Additionally, the margins and markets for these new offerings did not appear as attractive as its established model.

They were making a lot of money: While Netflix was just beginning its DVD-by-mail service and later its streaming/online service, Blockbuster was still earning billions of dollars in revenue using its current model.Īfter synthesizing analyses on its unraveling, I think these things most contributed to the failure: Late fees, which comprised an estimated 70% of profits, were added to a customer’s account if they did not meet the return deadline. Each time a customer rented a movie, they agreed to a time and day for return. It cost from $2-$5 typically to rent a film, new releases commanding higher prices than old films. Pathways to a Just Digital Future Watch this tech inequality series featuring scholars, practitioners, & activistsīlockbuster captured value by owning physical copies of movies that could be rented enough times to exceed the cost of purchasing. It built a strong brand with 100% recognition and attempted to offer a customer-friendly experience with movie popcorn, candy, and snacks also available for purchase. It’s 9,000 stores allowed customers to easily walk through aisles of movies advertised with their DVD cases in order to make a selection. I will first summarize the original business model in terms of value creation and value capture and then will offer an analysis of its failure with accompanying lessons.īlockbuster movie rental retail stores offered a wide selection of movies, but focused mainly on new releases. The reasons behind this failure reveal valuable lessons to future digital transformers and business leaders. Its revenues impressively climbed to around $6 billion dollars in 2004 only to suffer a crashing descent into bankruptcy in 2010.

As a teenager growing up in America in the late 1990s/early 2000s, I was a frequent customer of Blockbuster – the largest movie rental retail chain with a strong brand and stores across the country.

Blockbuster movie game