability of high-speed internet has made Netflix streaming even more enticing. Redbox has kiosks all over the place, in convenient locations so you don't have to make a special trip to a store just to rent a movie. Redbox charges 99 cents a night for rentals, which Blockbuster can't match. And Redbox doesn't have to operate a retail location, which keeps their operating expenses way down.
There's also on-demand movies on cable and satellite, streaming on PCs, and DVDs can now be purchased for as little as $5 at WalMart (around the cost of a Blockbuster rental). Where blockbuster once had little competition, they now find themselves struggling to survive.
And then there's the old business model built around something that everyone (except Blockbuster) despised: late fees. At one time, a large portion of Blockbuster's profits came from the fee charged if a movie was returned late. Many times, it was inconvenient to get a video back on time, and you paid the price for being late. This worked to Blockbuster's advantage for many years, but as competition began to emerge, they had to do something. And for a short time, they did. Remember this commercial?
Will they survive? Blockbuster already has closed more than 1,000 stores in the past two years because so many of them weren't making money. They plan on liquidating debt and opening more kiosks (I still haven't seen a Blockbuster kiosk, but I know they're out there). There's Blockbuster Online (now called "Total Access") that was designed to compete with Netflix, but so far it hasn't been a huge success. Blockbuster says they will keep their 3,300 stores up and running for the time being. Some new Android smartphones have a pre-installed Blockbuster application for watching rented or purchased videos. (Netflix already has an iPhone app that works in conjunction with their $9 a month unlimited streaming plan.)
Only time will tell if Blockbuster can emerge from Chapter 11, or if they will face the same fate as Hollywood Video... whose parent company Movie Gallery (once the second-largest U.S. movie rental chain behind Blockbuster), filed for bankruptcy protection in February of this year before liquidating in August.
