Last week, Blockbuster announced that will close its 300 remaining retail stores on January 2014 and the blockbuster mail service will end in the middle of December; only 50 Blockbuster franchising were not affected and they will continue to operate until next January.
It was not an easy decision for the video rental chain company, but the consumers are moving to digital distribution of video amusement.
Even though the company will close physical distribution of the video, they will keep the licensing rights on the brand and the video library; they will also continue to develop the digital offerings.
In 2004, the company had 9,000 retail stores globally, but Blockbuster had to struggle with competitors like Netflix, focused on movie delivery service and so declared bankruptcy in 2010 with $1 billion in assets and $1.46 billion in debt.
Unfortunately the company will lay off around 2,800 employees; at the beginning the CEO of the company, Mr. Dish, planned to keep 1,500 stores open and keep 15,000 workers. Progressively the company did not generate so much revenue and as consequence the stores were closing and the employees laid off.
The company was acquired in a bankruptcy auction for $320 million the next year, as a way for the satellite TV provider to enlarge its offerings and compete with companies such as Netflix. It was a remarkable drop for a company that had revenues of up to $5 billion.
Blockbuster was established in 1985 when videotape recorders became household products.
When Blockbuster filed for bankruptcy in 2010, it initially planned to be managed by investors. Unfortunately, those shareholders did not agree on the business plan and after unsuccessful sales Blockbuster was sold in 2011.
Why did Blockbuster go out of business?
Blockbuster stores were not up to date and the products were high-priced.
Red box put Blockbuster out of business. Redbox, the self-service movie rental company, created an easy way for the customer to rent the movie through self-service kiosk. The Redbox machines are all over the place. The customer picks the movie for 99 cents per night paying by credit card. Blockbuster tried to copy Redbox idea without success.
Netflix also put Blockbuster out of business. The giant online movie rental company has the best movies to the best prices, and the greatest customer service. Blockbuster tried to imitate Netflix but it was unsuccessful. The company had awful customer service for the online movie rent service. Blockbuster was always two steps behind Netflix. Netflix offered movies trough computer, TV, PS3, Xbox 360.
Blockbuster had excessive late fees. They are also known for very expensive late fees. If a customer did not drop off a movie on time, then Blockbuster would charge the client for each day the movie was delayed.
I believe that Blockbuster failed in different aspects of its business because they have always tried to clone the idea of other companies, but they never had their own ideas. Blockbuster thought to realize an enormous business and forgot the clientele that aid them to go up. Moreover Blockbuster completely forgot the customers’ needs in this new era.
Bye bye dear Blockbuster….we will miss you.