Home video rental giant Blockbuster is reportedly preparing to file for bankruptcy next month as it struggles to cope with competition from Netflix, Lovefilm and Redbox, companies who have revolutionised the rental industry with their postal and on-demand services.
Sources close to the matter to the LA Times that Blockbuster executives and senior debt holders held meetings with six major Hollywood movie studios to discuss the option of a “pre-planned” bankruptcy in September, which would allow the company to drop its most under performing stores and look to push its efforts to gain a larger share in the growing digital distribution market.
Netflix and Redbox, digital and postal rental companies in the US, and Lovefilm, a postal rental business in the UK, have been enjoying huge success as customers increasingly look to choose their rentals online and either have them shipped to them or delivered instantly via an internet stream.
Netflix already streams it’s digital catalog to Xbox Live, PS3, Nintendo Wii users, as well as offering a dedicated app for both iPhone and iPad owners (with an Android port currently in development). Blockbuster has offerings in these fields but has continued to preservere with its bricks and mortar stores, perhaps too much as it now has an estimated $1 billion from its costly leases and dwindling sales.
It’s not all doom and gloom for Blockbuster though, the majority of movie studios have backed Blockbuster, signing deals that will give the company films 28 days before its competitors ensuring its remaining 5,800 worldwide stores will keep a steady flow of new releases.
If it can exit bankruptcy, Blockbuster will also speed up its roll out of DVD kiosks, aiming directly for Redbox, offering rentals for $1 a night, reducing overheads and allowing customers to pick up movies quickly and cheaply.
Whilst Blockbusters efforts to shift its strategy from its stores to more convenient rental methods, we feel its just a matter of “too little, too late”. Netflix, Redbox and Lovefilm have made such significant progress in the online and kiosk rental market, it might only be a matter of time until your local Blockbuster finally shuts its doors.
It’d be in the best interest of the movie studios to rid themselves of the atrocity that is Blockbuster. The Blockbuster brand is going to disappear and anyone that says otherwise is likely still saying Blockbuster won’t file for bankruptcy.
This is a perfect example of a service provider thinking only in the context of their business model. Blockbuster worked fine in the 80′s and 90′s – but as technology evolved and delivery channels changed Blockbuster began to forget what it was that customers wanted.
They didn’t want to “Drive to the store, pick out a video, drive home and play the video”
They wanted to “Watch a movie”
If you can take out the irritating hassle of driving, walking around, picking things and the frustrations of your video being out of stock plus the annoyance of late fees and still offer the “Watch a movie” part then you’re going to do better. And as for the “Video store guy knows lots about these movies and can help me choose” – well, most video store people I met were 15 and had no idea about anything. I’d choose the recommendation algorithms any time over someone’s advice.
Netflix is an admirable company for focusing on the user outcome – they kicked things off with the videos/dvds by post and now with the streaming technologies.
As you say, I think their efforts to switch to the RedBox kiosk model are too late. And how will they manage the deal with all their employees? Surely some liabilities there.
RIP Blockbuster
There also going after Gamefly, now, with their game rentals through the mail (which they should have done sooner). It is a better deal than Gamely, though. Plans start at $4.99/mo.
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