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Blockbusted: The Fall of a Video Icon

25 Jan, 2013 By: Thomas K. Arnold


I hate to be a downer here, but the writing’s clearly on the wall. Blockbuster, an icon of the home video industry since the early days of rental, is not going to survive much longer.

Dish Network, which bought the ailing rental chain out of bankruptcy in April 2011, announced it is closing an additional 300 U.S. stores, either ones with expiring leases or exceptionally poor performance. A year ago Dish announced the shuttering of 500 domestic Blockbuster stores. The latest closure leaves Blockbuster with maybe 500 locations throughout the country — a far cry even from 2009, when Blockbuster still had more than 3,600 U.S. stores.

Blockbuster has been earmarked for the grave for quite some time. Blockbuster made 24/7 Wall Street’s “Ten Brands That Will Disappear” list in both 2010 and 2011. Blockbuster defied the odds and managed to survive, but the latest round of closures suggests even Dish realizes now it made a bad investment. At the time buying the Blockbuster brand seemed like a good idea because everyone thought Blockbuster was associated with movies, but looking back, the Blockbuster brand merely reminded consumers of the hassles they had to go through back when renting a movie from a physical store was their only option — exorbitant late fees, return trips and not finding the movie they wanted.

Blockbuster made more than a few missteps throughout the years, but I think the biggest one was not jumping headfirst into sellthrough in the early days of DVD and thus allowing the mass merchants to take over that segment of the business. Another was taking a dismissive view of Netflix, and then belatedly trying to compete only after it became clear that the subscription model had caught on. Heck, back in 2000 Blockbuster even passed on several offers to buy Netflix for just $50 million, opting instead to sign a 20-year deal with a subsidiary of Enron (!) to deliver on-demand movies to consumer homes.

Blockbuster has managed to hang on for a lot longer than most observers thought, but its day of reckoning, I fear, is coming up. Even the proverbial cat with nine lives eventually runs out of time.



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