Lessons from the fall of Blockbuster, Redbox
The end of an era is upon us. Gone is the way of the DVD as we watch the little red boxes fade pink and grind to a rusty halt in what few remaining locations they stand.
Redbox is latest death in an army of old giants, the onsite movie rental business. Movies are still being rented, of course, but they’re all streaming through devices and services we couldn’t have imagined 20 years ago. Blockbuster and Redbox sure didn’t. But to say it came as a great shock before they died is laughable.
No, no. They were warned, even as the sword of the almighty market had been fashioned for them.
Blockbuster, founded in 1985, and Redbox, in 2002, underestimated a subtle but consequential trend that popped up as early as 2000. Netflix saw it and decided to go for it.
How well I remember the joy of scouring Blockbuster for the latest movie rentals. It had been a step up in both aesthetics and selection in the early 1990s from the smaller, dinkier places I frequented in Shawnee. Stores were aglow with movie theater neon lights, walls awash with heart throbs — hero or villain— and movies playing on screens. It was rare to leave the store without a video because they had it, or would the next day, no matter what.
Prices were competitive, the return fees what one would expect, but how I dreaded paying them! As it turns out, Blockbuster raked in more than 15% of its income from those late fees we all paid.
Anyway, it was a big deal, this new chain and no one knew that better than Blockbuster.
However, along comes what must have looked like an insignificant spider. Netflix had the bright idea of offering DVDs by mail for a somewhat risqué monthly fee, but without postage or late fees. One simply browsed its website from their computer and ordered movies.
I remember my mother- in-law turned me onto them and it didn’t take me long to get hooked. I realized I made back my monthly subscription by not paying late fees! Suddenly thousands of movie titles, including the kinds of silver screen obscurities I loved, were within reach. That selection paled against any movie rental store.
A few weeks later, I found myself, a busy working wife and mother, driving by Blockbuster and wondering how they would make it.
But what did I know? I was just a budding journalist.
Let’s get back to what Blockbuster did and didn’t know. Netflix offers itself to Blockbuster for $50 million in 2000. (To put that in perspective, the streaming platform is now worth $273 billion.)
Blockbuster scoffs at the company like Netflix is a tawdry hustler trying to score an easy trick on a high class player. No, it says. Then Blockbuster gobbles up competitor movie and game retailers until its fully engorged, while Netflix plods along lean and mean until it goes public just two years later.
By then, Netflix knew it had something. It knew what the customer wanted and he who knows what the customer wants, wins.
By the time Blockbuster launched its own mail-in DVD service, it was far too late.
Then Redbox swings by with its cheap looks and easy money—no overhead to speak of and just around the corner where customers could slink by at all hours of the day or night for a quick rental. No store. No onsite employees. No customer account. No fuss. And no future.
Maybe Redbox saw Blockbuster’s blunder with Netflix and thought too many customers wouldn’t wait for the mail to come in. Their service, after all, was instant gratification without any strings attached and their overhead was zilch.
Redbox, owned by Chicken Soup for the Soul Entertainment...and here I need say no more. When was the last time you saw a copy of those books? My heavens! They had a Chicken Soup For The-everything back in the day. And they did sell! And then they ended up in yard sales and library book sales. And then, poof! Readers had at some point gotten tired of “eating” chicken soup every day. Their appetite changed just like the market changed on their movie rental scheme.
The enormous problem is that both Blockbuster and Redbox failed to see the consumer trend shift to something far lazier, far more on-point for a generation that was growing to prefer the click of a mouse to get what they wanted.
And here we are. How did it happen? Numerous business commentators have said it was bad leadership— as they usually do—but what does that really mean?
No commentator can say they were in those board meetings and I sure won’t pretend to know what went down, but when you pass up a trend like Netflix it means you missed that opportunity with breathtaking self-assurance that you made the right call.
I wonder if no one was telling Blockbuster and the ever-lingering Redbox what was about to happen, or worse they didn’t listen.
Leadership has to be prepared to hear of an impending doom from their market researchers, but they better have had the good sense to hire someone courageous enough to tell it. Everyone, in business or not, needs a “no man” in their lives instead of an unending lineup of “yes men” who cheer you on and sing your praises for what they can get out of you. Yes men tend to keep their jobs, get raises and promotions and drag the company down to the dust if you don’t see through them in time.
How hard it is! How painful to hear the words, “You’re wrong. You’re going to risk this company’s future share of the market if you don’t see what’s right in front of you!”
How about this one?
“Look, I’m not here to tell you you’re wonderful. I’m here to tell you that whoever you think you are, you’re not the one with the crystal ball. I am. It’s what I’m paid for. You better buy this company before it sinks you.”
Make no mistake– heeding that kind of talk takes a leader with humility and courage.
Say what you will about the embattled Mark Zuckerburg who’s stayed within the lane of winding trends, but Facebook is one consumer shift away from falling on its face if they miss it like Blockbuster and Redbox did.
Facebook is still alive and kicking, for now. Walmart has managed to fight for its share of the online retail market as it trembles before Amazon. Netflix has coped with competitors who have trailed behind them. Newspapers have diversified to online readers and held onto print to stay alive.
For now, that is. But now is something that changes and only the discerning will survive it.
Mindy Ragan Wood is an award-winning journalist with 18 years’ experience in city and county government and criminal justice. She can be reached at Mindy. Wood@Hilliary.com.