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I just read an interesting editorial from Alex Morris over at Seeking Alpha that gives a great look back at some of the history of Blockbuster, Movie Gallery, Netflix, Redbox and others, and how the first two paid the price for trying to keep things the same when the industry was changing around them.

I am always fascinated by decisions that are made by highly-paid executives when they think they are on the top of the world, even as their world begins to crumble around them. Take a look after the break to see some of this history, and be sure to share your thoughts in the comments about the decisions of the past and what the future might bring…

These poor “executive decisions” is exactly what happened at Movie Gallery, who continued a massive expansion effort after their acquisition of Hollywood Video in 2005, increasing their store footprint by 100+ each year, and completely ignoring the by mail, kiosk and digital distribution models that were being built all around them. They put their blinders on and forged ahead, and have now paid the ultimate price.

Blockbuster was not quite as blind as Movie Gallery, but the #1 company definitely felt on top of the world and never thought that upstarts like Netflix and Redbox could take them down. They had the opportunity to buy Netflix in 2000 for a paltry sum of $50 million, but decided it was too risky at the time. By the time they tried to get in front of the Netflix train in 2004 with their own by-mail service, it was too late.

The same is proving true now, as they try and roll out “Blockbuster Express” kiosks (in a partnership with NCR) while Redbox has a 20,000 unit head start. Coming late to the game again will likely net them the same results as last time – being almost completely shut out of the new model.

One of my favorite quotes from the article sums up my feelings well:

Failure to innovate and adapt to consumer desires is a pitfall of countless businesses, a majority of whom find themselves with no other options once they finally realize that they can’t survive without adapting. Movie Gallery realized this too late, and is paying the price today. Blockbuster has fought off the apparently inevitable up to this point, and unless they can quickly implement an improved business model, will soon follow the route of the horse drawn buggy.

Will Blockbuster survive this, or pay the price Movie Gallery did? What can they do to stay in the game, and do you even want them to make it?

24 Responses to “The Ultimate Late Fee: Blockbuster and Movie Gallery Pay the Price”

  1. Visitor [Join Now]
    Brad [visitor]

    I am grateful to have 11 redboxes and 2 blueboxes within a few miles of my home. I only wish there were more blueboxes around, since they have the new releases 28 days before redbox and Netflix and they allow online reservation with promo codes.

  2. Member [Join Now]

    NCR recently installed a BlueBox about a mile or so away from my house…They even have a free promo code at the top left of the kiosk for one night free rental…I used it for “It’s Complicated”(Highly recommended!)and I used another code for “Tooth Fairy” today(I couldn’t reserve a movie online because the kiosk hadn’t been added, so I emailed them and for my inconvenience they emailed me a promo code). Nice to not have to wait for the 28 day delay to pass.

    • Member [Join Now]

      movies are relased on tue … 1 am est. … sometime between 1 and 3 am
      you can rent online with a promo code the new releases and juist pick them up the next day at your convience. all for FREE!
      i do it every week! top releases, no 30 day bs, and FREE!!! also guaranteed to be there, no wasted trips. GIVE ME BLUE!!!!
      lots of blue!

  3. Visitor [Join Now]
    Peter [visitor]

    I think they’re going to have trouble surviving. Not saying they can’t do it, but it will be tough. Redbox has them beat on new release / price. Netflix pretty much has them beat on price and selection, especially when you add streaming to the mix. The only think Blockbuster really has going for them over either is the ability to quickly to to a store, find a movie, and rent it right then. You don’t get a great price and may have to deal with late/restocking fees, but you can get a movie pretty quickly if it’s not in demand.

    Having been bitten by the $5/movie + (ridiculous late charge) thing before, I’m not necessarily going to be sorry to see them go, but part of me does hope they find a way to survive if only to keep some competition going.

  4. Visitor [Join Now]
    John Small [visitor]

    BB will likely survive until streaming takes over but that doesn’t mean they won’t be filing CH. 11 this year.

    They were saddled with a lot of debt when they were spun off. That crippled them. That and their unwillingness to see new competition as any kind of threat.

    Movie Gallery dies of a self-inflicted wound. If they had not bought Hollywood, they would likely be operating profitably and competing with Family Video as the low priced B&M option out there.

  5. Visitor [Join Now]
    Kevin [visitor]

    I think they are on the right path. They have a new strategy utilizing their API to integrate with just about every digital device including their existing iPhone app. The big question will be if they can still get their foot in the door with companies like Nintendo, etc to provide competition to Netflix. Also, the API doesn’t make mention of mobile streaming ability. That will be key to their success. No streaming will mean failure. Currently I only know of them streaming to one mobile device, the T-Mobile HTC HD2. They also have streaming to Samsung DVD players and HDTVs.,1282935.shtml

  6. Member [Join Now]
    ChadCronin [chadcronin]

    It’s hard to stay in the corner of companies who dictate which content we see by editing movies and refusing to carry many and then charge us prices higher than the value of most movies. Redbox from the start provided what I wanted, no membership requirements, low price, convienient locations, online reservations, and free codes. I am sure I have saved at least $500 the last 2 years alone compared to BB pricing. At this point I am just waiting for Hollywood to release more titles that are worth renting. The studios can’t blame Redbox for not having money and cutting into their bottom line. I was working @ a movie theatre back in 2005 and I remember how everyone was saying movies were crap and there were no decent script developments on the films released. They just got lazy and were putting out crap expecting us to hand over our checks. If they really want out money they would be excited to have us pay $1 to $2 to rent a movie to see if we like it then pay $15 to $20 to buy it. They think this 28 day window is gonna make people go crazy to see movies sooner and get people to blind-buy or @ least pay BB prices to rent. I am gonna just wait it out and enjoy my catalogue and Facebook games in the mean time.

  7. Visitor [Join Now]
    will [visitor]

    I think BBI can survive if it is able to dump most of its debt, jettison non-core ventures (like On Demand and Total Access) and slim down to a reasonable size in BK. Then it can better compete with Family Video and the surviving independents. I also think Blockbuster Express can compete with Redbox as a reasonably strong #2, especially if Redbox increases its daily rental fee (highly likely.) Netflix has issues of its own, what with impending postal rate increases and the loss of Saturday delivery in its core by-mail rental service. It remains to be seen if streaming will fully compensate for these challenges.

    Netflix and Redbox are not hampered by the legacy costs of (and management focus on) maintaining a bricks-and-mortar infrastructure. BBI and Movie Gallery were tasked with changing a tire while the vehicle was in motion – nearly impossible to do.

  8. Member [Join Now]

    no one can survive when movies are free!!! love the boxes

    • Visitor [Join Now]
      TrickyM [visitor]

      Either can the company who gives free movies. So I wonder how long that will last? Hopefully if all the BB customers are as cheap as you, Redbox won’t have to worry about them for long anyways.

      Spammer, spammer, spammer!

      • Visitor [Join Now]
        John Small [visitor]

        To be fair Tricky, tlochner has been posting here for a long time and he has never made any bones about how much he likes the free movies.

        To call him a spammer is excessive. Just call him cheap. It fits better.

        • Visitor [Join Now]
          TrickyM [visitor]

          He’s just got it all over the place, it’s really all he comments on. I can see your point still.

          It’s a shame he doesn’t have any awareness of consumer etiquette. Regardless of which company you enjoy or have “Financial connections” with like FLON, these codes are issued as a courtesy to loyal customers and not to be the basis of rental.

          Do I consider tlochner a customer of these companies? No I don’t, because a customer buys things! (Or in this case pays for rentals).

          As I’ve mentioned before, I pay for my rentals as well as enjoy free ones because I deserve it.

          • Member [Join Now]

            i have paid them some $. i am a customer. i sign the contract with them. i have rights and so do they. they conviently set up free codes and i just take advantage of the situation. hey doesnt everybody try to beat the system. dont you hire an accountant to
            cheat as much as you can to pay less taxes each april?
            if movies are free by jumping through a few loopholes. isnt it teh same as your wife cutting coupons from the newspaper each week.
            free ben and jerrys ice cream last week with coupon. so its all advertisement and a numbers game. that is the world we live in.
            get used to it. we give 1000’s per year in cash donations to 10 or so charities. they need it more than coinstar!
            good luck.

          • Visitor [Join Now]
            TrickyM [visitor]

            Actually no, I don’t cheat on my taxes, I am an honest hard-working citizen. Cutting coupons reduces prices and doesn’t make things free typically.

            It’s fine to get things free. You are so insistent on things being FREE (notice the caps) that it is abundantly clear that you are obviously out for yourself. So why should anyone here trust what you have to say?

            In quotes you just “Take Advantage” of the situation, and other people. So if thats how you choose to live thats fine, but there are some good people who come into these rooms so don’t lower them to your level please. Thank you tlochner!

        • Visitor [Join Now]
          TrickyM [visitor]

          The spammer notation also, is the observation that his posts are typically all about the same thing, and not completely (or sometimes at all) relevant to the topic of the forum.

          I can at least respect that you tend to have statements in regards to different topics.

  9. Visitor [Join Now]
    Melissa [visitor]

    I like Blockbuster over Netflix for movies by mail. They cost the same if you don’t get the Total Access option. They get the movies before Netflix does. They don’t charge extra to rent blu-ray. They don’t restrict me from getting new releases just because I rent a lot of movies. They do charge extra for streaming but I wasn’t that impressed with the streaming I got from Netflix. The quality sucks. Now that Redbox has a 28 day delay on a lot of new releases, I haven’t been getting as many movies from them. I used to use them to get a movie on day of release if it was something I really wanted to see but now I just get it through Blockbuster 28 days earlier than I can from Redbox or Netflix. I don’t think there are any blue boxes in my area yet but I will have to check on that.

  10. Visitor [Join Now]
    Gregory Chandler [visitor]

    I think the 28 day window will hurt netflix / redbox in the long run. I rented avatar on the day it was released from blockbuster free. they have coupons if you know how to work the brick and mortor system as well. The express boxes work much better than redbox as well. you can reserve online and use a promo code so you can make sure you get that new release free with express. My other complaint with redbox they just know how to stock the machines not do maintance on them so a lot of machines in my area tend to be non usuable at times. Customer service doesn’t answer the phones in a timely matter either. I love Express much better.

  11. Visitor [Join Now]
    ryan [visitor]

    I have used all 3. I did not like netflix. Streaming videos was a bad selection. Nothing I really wanted to see. I don,t like dealing with mail. I sometimes don’t go to my mailbox but once a wek unless I am expecting something. I don’t want to wait for blockbuster or netflix to mail something out. Redbox is the best option for me. No blue boxes or bb stores bear me. Closest one is like 15 miles. The 28 day delay sucks. So if I really want to see the movie I will probably dl it instead of renting it. Good job hollywood, instead of getting people to spend money on rentals or ppv or buying the movie, you are encouraging piracy. Same as when the recording industry wanted too much for a cd then freaked out and tried to stop sharing music. There is always around it. It won’t stop, and for a certain segment of the population it only makes them break the law. When I lived near a bb and they had unlimited rentals for a set price I was happy to pay it and rent 3 movie at a time. And didn’t download or copy hardly anything. I moved and that flipped. Untill redbox, and now I dl very little. usually only if it is unavailable. Cheap and available is the way to go. If a streaming service popped up right now with good quality new releases on demand for 1 each or a reasonable monthly plan, I would be all over it. That is the future.

  12. Visitor [Join Now]
    Zach [visitor]

    I hope Blockbuster goes under. I owe them like $200+ in late fees! LOL

  13. Visitor [Join Now]
    Jessie [visitor]

    Just wondering why no one mentions these set top boxes that allow you to stream using the playon program? I have a netgear digital entertainer live (which has internet connectivity) and not only allows you to watch sites such as youtube or hulu(where you can watch feature movies albeit older ones) but through their playon scripts site you can download scripts which allows you to see sites such as FEAR NET and VeeHD which anyone that is familiar with this knows you can see the newest movies, Streamed directly to your tv and the only thing you pay for is the license to the Playon program itself!! I only point this out to show that competition is alive and well but there is just so much of it that companies that still rely on the traditional way of renting actual blurays/dvds are bound to suffer when WE the consumers have so many different choices for enjoying movies. No matter which way we ultimately choose WE win but in the business world its companies such as Movie Gallery and soon maybe Blockbuster that stand to lose. Fortunately for us, as one door(such as Movie Gallery) closes, another one (such as Redbox, Bluebox, Netflix, etc.) opens….Man, I feel like watching a movie now!!!:)

  14. Member [Join Now]

    Competition is good. I hope that blockbsuter or some other company can compete with redbox or mark my words there will be a large increase in price by redbox.