Why blockbuster failed

But as Blockbuster became a multibillion-dollar company in the early '90s, adding music and video-game rental to its stores, Huizenga was worried about how emerging technology like cable television could hurt Blockbuster's video-store model. In only two years under Viacom, Blockbuster lost half of its value. While Blockbuster and its new boss, John Antioco, focused on brick-and-mortar video stores, technological innovations meant that competition was on the rise.

In a deal that saw Enron do most of the work, a robust video-on-demand platform was successfully built and tested with customers. But it soon became clear to Enron that Blockbuster was so focused on its lucrative video stores that it had little time or commitment for the video-on-demand business.

As a result, in , Blockbuster walked away from the first major development of wide-scale movie streaming. Within a few years, Netflix and other competitors began to eat into Blockbuster's profits, not by undercutting it, but by reimagining video rental in the digital age.

Commercial: There's a better way to rent movies. Go to Netflix. Keep them as long as you want, without late fees. Then, when you're done, look: prepaid envelopes. Return one and they'll send you another movie from your list. All the movies you want, 20 bucks a month, and no late fees. This allows an all-Netflix all the time physical cinema. A further important note about Netflix is that even over the span of two different economic recissions in and in , they pushed forward with innovation instead of acting conservatively.

Had Blockbuster been more open to market evolution and the roles new startups can serve to help an established corporation, they would have purchased Netflix, and perhaps even allowed them to drive their online presence. As continues forward in an economic nightmare, innovation needs to be top of mind for both startups and corporations alike. We wrote two different pieces recently about corporate innovation with startups and startup accelerators, and particularly how corporations need to invest hard into innovation right now, during economic recessions.

In Recessions, Investing in Innovation is Essential. In addition to the saga of Netflix and Blockbuster, there are many other examples of established companies failing to innovate, however the two below, one big and one small, are good food for thought.

From the Huffington Post :. The dot-com bubble had burst - leaving a sour taste in the mouths of many when it came to anything involving newfangled technology. If you are curious about why only one Blockbuster store remains today then consider these eight reasons for why it is no longer the juggernaut it once was. Walking away from the deal of the century. Blockbuster made a critical error when it walked away from a deal with Netflix. Netflix was still a young upstart in those days having only launched its business three years earlier.

But Blockbuster passed on the deal claiming the price was too high. Before too long Netflix was no longer the underdog it was building a loyal and growing customer base. An inability to pivot quickly. Blockbuster was skeptical about the potential of renting DVDs online and sending them to customers via mail the way Netflix did.

You no longer had to go to a Blockbuster to get the movie you wanted to see or the video game you wanted to play. Instead you could simply go online, select the movie you wanted to see and voila it would show up in your mailbox a few days later. Throughout the '90s and early s, Blockbuster was the top video-rental company in the US, but that didn't last forever. As other, more dynamic services emerged and customers complained about late fees, Blockbuster eventually went bankrupt.

Today, just one store remains in Bend, Oregon. After working in computer software, Cook decided to open his own video-rental store in Dallas , Texas. His company was different than other rental stores because it offered customers a selection of 8, VHS tapes with the help of a modern, computerized check-out process, while other, smaller rental stores could only offer a couple hundred movies.

At the time, rental stores, like Blockbuster, were the only way people could watch movies that had left theaters without buying the VHS tapes themselves. Later that year, Cook left the company , as the headquarters moved to Fort Lauderdale, Florida. In , Blockbuster became the leading video-store chain in the US with stores. In , the company also expanded overseas when it bought out video-rental chain Ritz in the UK. At this time, there were 2, Blockbuster stores.

Five years later, Viacom took Blockbuster public, as the number of stores reached 6, globally. Blockbuster was known for charging customers a fee for every day they were late returning a movie rental.

This frustrated many customers, including Netflix founder Reed Hastings. In its early stages, Hastings' company, which had no late fees, would send DVDs straight to your house for a flat monthly rate.