Is Blockbuster still a blockbuster

Created on 2008-04-10 02:31:00

Blockbuster has been in business for over twenty years and in that time frame, has become the face of video rental in the eighties and nineties. Since the introduction of the DVD and the internet, Blockbuster has moved into the online DVD rental market which had been monopolized by Netflix. Blockbuster has a worldwide presence and corporate wealth, but has not been able to displace Netflix. So is Blockbuster still a blockbuster?

Blockbuster started as a video rental store in Dallas, Texas in 1985 and expanded to incorporate hundreds of stores across the US and elsewhere. In 1994 it was purchased by the media giant Viacom for over $8 Billion. Blockbuster has made several acquisitions in the UK, firstly Ritz Video and then Gamestation. In 2004 Blockbuster made a hostile takeover bid of its main high street competitor, Hollywood Video, but failed. Currently there are over 5000 Blockbuster stores worldwide.

Blockbuster started as a video rental store and paid the movie studios a large fee per VHS tape which it would then rent until it was sold as a “previously viewed” tape for a nominal amount. This model has continued as Blockbuster moved from VHS tapes to renting DVD’s.

Blockbuster stores carry large amounts of newly released movies, but reduce the number after a certain amount of time, so that there are only one or two copies of older movies. This allows copies of films to be sold, recouping some of the initial expense. However, this has been one of the issues that online companies address, whereby an online company will generally have all movies in stock to be sent out, while availability of an older movie varies from store to store.

Blockbuster began renting video games as well as DVD’s, but in 2002 Blockbuster started to lose money. It lost $1.6 Billion in 2002 and over $1 Billion in 2003 and 2004. This loss of profit coincided with the rise of the online DVD rental company, Netflix.

Blockbuster started its own online service in late 2004 as a response to Netflix. Blockbuster has developed a number of subscriptions which initially hyped the ability to return DVD’s to a local store instead of sending the DVD back via the mail. However in 2007, this policy changed to limited returns thus negating the one advantage it had over Netflix.

Despite Blockbuster’s obvious advantage over an online only operation like Netflix, it has only at best had 30% of the number of subscribers of Netflix. At the end of 2007 a large price increase in Blockbuster’s subscription rates has further reduced the total number of subscribers and Blockbuster continues to be in the red.

Blockbuster was the place for movie rentals and it is still a force on the street. However, technology changes and people use the internet for delivery of movies instead of the high street, their inability to capture Netflix’s customer base may cause their eventual online demise.