Death of Blockbuster Was Only a Matter of Time

6 Nov, 2013 By: Thomas K. Arnold

So this is it.

Just like that, it's over.

With Dish finally making the announcement all of us knew was coming, even though we might not have wanted to believe it, the Blockbuster era is officially over.

Another pop cultural icon, dead and soon to be buried — another nail, critics will say, in the coffin of the packaged home entertainment industry.

Granted, the fewer than 300 Blockbuster stores that remained of the once-mighty video rental chain amounted to a mere skeleton of the Blockbuster of the pre-DVD, pre-sellthrough era. During those heady days for the company, Blockbuster’s clout was such that we in the home video trade appropriated the “Big Blue” nickname that for years had been proudly worn by IBM and applied it to the unstoppable video power chain from Dallas, which within a decade of its 1986 launch had become the dominant player in the video retail trade.

No sooner had the first Blockbuster store been opened — by a fellow named David Cook — than its feeding frenzy began. Blockbuster began gobbling up mom-and-pops, then regional chains, then national rivals such as Erol’s (in 1990, for $40 million). By then, Blockbuster had been sold to Wayne Huizenga, the celebrated waste-management king, who had an even bigger vision for, well, “Big Blue.”

In 1993, Blockbuster acquired a controlling interest in Spelling Entertainment Group; a year later, Viacom acquired the company for a breathtaking $8.4 billion. By the time Blockbuster’s 10-year marriage to Viacom ended, in 2004, the company had 60,000 employees and upwards of 9,000 stores.

The relatively swift decline and fall of the Blockbuster empire has been well chronicled, by this publication and others. The upshot is that the home video business changed, but Blockbuster refused to change with it, clinging to its physical video rental model even after DVD sent the business spiraling toward sellthrough, even after consumer discontent with late fees and return trips paved the way for Netflix and Redbox.

Blockbuster filed for bankruptcy in September 2010; seven months later, the chain and its tattered fleet of about 1,700 remaining stores was bought at auction by Dish Network, ostensibly for the value of the brand name, for $233 million and the assumption of $87 in debt.

I can only imagine what Dish executives were thinking in the days and weeks after their purchase. Talk about buyer’s remorse — things went from bad to ugly to “My God, what have we done?” Stores fell like dominos: 200 in July 2011, 500 more in 2012, and another 300 earlier this year.

Now, as noted previously, it’s all over. All remaining Blockbuster stores, as well as the company’s once-promising by-mail DVD distribution operations, will be closed by January 2014.

In a press release, Dish chief Joseph Clayton said, “This is not an easy decision.”

Come on, Joe. At this point, I’m afraid it was the only decision.

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About the Author: Thomas K. Arnold