It looks like Blockbuster video is headed toward bankruptcy. It’s still a little early to tell whether or not they will end up filing for bankruptcy protection, but either way, things are certainly shaky.
It doesn’t seem like it was that long ago that Blockbuster Video was the number one place to get a movie. They expanded like a wildfire and put thousands of mom and pop video stores out of business. Then the video rental market changed and the home video market soured. Blockbuster’s main national competitor, Hollywood Video, recently went back to bankruptcy court for the second time in 3 years. They plan on closing 1/3 of all remaining stores (they have already closed over 2,400 stores in the last few years). More on Hollywood Video at MSNBC.
Now it looks like Blockbuster might be next in line. What happened?
Netflix changed how we watch movies
It seemed like the Blockbuster had the perfect business model. They offered the best selection of any movie chain and bought up or forced out thousands of smaller family owned video rental stores who couldn’t compete in terms of movie selection, availability, or even price.
But then Netflix came along and offered consumers DVDs through the mail – unlimited and without late fees (late fees were once a HUGE portion of Blockbuster’s profits). The free Netflix trial offer lead to thousands of full time customers who fell in love with the quality and convenience Netflix offers. Check out this Netflix review for a full list of services and features they offer – you’ll see that it is a very good deal – unlimited DVD rentals (one at a time) with no late fees and access to streaming videos for about the price of 2 rentals from a Blockbuster Video store.
BlockBuster offers BlockBuster Total Access, but even though it is popular, they never advertised it as heavily as Netflix did and it never caught on quite the same way.
Netflix added to their popularity by adding streaming videos and integrated technology to their subscription model. Faster internet connections and better technology aided this development and furthered the gap between Netflix and Blockbuster.
Compare Netflix and Blockbuster. See this full Netflix and Blockbuster comparison for more information about how the two movie services stack up and check out my GameFly review to get a feel for how they compete.
Along comes Redbox
Then RedBox entered the scene with $1 a day movie rentals from a vending machine. Instead of maintaining a storefront business with employees and other overhead, RedBox kept to a minimum and placed their vending machines in thousands of popular places including grocery stores, fast food restaurants, airports and other convenient locations. Who wouldn’t pay $1 to watch a movie during a long layover?
RedBox got a huge jump on the DVD vending machine business, leaving Blockbuster struggling to find a way to compete in that space while not eating into their retail store space.
Blockbuster adds vending machines, streaming movies, mobile movies – too little too late?
Blockbuster got caught off guard and was slow to change their business model, which lead to $1 billion in debt as they struggled to find their niche in the video rental market. They now offer many of the same features as Netflix and RedBox, including offering at home DVD rentals, streaming videos, and DVD kiosks where people can rent movies from convenient locations. Blockbuster actually beat Netflix to the mobile movie market and now offer streaming movies on some of the latest models of mobile phones. But it is too little, too late?
Netflix has such a huge lead on Blockbuster when it comes to the at home DVD rental game, has a wider selection of movies, better streaming technology, and more ways to integrate their plan with various forms of technology (video gaming systems, DVD and Blu-Ray players with built in Netflix tuners, etc.). And RedBox has a huge jump on the DVD vending machine business.
Where does this leave Blockbuster?