Why Blockbuster Couldn't Avoid Bankruptcy

Here is an interesting perspective from TIME on why Blockbuster may have gone under. A lot of these points are interesting and I learned some new info I wasnt aware of before. However it leaves out the other obvious reason - their overpriced video rentals had to compete with lower priced, more easily assessable options - Redbox, Netflix, Friendly Video, VOD, etc. Nonetheless, its still a interesting study on how a great company simply lost the core of it's identity along the way - simply getting movies to everyday people. Here it is, after the jump. What do you think?



Back in April, months or years after lots of other people, I got the idea that there was no way video chain Blockbuster could avoid bankruptcy. So I went to talk to a few people about how the company got into its sorry situation and what it planned to do to get out. One of the people I talked to was current Blockbuster CEO James Keyes. He swore that the company was not considering bankruptcy. Nonetheless, I was intending to write a story saying that Blockbuster was done for. Then there was that whole Goldman thing, which lead me to Cedar Rapids, and how that town and others lost money in the Goldman deal and were mistreated by Wall Street in general. Not to mention that whole thing in the Gulf. So Blockbuster beat me to it. But according to the bankruptcy papers Blockbuster filed today Keyes was officially considering bankruptcy even as early as May, weeks after we met. Probably earlier.

Why did I have the feeling that Blockbuster would soon be busted? From the file of reporting anecdotes that I have not yet worked into a story here it is:

In doing my initial research for the story a number of people I talked to said the big mistake that Blockbuster had made in the past was to do too much with their stores. When Viacom owned Blockbuster, they tried to turn the stories into a dumping ground of Viacom merchandise. Dolls and toys and books and other stuff. Other CEOs had added candy and popcorn and even stores that served pizza. Made sense to me. When you are going to watch a movie at home, pizza and candy seemed like likely pairings. But none of those items ever sold.

It turns out the movie renter has a limited time. You need to get your movie and get home to watch it. Spend too much time at the store and your evening was ruined. No time to watch the movie. So renters never stayed long enough in the store to pick up anything other than the rental. So in the early 2000s Blockbuster stripped most of that stuff out of the stores, or so they said.

During the interview, I asked Keyes how many stores he planned to close in the next year. At the time, he said he wasn't planning on closing many stores. Instead, he had a new idea called Rock the Block that was going to make the stores dramatically more profitable. What's more, he said the stores could act as a venue for showing off Blockbusters' new home delivery technology. The company had partnered with some television and DVD makers to include Blockbuster branded software that can quickly download movies over the internet and immediately watch them on your TV. Put aside the fact that Keyes was using the stores to sell people on not using the stores, and this made some sense. Apple has been successful with its stores in getting out the message that the companies computers were hip and easy to easy. The stores turned the computers into something of a luxury item. So if Blockbuster could transform some of its stores into hip looking electronic outlets demonstrating the easy of their video demand service delivered though high-end TVs and DVDs and DVRs, I could see how Blockbuster would be able to rebrand itself.

Read the rest of this piece HERE.

Oh and here is an odd note: You can currently rent two of our movie titles directly from Blockbuster online HERE.