There are too many idiots who run big companies in this world. Blockbusters are just one of the few who refuse to change over time and are now facing extinction because they are too stubborn to keep up with the times. In the 1990s, Blockbuster was a big dog in the industry. They reaped huge profits and basked in the glory of their success. Services like Netflix have just started to appear, but they don’t pose a serious threat to them.
Of course, they think this trend will continue and they can shake up their physical business model forever instead of changing over time. Starting in 2002, they faced difficult times as their stock plummeted and Blockbuster saw a year-over-year decline in sales in the billions.
Why their business plan failed
There are many reasons why Blockbuster’s business plan failed. One reason for this is because they have a limited selection of movies in their stores. Just last week I was in Blockbuster with my girlfriend. He had never seen “The Sixth Sense” before, so we thought it would be great to pick it up on the way home as we passed the local store. We went inside and started exploring the islands up and down.
For some reason, Blockbuster thought it would only keep a copy of the movie in stock! And a copy of this movie has already been rented. Just then and then I exploded into one of his co-workers – “and that’s why you guys lost money.” He looked at me as if I had said something wrong.
The truth is that Blockbuster doesn’t believe that people want to rent a movie that has been out for several years. They are too focused on new releases and forget about the films that people were interested in some time ago.
I understand that they have limited space in their store and can’t keep many copies of every movie made since the beginning of time. People may take the time to come to their store with the movie they want to watch. Just don’t count on it to be available. This brings me to the next point, why their business model failed.
Competition with other services
You know that your business plan hasn’t been strong from the start if a movie rental box outside your local 7-11 store causes you to fail. I’m talking about Redbox – a $1 movie rental kiosk that you see right outside the store these days.
One appeared a few months ago in the 7-11 store near my house. When I first saw it, I thought, “Who’s going to get a movie from here?” But oh kid, I was wrong! There is usually a large queue of people waiting to get the movie.
It makes sense – people just want to take strips on the go. No one wants to have to go to the store just to get a movie that might not even be available. In addition, all the costs of getting a movie from Redbox cost $1! Compare that to how much Blockbuster costs.
The cost of renting a movie
Blockbusters are still stuck on an expensive business model of charging arms and legs for film distributors. The last time I got a movie from this store, it cost about $5! That’s for a single film distributor! I believe that the mentality that people are still willing to pay large sums to see a movie has a greater negative impact on the blockbuster finish than they still realize.
When there are competitors like Netflix and Redbox that offer movie rentals at such low prices, Blockbuster still charges $5 per person.
They need to put more money into their research and development department or hire someone who understands what people want. Having economists on their team would also be very beneficial. If a company simply refuses to believe in the supply and demand model, it will not last in the game any longer.
When was the last time blockbusters lowered their prices? I remember in 1998 they charged about $3 for movie rental. By having more competition, they should reduce the cost of renting a movie, rather than increase it.
Why would someone pay $5 for a movie rental when they can get it for $1 from Redbox or subscribe to Netflix for $8.99 per month and rent as many movies as someone wants? Even if someone gets two movies a month from Netflix, they will pay less than the cost to rent a movie from Blockbuster!
This does not even take into account other benefits that a person receives, such as. Because you never have to leave your home and prepaid envelopes to return the movie. Not to mention that one doesn’t have to worry about movies not being available except in some individual cases.
What should blockbusters learn from their own mistakes
Even if there are fools leading this company, there are still things that blockbusters can learn from their failed attempts to stay on top. One of the first things they need to do is a close deal that is not profitable, or even one that only breaks even but will not grow. It doesn’t make sense to keep it open.
According to their financial statements, it looks like they are causing very high expenses by keeping these types of transactions open. The smartest thing Blockbuster can see right now is that the brick and mortar business model is failing.
If they want to stay competitive, they must stop having an emotional attachment to their business and let them go. There’s no point in being in a relationship when all that brings you is misery and stress!
Make uses of their powers
This is not just bad news for blockbusters. There are things that can be done to be competitive again and increase its advantages. What Blockbuster has is a very established brand! It’s hard to find someone who doesn’t recognize the name of the blockbuster.
The smartest thing they can do is to take advantage of and benefit from the advantages they have over others. Why not start installing movie rental kiosks like Redbox? I can almost guarantee that if Blockbuster is willing to compete in the price field, they will be the top.
People tend to choose brands that they know have been around for a while, as newcomers. Even if Blockbuster costs a bit more than the $1 Redbox movie rent, they will draw income from their competitors and put it back in their own hands.
Blockbusters may even be able to negotiate a better placement location for their stalls than Redbox. As the phrase says, in terms of business – location, location, location!
Another thing where Blockbuster has an advantage over its competitors is the impulse buying market. Surprisingly, this is a large category of people who don’t want to wait for the movie to arrive in the mail. They want to get the movie on the go and pay all the blockbuster fees.
The only problem that a good old blockbuster has to solve is how to save all the movies that people want. I’m willing to bet that most of the customers who walk through their doors leave empty-handed because they haven’t found the movie they’re getting in stock.
Not only did such people leave the store empty-handed, they also left with the money that Blockbuster could make! Unfortunately, I cannot give any innovative advice on this topic. I believe there are people who can help the chain of stores with this problem at the right price.
There is still some life in the blockbuster and they can make a decent comeback if they are willing to look at things objectively. Everyone who has built something valuable has an emotional attachment to it and I believe Blockbuster suffers from this syndrome.
They will have to cut a lot of their business – which in turn will reduce their expenses by a large amount. It doesn’t matter how much money the company makes if in the end everything is paid for expenses. It is better to have a smaller chain of stores that are very profitable than to confuse too many that mess up the bottom line.
Another positive side effect of a less manageable business is that it’s easier to make changes across the organization to keep up with the times. It will be a little more difficult to manage 4000 stores than 1500 or less.
However, as we have seen many times, companies tend not to realize what the changing times require until it is too late. Although I wish it could be different, Blockbuster will most likely not return because they are unwilling to recognize the problems they are facing. The best thing they can expect is for someone to buy it and start incorporating some of the business strategies described in this