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?