In 2000, Netflix founder, Reed Hastings, pitched his plan to provide the online service for Blockbuster as long as they plugged his company in their stores. Being the small up and coming company that Netflix was, he and his colleague were met with sharp criticism and no deal. This would prove to be a pivotal moment in Blockbuster’s downfall. At the time of proposal, Blockbuster was bringing in over 5 billion in sales and opening over 8,000 stores. Turning down Mr. Hastings didn’t have to have the colossal effect that it had on the video empire, if they wouldn’t have denied the power and necessity of innovation in the competitive world of business.
Blockbuster was running a well oiled machine. In a perfect world, they could’ve continued to run the company the same way and their profits would undoubtedly grow at the same rapid rate. If the denial of a partnership with Netflix revealed anything, it was that those in charge at Blockbuster had gotten too comfortable with their model. They thrived off of late fees and faithful customers. After a while, people got tired of having to pay incredulous amounts for movies that they watched once, but maybe forgot they had or lost. Blockbuster realized this fault, but it was quite late when the company eliminated the late fees, about 6 years before filing for bankruptcy.
The field that Blockbuster really missed the mark on innovation in was the Internet. It is no doubt that the invention of the internet and furthering of technology had made humans lazier. Nowadays, one can open up “Favor” and have somebody go to the grocery store and bring them their groceries without even having to throw on a pair of pants(although opening the door for the delivery would be a bit awkward). Blockbuster CEO, John Antioco, wasn’t blind to the fact of the need for Blockbuster to reach the cyber masses. He fought hard to end the late fees and bring Blockbuster to the internet, but his boardroom weren’t quite on board with the changes. These changes would in short term damage profitability by about 400 million. In 2006, Antioco helped bring forth Blockbuster Total Access. Total Access allowed people to buy a membership and stream unlimited movies like Netflix’s new streaming model, but the choices were much more limited and lacked older classics. With a poor collection and too late of timing, Total Access wouldn’t bring the profit that Blockbuster needed. Yes, Total Access was a failed innovation, but if Blockbuster wanted to continue, they would have to figure out how to crack the online code. Inner fighting and loss of faith led to Antioco’s departure, leaving the company in new leadership without the man that more than doubled its revenue under his control. Under new leadership, Blockbuster completely abandoned their internet advancements to return to their roots. The stubborn abandonment would be the final nail in the coffin.
The fall of Blockbuster serves as an important cautionary tale in the modern business world. There are always people out there looking for new ways to improve and compete with existing companies and products. If one wants to be successful, they must continuously innovate their present model, because you never know when a small company will take off or when a monumental company will fall.