Saturday, January 24, 2009

E-Slapping Blockbuster: 5 Reasons why they are failing...miserably

Two weeks ago, Netflix and LG unveiled their recent HD love child – a new TV that can stream HD quality content from Netflix without a set-top box. There will be no need for a bulky box that sits among the orgy of DVRs, DVD players, VHS players (God forbid) and stacks of unorganized DVDs that are waiting to be scratched to the point of being unreadable. There will simply be a TV and an Ethernet jack – simplicity worthy of an Absolut Vodka ad brandishing their token slogan “In an Absolut World.”

It is this sort of ingenuity that has thrust Netflix to the forefront of the DVD rental business. In 12 short years, Netflix has grown its customer base to 8.2M subscribers and leads all online retailers in customer satisfaction. This innovative drive towards excellence begs one question: “Why is Blockbuster failing...miserably?”

Below, is a closer look at Blockbuster’s 5 biggest foul-ups.
  • Ignorant complacency – Winston Churchill once said “However beautiful the strategy, you should occasionally look at the results.” Blockbuster should have paid attention in history class. While a solid brick and mortar (B&M) strategy carried them through the nineties, it was a strategy that did not leave them flexible to react effectively to changes in the marketplace.
  • Blatant disregard to Gen-Y – Advancements in content delivery equate to higher efficiencies for consumers. If Echo Boomers are enamored with streamlining their lives, then a business needs to be responsive and work to fulfill those wants/needs in order to be successful. Trying to force-feed Echo Boomers a B&M solution to their media needs just won’t cut it.
  • Poor customer satisfaction - Blockbuster is to late fees what Bono is to crazy sunglasses. No matter what else the biz/person may do that is positive, all the consumer can focus on is those darn sunglasses.
  • One foot in – One foot out - Kudos to Blockbuster for FINALLY attempting to take on Netflix a couple years back with their Total-Access program. The only problem is - there’s a greater probability of getting drunk off O’Doul’s than Total-Access actually posing a threat to Netlix. The reasoning: Blockbuster is still trying to dominate the B&M biz while trying to launch a movies-by-mail biz model simultaneously, effectively neglecting both children - someone should contact child welfare services.
  • Reactive business Environment - It took them 9 years to develop an internet-based DVD subscription service to compete with Netflix! Need I say more?
As the internet axiom goes with debunked ideas...“kill it with fire.” Blockbuster has been heading down the wrong path for quite some time, and it won’t be too long before they’ll be keeping Circuit City company.


Michael O said...

I think you pretty much hit the nail on the head, Josh. Blockbuster theoretically should be stealing tons of market share from NetFlix right now. They have similar price points, but Blockbuster provides a better value for customers by allowing them to exchange movies in-store for free. The problem is that their reliance on B&M business has left them with soaring fixed costs & overhead relative to NetFlix and sagging margins.

Compound that with the fact that NetFlix was able to capitalize on a first-mover advantage with internet DVD subscriptions, and it's not surprising that Blockbuster is floundering.

NetFlix recorded 45% profit growth last quarter, so that's really all you need to know.

Anonymous said...

I personally do think it's strange when the first thing that comes to mind when I think about movies is Blockbuster and not necessarily NetFlix, then why do they let NetFlix around? I wonder what they imagined the way NetFlix were so successful early on and why they never made an attempt early on to get into the business. Even with a successful business during the 90's, they had to think of the proliferation of e-business especially with ebay and amazon being extremely successful. I just see the green light for rentals right there. And now, with the internet becoming the go-to place for everything, why isn't blockbuster already in it. I'm pretty sure some investor bankers would see the captivating brand name and say lets maximize every resource out there and stick our name it and everybody will choose blockbuster. If blockbuster can get into online-streaming, and offer something ahead of the curve such as HD wireless-streaming service(wouldn't that be crazy), then blockbuster has no reason to worry. But I think it might be too late, and we'll never see the familiar rental store ever again.

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