8 ms·

Blockbuster: Losing the plot

85 points by ColinCochrane 12y ago

GotAnyMegadeth 12y ago
Took me a few seconds to realise that the article meant USA pissed and not UK pissed
- itsathrowaway 12y ago
  What is the UK definition?
  - rmc 12y ago
    Incredibly drunk.
tantalor 12y ago
> Know what business you are in. This is the same point Steve Jobs makes in this clip, https://www.youtube.com/watch?v=ZBma82g3Uag https://www.youtube.com/watch?v=ZBma82g3Uag
bit_by_bit 12y ago
I'm surprised they made no mention of how Netflix had an important role in the demise of Blockbuster.
- chrisbolt 12y ago
  Read the next page: http://daindunston.com/blockbuster-the-customer-owns-your-purpose/ http://daindunston.com/blockbuster-the-customer-owns-your-pu...
  - jobu 12y ago
    Thanks! I didn't even notice the link at the bottom. The second page is about Blockbuster struggling to turn it around, and is actually more interesting than the first. *Interesting side-note: This is the third article I've read today that mentioned Carl Icahn. That guy has his fingers in everything!
RankingMember 12y ago
I think this was more a perfect storm of problems: Netflix coming on the scene, Blockbuster having terrible customer service/fees, and the wishy-washy corporate leadership.
- smacktoward 12y ago
  I always get frustrated when I hear people describe a failure as the result of a "perfect storm," because it lets the people behind the failure off the hook. "Nothing we could have done! Perfect storm!" The article cites problems with Blockbuster's management that go all the way back to 1996, before Netflix even existed. And if anything, it sounds like the various cadres of corporate leadership weren't "wishy-washy" so much as they were laser-focused on a single idea -- the one-stop retail "7-11 for the mind" concept. It's just that the idea they were focused on was terrible.
  - cm2012 12y ago
    The amazing part is that they had a CEO who really understood that and turned Blockbuster around, who was then ousted for stupid political reasons by Icahn and replaced with a fool.
    - ColinCochrane 12y ago
      Especially given how he was ousted because Icahn thought he was being given too large of a bonus, and then end up paying him nearly 5x that amount in severance. For Carl Icahn, who had used the CEO’s compensation as a cause célèbre in his proxy battle, this was a chance to take a stand. He instructed the board not to pay the bonus and informed Antioco that he could take $2 million or nothing. When the dust cleared from the ensuing fur fight, Icahn was holding Antioco’s resignation and a contract requiring him to pay $24 million in severance.
      - twic 12y ago
        No, no, no, listen, all of these people knew exactly what they were doing, and made great decisions. They must have done - why would they be CEOs and investors paid telephone number salaries otherwise? You'd have to live in a pretty crazy world for that to be the case!
cm2012 12y ago
The second page of the article (http://daindunston.com/blockbuster-the-customer-owns-your-purpose/ http://daindunston.com/blockbuster-the-customer-owns-your-pu...) paints a fairly convincing picture that Jim Keyes was a disastrous idiot as CEO that basically wrecked the company, and that Carl Icahn was an idiot for ousting the previous CEO and installing Keyes. Is there any evidence to the contrary? It seems so clear cut in the article that I want to question it.
- ColinCochrane 12y ago
  Some supporting evidence in a letter from Blockbuster's shareholders to the company when it filed for bankruptcy. "Jim Keyes and all involved will be held accountable for their actions that led to this today," former shareholder, Niko Celentano, wrote at the time of the bankruptcy filing. "Jim Keyes and his BOD's have failed all shareholders in their fiduciary responsibilities due to them. Jim Keyes is the main reason Blockbuster is in this position today due to his denial of being in a business model that did not work anymore. If Jim Keyes would have seen the changes that were evolving in this industry in the past few years, Blockbuster would not have been in the courts today filing Chapter 11 bk protection.... Jim Keyes has failed in his job as CEO of Blockbuster and should resign immediately." From http://www.thestreet.com/story/10886236/1/should-blockbusters-ceo-be-replaced.html http://www.thestreet.com/story/10886236/1/should-blockbuster....
  - scintill76 12y ago
    Armchair investor here, but I get the feeling this is a person looking to blame someone. If it was so obvious that the CEO was incompetent or taking the wrong strategic path, wouldn't you have some better option than to wait for bankruptcy, then complain about how you knew it was going down the toilet all along? That article, and some other things I skimmed over, allege some more serious malfeasance, but this quote doesn't say "Jim Keyes has lied to us" or "filed fraudulent documents with the SEC" or something like that. I don't know much about fiduciary duty, but this statement doesn't seem to identify specific ways Jeff Keyes failed to execute the duty. He may have made some bad choices over "the past few years", but apparently this investor chose not to bail out. Why shouldn't he share the blame?
JeremyMorgan 12y ago
The biggest problem was a complete lack of understanding of the industry within corporate leadership. I spent many years in at Hollywood Video corporate in the late 2000s and saw much of it first hand. Blockbuster didn't understand what was going on and Hollywood was too busy trying to copy Blockbuster. Neither of them saw Netflix as a threat until it was too late. Just as the article mentions, the VCR revolutionized the viewing experience for Boomers who were used to waiting for something to come on TV. The video chains experienced insane success, and thought they could ride that formula out for decades. Netflix revolutionized movie entertainment for Gen-X and millennials who were used to and unimpressed by VHS/DVD rental models. The execs at the top (boomers) ignored the new fangled streaming stuff because they didn't use it, didn't understand it, and most of all didn't see the value. The younger of us working at Hollywood saw the writing on the wall in the early 2000s as Netflix was making it's climb. The even younger folks working at the stores knew it even better. But none of us could convince anyone at the top that it was important, until the late 2000s when they made a half assed attempt to be an "also does" to the then dominant Netflix. When you're in a fast moving business, you don't bet everything on what's happening now, you've got to think about what's coming soon...
- mikestew 12y ago
  Though your "biggest problem" might tie in with mine, I saw Blockbuster's biggest problem being that they didn't realize how much their customer loathed them. All it took was someone, anyone to come along and offer an alternative the model of: 1. Go to a physical store. 2. Pick out your second or third tier choice, because all copies of the one you want are gone. 3. Pray you don't forget to bring it back on time. Customers hated them, and it would appear that Blockbuster hated them back. Maybe it didn't have to be Netflix, but someone was going to come along eventually and pull off an alternative that has no late fees, always has what you want, and you don't have to drive there. Could have been Redbox. You still have to drive there, sometimes the kiosk is out (in which case the web or app can tell you not to bother to get in the car), but at least if you're late it's only another dollar. Blockbuster tried to fake it, but it still came off as the same weaselly company with the same weaselly fine print ("no late fees" comes to mind). Hollywood kind of tried, and they seemed a little more sincere, but it was still the doomed physical model.
panzagl 12y ago
I miss Blockbuster, or at least video rental stores. I'm way past the phase of life where owning a collection of movies seems like a good idea, and am tired of companies with their hand in my pocket every month. There was also a sense of occasion- it was a place to go to, everybody got something they wanted, and the family was committed to spending a couple hours together afterward. Browsing the Netflix isn't the same- talk about “managed dissatisfaction"...
- stormbrew 12y ago
  I feel this way about all sorts of shopping now. Online shopping of all sorts is very different from physical, in-store shopping. Online there is no tactile element at all, no sense of place and no ability to examine products or be surprised by what you find. I'm not saying it's necessarily better or worse, but I do think it results in buying very different things. The thing I miss most is book shopping. Particularly for technical books. You can't buy them on any basis but recommendation now because it's not worth it for any book store to carry them.
  - npsimons 12y ago
    It's odd, but I feel almost exactly the opposite to you and GP - I hate shopping. I hate having to drive through traffic, I hate looking for something for even five minutes and not finding it, and I hate dealing with people (well, not all people, and hate may be too strong a word, but it follows the other two). I am hardly ever surprised by what I order online - on the contrary, I know they have it, and I am almost always guaranteed to have good quality. How many brick and mortars have even an agregrate rating of their products listed right next to them? And no brick and mortar can compare with the selection you get online. The tactile and "sense of place" seem very subjective, especially when you consider that 95% of your time with a product will be spent with it away from where you purchased it. I'm all for buying locally to keep taxes going to local funding and employing people in my community, but if I go to a brick and mortar and can't find something once, in 5 minutes, I'll never buy it in a brick and mortar again.
    - 12y ago
smrtinsert 12y ago
I don't miss Blockbuster as much as I miss Tower Records. For a music and book fan it was a true community center. The only problem is that I would inevitably end the book store tour at Borders so I guess too many retailers was a common thread those days.
Animats 12y ago
Even if Blockbuster management had done everything right in the stores, the stores would still be dead. The entire video rental store industry is gone in the US.
- JoeAltmaier 12y ago
  Huh. And here we just had one open up near me, doing great too. They rent videos, make pizza, sell pop. One-stop shopping! Lots of folks I know use it.
- tantalor 12y ago
  It doesn't matter what happens to the stores. Their business was entertainment, not stores. Netflix understood this, and that's why their revenue from streaming is >10x that of the rental side. http://ir.netflix.com/results.cfm http://ir.netflix.com/results.cfm
spb 12y ago
It seems to me there are two components involved in being a successful disruptor: 1. Be competent at what you do. 2. Have your main competitor be grossly incompetent. What this article and its successor indicate is that Netflix satisfied both of these criteria: when, in 2007, Blockbuster had a fairly sensible Netflix-style plan in place, Carl Icahn instated a new CEO who chose to completely demolish it. Had Blockbuster not done this, it's entirely possible Netflix would have not have had room to grow (as Lyft experienced after Uber launched UberX to muscle out Lyft's not-just-black-car model). I feel that Hacker Newsies get a little wrapped up in the party line of libertarian economics being the ultimate meritocracy, ignoring that capitalism is essentially just an oligopoly with the meritocratic potential to fail only in the case of gross incompetence (which, incidentally and curiously in practice, happens on a fairly regular basis). Also, I feel things will work better as we try to structure things in a way that disabuses ourselves of the notion that things are working the way they should. Companies still ask questions in the hiring process under the pretext that their employees should want to perpetuate their current operating procedure. Admitting that things are broken, even slightly, leads to smart, sensible people being cast aside, in favor of those who will blindly go down with the ship. This teaches the workforce to be more lemming-like, in order to be hireable.

85 points by ColinCochrane 12y ago

GotAnyMegadeth 12y ago

Took me a few seconds to realise that the article meant USA pissed and not UK pissed

itsathrowaway 12y ago
What is the UK definition?
- rmc 12y ago
  Incredibly drunk.

tantalor 12y ago

> Know what business you are in. This is the same point Steve Jobs makes in this clip, https://www.youtube.com/watch?v=ZBma82g3Uag https://www.youtube.com/watch?v=ZBma82g3Uag

bit_by_bit 12y ago

I'm surprised they made no mention of how Netflix had an important role in the demise of Blockbuster.

chrisbolt 12y ago
Read the next page: http://daindunston.com/blockbuster-the-customer-owns-your-purpose/ http://daindunston.com/blockbuster-the-customer-owns-your-pu...
- jobu 12y ago
  Thanks! I didn't even notice the link at the bottom. The second page is about Blockbuster struggling to turn it around, and is actually more interesting than the first. *Interesting side-note: This is the third article I've read today that mentioned Carl Icahn. That guy has his fingers in everything!

RankingMember 12y ago

I think this was more a perfect storm of problems: Netflix coming on the scene, Blockbuster having terrible customer service/fees, and the wishy-washy corporate leadership.

smacktoward 12y ago
I always get frustrated when I hear people describe a failure as the result of a "perfect storm," because it lets the people behind the failure off the hook. "Nothing we could have done! Perfect storm!" The article cites problems with Blockbuster's management that go all the way back to 1996, before Netflix even existed. And if anything, it sounds like the various cadres of corporate leadership weren't "wishy-washy" so much as they were laser-focused on a single idea -- the one-stop retail "7-11 for the mind" concept. It's just that the idea they were focused on was terrible.
- cm2012 12y ago
  The amazing part is that they had a CEO who really understood that and turned Blockbuster around, who was then ousted for stupid political reasons by Icahn and replaced with a fool.
  - ColinCochrane 12y ago
    Especially given how he was ousted because Icahn thought he was being given too large of a bonus, and then end up paying him nearly 5x that amount in severance. For Carl Icahn, who had used the CEO’s compensation as a cause célèbre in his proxy battle, this was a chance to take a stand. He instructed the board not to pay the bonus and informed Antioco that he could take $2 million or nothing. When the dust cleared from the ensuing fur fight, Icahn was holding Antioco’s resignation and a contract requiring him to pay $24 million in severance.
    - twic 12y ago
      No, no, no, listen, all of these people knew exactly what they were doing, and made great decisions. They must have done - why would they be CEOs and investors paid telephone number salaries otherwise? You'd have to live in a pretty crazy world for that to be the case!

cm2012 12y ago

The second page of the article (http://daindunston.com/blockbuster-the-customer-owns-your-purpose/ http://daindunston.com/blockbuster-the-customer-owns-your-pu...) paints a fairly convincing picture that Jim Keyes was a disastrous idiot as CEO that basically wrecked the company, and that Carl Icahn was an idiot for ousting the previous CEO and installing Keyes. Is there any evidence to the contrary? It seems so clear cut in the article that I want to question it.

ColinCochrane 12y ago
Some supporting evidence in a letter from Blockbuster's shareholders to the company when it filed for bankruptcy. "Jim Keyes and all involved will be held accountable for their actions that led to this today," former shareholder, Niko Celentano, wrote at the time of the bankruptcy filing. "Jim Keyes and his BOD's have failed all shareholders in their fiduciary responsibilities due to them. Jim Keyes is the main reason Blockbuster is in this position today due to his denial of being in a business model that did not work anymore. If Jim Keyes would have seen the changes that were evolving in this industry in the past few years, Blockbuster would not have been in the courts today filing Chapter 11 bk protection.... Jim Keyes has failed in his job as CEO of Blockbuster and should resign immediately." From http://www.thestreet.com/story/10886236/1/should-blockbusters-ceo-be-replaced.html http://www.thestreet.com/story/10886236/1/should-blockbuster....
- scintill76 12y ago
  Armchair investor here, but I get the feeling this is a person looking to blame someone. If it was so obvious that the CEO was incompetent or taking the wrong strategic path, wouldn't you have some better option than to wait for bankruptcy, then complain about how you knew it was going down the toilet all along? That article, and some other things I skimmed over, allege some more serious malfeasance, but this quote doesn't say "Jim Keyes has lied to us" or "filed fraudulent documents with the SEC" or something like that. I don't know much about fiduciary duty, but this statement doesn't seem to identify specific ways Jeff Keyes failed to execute the duty. He may have made some bad choices over "the past few years", but apparently this investor chose not to bail out. Why shouldn't he share the blame?

JeremyMorgan 12y ago

The biggest problem was a complete lack of understanding of the industry within corporate leadership. I spent many years in at Hollywood Video corporate in the late 2000s and saw much of it first hand. Blockbuster didn't understand what was going on and Hollywood was too busy trying to copy Blockbuster. Neither of them saw Netflix as a threat until it was too late. Just as the article mentions, the VCR revolutionized the viewing experience for Boomers who were used to waiting for something to come on TV. The video chains experienced insane success, and thought they could ride that formula out for decades. Netflix revolutionized movie entertainment for Gen-X and millennials who were used to and unimpressed by VHS/DVD rental models. The execs at the top (boomers) ignored the new fangled streaming stuff because they didn't use it, didn't understand it, and most of all didn't see the value. The younger of us working at Hollywood saw the writing on the wall in the early 2000s as Netflix was making it's climb. The even younger folks working at the stores knew it even better. But none of us could convince anyone at the top that it was important, until the late 2000s when they made a half assed attempt to be an "also does" to the then dominant Netflix. When you're in a fast moving business, you don't bet everything on what's happening now, you've got to think about what's coming soon...

mikestew 12y ago
Though your "biggest problem" might tie in with mine, I saw Blockbuster's biggest problem being that they didn't realize how much their customer loathed them. All it took was someone, anyone to come along and offer an alternative the model of: 1. Go to a physical store. 2. Pick out your second or third tier choice, because all copies of the one you want are gone. 3. Pray you don't forget to bring it back on time. Customers hated them, and it would appear that Blockbuster hated them back. Maybe it didn't have to be Netflix, but someone was going to come along eventually and pull off an alternative that has no late fees, always has what you want, and you don't have to drive there. Could have been Redbox. You still have to drive there, sometimes the kiosk is out (in which case the web or app can tell you not to bother to get in the car), but at least if you're late it's only another dollar. Blockbuster tried to fake it, but it still came off as the same weaselly company with the same weaselly fine print ("no late fees" comes to mind). Hollywood kind of tried, and they seemed a little more sincere, but it was still the doomed physical model.

panzagl 12y ago

I miss Blockbuster, or at least video rental stores. I'm way past the phase of life where owning a collection of movies seems like a good idea, and am tired of companies with their hand in my pocket every month. There was also a sense of occasion- it was a place to go to, everybody got something they wanted, and the family was committed to spending a couple hours together afterward. Browsing the Netflix isn't the same- talk about “managed dissatisfaction"...

stormbrew 12y ago
I feel this way about all sorts of shopping now. Online shopping of all sorts is very different from physical, in-store shopping. Online there is no tactile element at all, no sense of place and no ability to examine products or be surprised by what you find. I'm not saying it's necessarily better or worse, but I do think it results in buying very different things. The thing I miss most is book shopping. Particularly for technical books. You can't buy them on any basis but recommendation now because it's not worth it for any book store to carry them.
- npsimons 12y ago
  It's odd, but I feel almost exactly the opposite to you and GP - I hate shopping. I hate having to drive through traffic, I hate looking for something for even five minutes and not finding it, and I hate dealing with people (well, not all people, and hate may be too strong a word, but it follows the other two). I am hardly ever surprised by what I order online - on the contrary, I know they have it, and I am almost always guaranteed to have good quality. How many brick and mortars have even an agregrate rating of their products listed right next to them? And no brick and mortar can compare with the selection you get online. The tactile and "sense of place" seem very subjective, especially when you consider that 95% of your time with a product will be spent with it away from where you purchased it. I'm all for buying locally to keep taxes going to local funding and employing people in my community, but if I go to a brick and mortar and can't find something once, in 5 minutes, I'll never buy it in a brick and mortar again.
  - 12y ago

smrtinsert 12y ago

I don't miss Blockbuster as much as I miss Tower Records. For a music and book fan it was a true community center. The only problem is that I would inevitably end the book store tour at Borders so I guess too many retailers was a common thread those days.

Animats 12y ago

Even if Blockbuster management had done everything right in the stores, the stores would still be dead. The entire video rental store industry is gone in the US.

JoeAltmaier 12y ago
Huh. And here we just had one open up near me, doing great too. They rent videos, make pizza, sell pop. One-stop shopping! Lots of folks I know use it.
tantalor 12y ago
It doesn't matter what happens to the stores. Their business was entertainment, not stores. Netflix understood this, and that's why their revenue from streaming is >10x that of the rental side. http://ir.netflix.com/results.cfm http://ir.netflix.com/results.cfm

spb 12y ago

It seems to me there are two components involved in being a successful disruptor: 1. Be competent at what you do. 2. Have your main competitor be grossly incompetent. What this article and its successor indicate is that Netflix satisfied both of these criteria: when, in 2007, Blockbuster had a fairly sensible Netflix-style plan in place, Carl Icahn instated a new CEO who chose to completely demolish it. Had Blockbuster not done this, it's entirely possible Netflix would have not have had room to grow (as Lyft experienced after Uber launched UberX to muscle out Lyft's not-just-black-car model). I feel that Hacker Newsies get a little wrapped up in the party line of libertarian economics being the ultimate meritocracy, ignoring that capitalism is essentially just an oligopoly with the meritocratic potential to fail only in the case of gross incompetence (which, incidentally and curiously in practice, happens on a fairly regular basis). Also, I feel things will work better as we try to structure things in a way that disabuses ourselves of the notion that things are working the way they should. Companies still ask questions in the hiring process under the pretext that their employees should want to perpetuate their current operating procedure. Admitting that things are broken, even slightly, leads to smart, sensible people being cast aside, in favor of those who will blindly go down with the ship. This teaches the workforce to be more lemming-like, in order to be hireable.