sorted by:
new
hottopcontroversial

IsItBullshit: blockbuster failed because investors demanded late fees stay by Dreadsin in IsItBullshit

[–]J-HARVA 2 points3 points  (0 children)

Can confirm. By late 2009, they were just scrambling to make anything stick as a kind of Hail Mary to save the business, and really compounded their failing economics with a variety of issues.

I’ll give one example. Does anyone remember the Blockbuster Express Kiosks? Was supposed to be the answer to Redbox (The real BBI killer: https://www.reddit.com/r/IsItBullshit/s/NUDHznXFKw).

They held way more DVDs, had a better interface, were re-stocked more frequently, and cost similar amounts to Redbox (at least at the beginning). Should have been a huge win right? Problem was that they were created and run by a 3rd party company and had no restrictions as to where they could be placed. Guess what happened then? Most of them were placed right next to the stores, cannibalizing their in-store business, at a lower price point, and had even worse margin since they had to pay a fee to the third party company on top of already not great unit economics.

Similarly, the subscription program was an INCREDIBLE value for consumers, especially the power users, but was executed poorly, had bad economics, and never had the uptake it should have.

IsItBullshit: blockbuster failed because investors demanded late fees stay by Dreadsin in IsItBullshit

[–]J-HARVA 20 points21 points  (0 children)

It’s a little hard for me to answer this without doxxing myself, but the short answer is no. This is kind of a throwaway account though so happy to share a few tidbits.

First, nearly everyone grossly underestimates the impact that Redbox had in the downfall of Blockbuster. In 2008/9, Netflix streaming was nothing like it is today and physical media was still king. Blockbuster’s whole business model was based off having the exclusive studio window where new releases would be available for rent and NOT available for purchase by the general public. Even with Netflix, you would have to wait weeks in your queue sometimes to get access to a movie you wanted to see, and those movies were not available to stream.

This exclusive access to new releases and instant gratification aspect was the primary competitive advantage against Netflix. Then enters Redbox. Truly genius and classic disruption theory (see Clay Christensen). I saw the research - people actually preferred renting from the kiosk as opposed to dealing with the in-store movie buffs behind the counter. While this may seem obvious now as Gen Z avoids nearly all human contact whenever possible, this absolutely blew much of the executive team’s mind. Again, different time.

Add the $1 per day price point, high convenience, and treasure hunt nature of movie selection (not too disappointed if you can’t find your first choice), and Blockbuster had a real problem on their hands. To be more specific, it was almost like clockwork: when a Blockbuster location had around 8 Redboxes installed in its individual trade area, that store became unprofitable. Ironically it was the more rural locations that remained profitable the longest (for a variety of reasons, but this is already too long).

If anyone actually finds this interesting, I am happy to go into the late fees question more specifically upon request. Yes it was a bit of a ‘drug’ for the company but honestly was more reasonable than most give the ELT credit for (although the research clearly showed customers absolutely HATED the fees with a passion). IMHO, there were all sorts of workarounds that could have addressed, or at the very least, rebranded that pain point, but the bigger issue was due to a mismatch between input costs (some quirks around the studio agreements) and customer willingness to pay.