Blockbuster Video Analysis
The Company Leader in Blockbuster Video of 20th Century and Bankruptcy Court
Blockbuster was at one time known as the video business. However, thousands of stores that house many employees have been shattered by the recent bankruptcy that engulfed its existence. More than twenty-five years back, the Blockbuster Video revolutionized media industry through popular films. This is because it was keen at producing most of the content demanded by the film consumers. It created a culture where most people preferred to rent out films and watch them at the comfort of their homes (Mcdonald & Wasko, 2008).
The scenario meant that it had established a culture to consuming their content made possible by vast network of outlets conveniently located to suit the daily routine of their customers. Moreover, the success developed stiff competition between managers and employees who wanted to cling into the status quo. Therefore, it is possible to state that blockbuster had an effective business model, which calcified as years went by. The company managers were impressed, comfortable and sluggish by the level of profitability as well as scale (Dick, 2000). The situation presented new encumbrances, as they were incapable to respond effectively to emerging competitive threats as well as change in the business environment.
Blockbuster had created a powerful brand in the film consumer market with a few competitors who presented little threats. For instance, Netflix business operations never seemed to match the level of success that Blockbusters was harnessing. During this period, Netflix had just been established and was a virtual company whose business operations was centered on mailing DVDs to consumers’ homes (Dick, 2000). Later it was able to upgrade its services by permitting consumers to stream content online, which was its competitive edge. The undertaking raised their level of profit by 25% while continually sealing business deals with content-makers such as the Hollywood. The firms were able to provide a streaming-only choice to their consumers accounting to about 20% internet traffic of prime time today (Martelle, 2012). This was while Blockbusters were still entangled in their traditional way of doing business with little attention to changes happening in the business environment and the new way of doing business being adopted by their competitors such Netflix.
Moreover, Redbox was yet another competitor that contributed heavily to the collapse of Blockbuster Videos. This is because it was able to employ a strategy of ensuring that consumer experience was enriched by offering films near consumers thereby having greater convenience coupled with lower prices as compared to Blockbusters. According to statistics, the second quarter recorded a 44% rise in Redbox’s revenue at the parent’s corporation as a result of DVD services (Martelle, 2012). It was a good indicator that the strategies were effective because the firm had positive reception from the consumer market. On the other hand, Blockbuster Corporation tried to put up efforts later on in countering the developments, but that was considered too late.
After becoming a dominant force in the film industry Blockbuster became a struggling rental business as its competitors had overtaken it. Therefore, in 2010 it was forced to file for protection due to bankruptcy (Form 10-k, 2011). This is while it sought to employ strategies that would enable it pay off enormous debts that had accumulated besides competing with other rivals in the film business. The filing process in regards to bankruptcy was completed at a Manhattan court that was estimated to eliminate nearly $1billion debt that Blockbuster had accumulated (Form 10-k, 2011). The process included the handing over of a vast equity state to all senior shareholders or bondholders led by Carl C. Icahn who was an investor in the corporation. However, all bondholders considered to hold junior positions were not to be considered after the bankruptcy filing court case (Form 10-k, 2011).
Top Five Missteps over the last Decade that Doomed Blockbuster
Blockbuster was established more than thirty years ago where it had placed high value for prepositions even as it opened new stores. This is considered a relatively revolutionary marketing strategy as it was able increase consumer access to many movie titles that depended on their preference at a single store. In fact, it is hailed as the first company business that ventured in the business of renting out movies to consumers. It was able to reach high scales and profit margins making it to dominate the landscape of video rental. Consequently, it eliminated all other small businesses that were involved in movie renting business. Their success was unmatched as the one-stop shop created convenience to thousands of consumers. However, Blockbuster was not keen on changing consumer needs as most consumers wanted to access their preferred movies or content at the comfort of their homes (Martelle, 2012). Blockbuster’s competitors slowly drove it out of business.
Moreover, Blockbuster was unable to embrace new technologies resulting to loss of market share as well as revenue. This is because its competitors such as Redbox, Netflix and other competitors pioneered in new ways of doing business incorporating new technologies. For instance, while still stuck to traditional methods, a competitor such as Netflix was able to grow its market share to about 15million by 2010 (Martelle, 2012). It was only able to respond to technological advancements when the market share was divided amongst its competitors.
Addition to its affliction, there was disunity in the management due to power struggles as reported by Digital Trend’s Ryan Fleming. This was indicated during the process of preparation to bankruptcy when various senior managers were fighting for the control a new restructured Blockbuster company’s fate (Form 10-k, 2011). The power struggle was only eliminated after some senior people purchased large volumes of company’s debts. Individuals with the highest purchase were therefore guaranteed higher control and power during the restructuring process. This means that such individuals would have the power to promote whatever they approved of and disapproved any acts that went against their wish.
Hollywood and other content-creators established business deals with the companies that were keeping up with changes in the environment (Martelle, 2012). Such business deals were ideal in promoting and creating awareness among consumers with the main aim of raising their revenues by reaching out as many consumers as possible. The best way of achieving such a goal was through establishing such deals with companies that were embracing new technologies as well as adapting to consumers preference changes.
Competition was a major contributor towards Blockbuster’s collapse and bankruptcy. Although Blockbuster had created myriad loyal consumers, it lost them to the competitors who were keen on their needs and wants (McDonald & Wasko, 2008). More consumers responded to only those companies who responded to their lifestyle changes through heightened consumer experience (Martelle, 2012). The same was lacking in Blockbuster Company that was still clinging to traditional methods of doing business.
Dick. K. P. (2000). Minority Report. New York. Wiley Publishers.
Form 10-k (2011). United States Securities and Exchange Commission: blockbuster inc. 10-K 1 d10k.htm FORM 10-K. Retrieved from> http://www.kccllc.net/documents/1014997/1014997110928000000000001.pdf. Date Accessed. January 31, 2017.
Martelle S. (2012). Detroit: A Bibliography. London. Gollancz Books.
McDonald P. & Wasko J. (2008). The Contemporary Hollywood Film Industry. Cambridge. Cambridge University Press.