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Internet didn't kill the video store, Blockbuster killed itself at the dawn of DVD. When DVD was coming out as a new format, Blockbuster got greedy and when the

Internet didn't kill the video store, Blockbuster killed itself at the dawn of DVD. When DVD was coming out as a new format, Blockbuster got greedy and when the movie industry wanted the same profit sharing deal, Blockbuster was the #1 revenue source for Hollywood, so Blockbuster wanted a better deal. Major movie studios decided to then make better wholesale deals with Wal-Mart driving the price of movies down from $20+ to $5-15. At the same time renting a movie from Blockbuster was in the $3-5 range and Blockbuster famously made a ton of money with late fees. Within a few years Wal-Mart was Hollywood's #1 revenue source. Basically, Blockbuster had a near monopoly and used it to piss off both their suppliers and customers. Over time, Netflix, Redbox, and others have taken business from Blockbuster, but most of that was Blockbuster pissing it away more than it is the internet "disrupting" Blockbuster. Blockbuster is a case of self-sabotage.

HelloMcFly 13y ago
That just sounds a lot less plausible to me, like an explanation given if someone had asked for a devil's advocate position. I find it hard to believe that opting not to pursue a more lucrative deal for themselves with Hollywood studios in the DVD era would have significantly impacted Blockbuster's trajectory. Wal-Mart would have likely negotiated very similar deals they ultimately got regardless of Blockbuster's actions (it's not as if Wal-Mart didn't sell movies up to that point anyway, or squeeze suppliers for great deals). Blockbuster's money-maker was always new releases (and fees on them), the price of which stayed around $20+ to buy on release anyway. Did they piss away their "near monopoly"? Most certainly, but I think it was by not adapting with the times rather than a commitment to late fees and driving Hollywood to Wal-Mart. Blockbuster made sense in a non-automated DVD world, Wal-Mart or not. They didn't make sense in a digital (Netflix) or automated (Netflix, Redbox) world. Just an armchair observer though. I could be wrong. But the "obvious" explanation in this case really does seem a lot more plausible.
- programminggeek 13y ago
  Yes, except that before DVD's, tapes were routinely $20+ and DVD's dropped below $15 surprisingly fast and when you figure for inflation, that they are still around $15 means they are selling the same product for considerably cheaper than VHS did (and for a while in higher volumes). I totally agree that digital hurt Blockbuster, but Blockbuster was in a terrible place before the world went digital streaming. Netflix DVD mailers basically stole millions of customers on the promise of "no late fees", which was clearly a huge customer complaint with Blockbuster. Blockbuster's decline started before streaming was big and Blockbuster did a reasonable job to try and keep up with Netflix in terms of building up their own mailing business, digital rental business, kiosk business, etc. but the fundamental problem with Blockbuster's business is they needed to rent things for $5 a pop to pay for the revenue sharing and rent. Redbox and Netflix built their business without paying as much or anything in revenue sharing and a completely different operational cost structure. The only way Blockbuster could have stayed afloat is to keep happy customers, but they pissed too many people off too many times by being too expensive and ripping people off with late fees. Happy repeat customers who are willing to pay a premium for awesome service will keep many businesses alive, but Blockbuster lost happy customers and didn't have awesome service. Internet played a part, but let's not throw away the business fundamentals with the bathwater.

HelloMcFly 13y ago

That just sounds a lot less plausible to me, like an explanation given if someone had asked for a devil's advocate position. I find it hard to believe that opting not to pursue a more lucrative deal for themselves with Hollywood studios in the DVD era would have significantly impacted Blockbuster's trajectory. Wal-Mart would have likely negotiated very similar deals they ultimately got regardless of Blockbuster's actions (it's not as if Wal-Mart didn't sell movies up to that point anyway, or squeeze suppliers for great deals). Blockbuster's money-maker was always new releases (and fees on them), the price of which stayed around $20+ to buy on release anyway. Did they piss away their "near monopoly"? Most certainly, but I think it was by not adapting with the times rather than a commitment to late fees and driving Hollywood to Wal-Mart. Blockbuster made sense in a non-automated DVD world, Wal-Mart or not. They didn't make sense in a digital (Netflix) or automated (Netflix, Redbox) world. Just an armchair observer though. I could be wrong. But the "obvious" explanation in this case really does seem a lot more plausible.

programminggeek 13y ago
Yes, except that before DVD's, tapes were routinely $20+ and DVD's dropped below $15 surprisingly fast and when you figure for inflation, that they are still around $15 means they are selling the same product for considerably cheaper than VHS did (and for a while in higher volumes). I totally agree that digital hurt Blockbuster, but Blockbuster was in a terrible place before the world went digital streaming. Netflix DVD mailers basically stole millions of customers on the promise of "no late fees", which was clearly a huge customer complaint with Blockbuster. Blockbuster's decline started before streaming was big and Blockbuster did a reasonable job to try and keep up with Netflix in terms of building up their own mailing business, digital rental business, kiosk business, etc. but the fundamental problem with Blockbuster's business is they needed to rent things for $5 a pop to pay for the revenue sharing and rent. Redbox and Netflix built their business without paying as much or anything in revenue sharing and a completely different operational cost structure. The only way Blockbuster could have stayed afloat is to keep happy customers, but they pissed too many people off too many times by being too expensive and ripping people off with late fees. Happy repeat customers who are willing to pay a premium for awesome service will keep many businesses alive, but Blockbuster lost happy customers and didn't have awesome service. Internet played a part, but let's not throw away the business fundamentals with the bathwater.