8 ms·

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

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.
- platz 12y ago
  It will be interesting to see how Redbox fares in the next few years.
  - mikestew 12y ago
    Yeah, it will. I still use Redbox when they have what they want if I want it in Blu-Ray. iTunes' HD is pretty good, but it's no match for physical media even on my ancient 42" 720p plasma. But I don't know that grabbing a dollar from my wallet once a month is a sustainable business model. Redbox is giving streaming a whirl, but frankly when I saw Verizon's name attached to it I didn't even bother.
    - CrazedGeek 12y ago
      Redbox Instant actually shut down last month: http://venturebeat.com/2014/10/04/redbox-instant-is-shutting-down-and-issuing-refunds/ http://venturebeat.com/2014/10/04/redbox-instant-is-shutting...
  - jonnathanson 12y ago
    As far as I can tell, Redbox targets a different consumer base from Netflix's. The majority of Redbox machines are placed outside of Safeways, Walgreens, Walmarts, 7-Elevens, and so forth. The sort of customer who rents DVDs from these machines is likely to be of lower socioeconomic status than your typical Netflix subscriber. He or she may not have a cable subscription, may not have high-speed internet access [1], and may deem Netflix's monthly fee to be too expensive. He or she could be a working-class parent, a college student on a tight budget, or maybe a reasonably affluent professional who, for one reason or another, doesn't consume enough entertainment to find Netflix worthwhile. On top of this base, you have a small proportion of ad hoc Redbox usage from people who happen to stop by, see a movie they can't get on Netflix, and check it out. And you have a very small proportion of film buffs who prefer the AV quality of physical media, like Blu-Ray. Time will tell how long this strategy will work for Redbox. In their favor: their 36,000 kiosks are placed directly in the footpath of hundreds of millions of shoppers every week. (Walmart alone sees over 100M shoppers per week in the US, and 3,700 Walmart stores have Redbox kiosks). Working against them: broadband penetration, Netflix, Amazon, and the steady transition away from physical media. [1] About a quarter of US households do not have high-speed broadband. That number will shrink over time, obviously, but perhaps not as quickly as we like to think it will.
grecy 12y ago
> 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. > 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... I work at a telco where the upper management still genuinely believe fax machines are great and we should be increasing the number of copper land lines to homes. Those two statements rang very, very true for me.
- tsotha 12y ago
  Heh heh. I work for a mobile company that still thinks it's going to soak its customers for things like driving directions and ring tones. As an employee I get all the company apps for free and I still don't use them because they're not as good as what I can get from google for free. And then there's text messaging. How long did they really think they were going to be able to charge $0.20 for something their customers can do for free?
  - rogerbinns 12y ago
    > How long did they really think they were going to be able to charge $0.20 for something their customers can do for free? It is worse than that. When people tell others their preferred way of being contacted they will take convenience and pricing into account. The SMS charges mean they'll prefer other means (eg Facebook messages) which makes their phone number and service less and less relevant. It was a great way of forcing customers to go elsewhere.
ArkyBeagle 12y ago
It's taken years for Netflix to figure out how to stand in the wind. Even then, there are titles that are simply not available as streaming. Behind that is the First Sale issue, convoluted as it is - my understanding is that one effect of First Sale is that Netflix limits what it will stream. I can't imagine Hollywood trying to emulate Blockbuster. Hollywood was actually a decent store. I could find something at Hollywood; I counted and the last 12 times I went to Blockbuster, after 30 minutes of scouring the store ... nothing. Blockbuster had $1B in debt against estimated $500M in revenue in 2010. I can't help but think that like ClearChannel, Fender Musical Instrument Corp/Guitar Center all that debt is a big problem. SFAIK, there are still a lot of Redbox out there, and the ones I see are always busy.

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.

platz 12y ago
It will be interesting to see how Redbox fares in the next few years.
- mikestew 12y ago
  Yeah, it will. I still use Redbox when they have what they want if I want it in Blu-Ray. iTunes' HD is pretty good, but it's no match for physical media even on my ancient 42" 720p plasma. But I don't know that grabbing a dollar from my wallet once a month is a sustainable business model. Redbox is giving streaming a whirl, but frankly when I saw Verizon's name attached to it I didn't even bother.
  - CrazedGeek 12y ago
    Redbox Instant actually shut down last month: http://venturebeat.com/2014/10/04/redbox-instant-is-shutting-down-and-issuing-refunds/ http://venturebeat.com/2014/10/04/redbox-instant-is-shutting...
- jonnathanson 12y ago
  As far as I can tell, Redbox targets a different consumer base from Netflix's. The majority of Redbox machines are placed outside of Safeways, Walgreens, Walmarts, 7-Elevens, and so forth. The sort of customer who rents DVDs from these machines is likely to be of lower socioeconomic status than your typical Netflix subscriber. He or she may not have a cable subscription, may not have high-speed internet access [1], and may deem Netflix's monthly fee to be too expensive. He or she could be a working-class parent, a college student on a tight budget, or maybe a reasonably affluent professional who, for one reason or another, doesn't consume enough entertainment to find Netflix worthwhile. On top of this base, you have a small proportion of ad hoc Redbox usage from people who happen to stop by, see a movie they can't get on Netflix, and check it out. And you have a very small proportion of film buffs who prefer the AV quality of physical media, like Blu-Ray. Time will tell how long this strategy will work for Redbox. In their favor: their 36,000 kiosks are placed directly in the footpath of hundreds of millions of shoppers every week. (Walmart alone sees over 100M shoppers per week in the US, and 3,700 Walmart stores have Redbox kiosks). Working against them: broadband penetration, Netflix, Amazon, and the steady transition away from physical media. [1] About a quarter of US households do not have high-speed broadband. That number will shrink over time, obviously, but perhaps not as quickly as we like to think it will.

grecy 12y ago

> 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. > 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... I work at a telco where the upper management still genuinely believe fax machines are great and we should be increasing the number of copper land lines to homes. Those two statements rang very, very true for me.

tsotha 12y ago
Heh heh. I work for a mobile company that still thinks it's going to soak its customers for things like driving directions and ring tones. As an employee I get all the company apps for free and I still don't use them because they're not as good as what I can get from google for free. And then there's text messaging. How long did they really think they were going to be able to charge $0.20 for something their customers can do for free?
- rogerbinns 12y ago
  > How long did they really think they were going to be able to charge $0.20 for something their customers can do for free? It is worse than that. When people tell others their preferred way of being contacted they will take convenience and pricing into account. The SMS charges mean they'll prefer other means (eg Facebook messages) which makes their phone number and service less and less relevant. It was a great way of forcing customers to go elsewhere.

ArkyBeagle 12y ago

It's taken years for Netflix to figure out how to stand in the wind. Even then, there are titles that are simply not available as streaming. Behind that is the First Sale issue, convoluted as it is - my understanding is that one effect of First Sale is that Netflix limits what it will stream. I can't imagine Hollywood trying to emulate Blockbuster. Hollywood was actually a decent store. I could find something at Hollywood; I counted and the last 12 times I went to Blockbuster, after 30 minutes of scouring the store ... nothing. Blockbuster had $1B in debt against estimated $500M in revenue in 2010. I can't help but think that like ClearChannel, Fender Musical Instrument Corp/Guitar Center all that debt is a big problem. SFAIK, there are still a lot of Redbox out there, and the ones I see are always busy.