Understanding the Blockbuster Business Model

Network scientists call this the threshold model of collective behavior. For any given idea, there are going to be people with varying levels of resistance. As those who are more willing begin to adopt the new concept, the more resistant ones become more likely to join in. Blockbuster went bankrupt in 2010 and Netflix is now a $28 billion dollar company, about ten times what Blockbuster was worth. Today, Hastings is widely hailed as a genius and Antioco is considered a fool. At the time, there were only 300 Blockbuster stores still in operation, Business Insider reported.

It is not clear whether Antioco’s team did such an analysis or not, but by 2004—six years before the company went bankrupt—he sensed that Netflix had become a significant threat and sought to change his firm’s policies. Yet how he went about doing that sealed his, and ultimately Blockbuster’s, fate. From 2003 to 2005, the company lost 75% of its market value, Forbes reported.

By 1988, just three years after the first store opened, Blockbuster was America’s No. 1 video chain, with over 400 stores nationwide. Rewind, which has become a video platform for creators, said they had 13 meetings with DISH about the acquisition. The DAO said there are several options for the company after it is bought, including creating an NFT presence, a streaming platform or distributing films to theaters. It is important to focus on the positive attributes of an interaction with a customer instead of the negative attributes. Fines and penalties work for libraries because they receive public funding. It didn’t work for Blockbuster because eventually their customers got tired of being penalized.

  • So the inability to understand the networks that would determine his fate struck John Antioco twice.
  • That year, Blockbuster had 9,000 stores globally, according to Business Insider, and it earned $5.9 billion in revenue.
  • But when on-demand movie services, pay-per-view and cheaper rental services such as Redbox began to gain popularity, Blockbuster struggled to retain its customer base.
  • From 2003 to 2005, the company lost 75% of its market value, Forbes reported.

In March 2010, Blockbuster began «Additional Daily Rates», or «ADRs», for rentals not returned by their due date in the United States, having already used this procedure in other countries such as the UK for many years. An ADR was charged for each day a member kept the rental beyond the rental terms. On March 12, 2010, PricewaterhouseCoopers, Blockbuster’s independent registered public accounting firm, issued its audit opinion disclosing substantial doubt about Blockbuster’s ability to continue as a going concern. On March 17, 2010, Blockbuster issued a bankruptcy warning after continued drops in revenue threatened its ability to service its nearly $1 billion (~$1.32 billion in 2022) debt load. In Blockbuster Season 1, the staff at the video-rental franchise’s last store on Earth try to keep their beloved shop open as their corporate competitors’ booming streaming services dominate the market. A long, long time ago, when streaming became the predominant form of entertainment, video stores shuttered across the globe.


We need to stop acting as if there is a recipe for business—like a cake or a casserole—and start thinking in terms of how factors are connected. The structure of those unseen connections, their context and how they relate to our objectives increasingly makes the difference between success and failure. Keyes felt the company couldn’t afford to keep losing so much money, so we pulled the plug. To this day I don’t know what would have happened if we’d avoided the big blowup over Antioco’s bonus and he’d continued growing Total Access. While ideas usually take hold in small niches of innovators, they can often spread to early adopters, who are only slightly more resistant to join in.

What wound up destroying the Blockbuster business model was the successful implementation of what we’ll call the “Threshold Business Model.” It is based on the theory of collective behavior. As more people experienced Netflix, they enjoyed it, told their friends, and eventually the word of mouth created new subscriptions. People still held onto Blockbuster, but the peer pressure of everyone going to Netflix and liking creates a threshold that eventually allows one business to dominate and the other to file for bankruptcy.

First, he failed to realize how quickly a niche idea could snowball into a viral cascade. Second, he failed to construct a network that could carry his ideas of change throughout his own organization. Netflix proved to be a very disruptive innovation, because Blockbuster would have to alter its business model—and damage its profitability—in order to compete with the startup. Despite being a small, niche service at the time, it had the potential to upend Blockbuster’s well oiled machine. In 1998, after the closure of KPS Video Express, Blockbuster saw an opportunity to enter into the Hong Kong market, and entered into negotiations with KPS’s receivers Ernst & Young to buy the KPS operations. Blockbuster re-opened 15 of 38 former KPS stores by February 16, 1998,
[189] and re-employed 145 former KPS staff.[190] KPS members were given special offers to join Blockbuster, but the video pre-paid coupon system was not retained.

Duncan Watts, a pioneer in network theory, is quick to point out that social dynamics tend to be idiosyncratic and it’s not always clear exactly where thresholds exist. Still, you can use conventional marketing analysis to evaluate whether an idea is spreading to new groups or just growing within a niche. Antioco was, in fact, a very competent executive—many considered him a retail genius—with a long history of success.

Blockbuster Entertainment Inc – known to most as Blockbuster – is an organization whose unfortunate demise was due to their failure to innovate. Blockbuster provided a video games and home movie rental service which was particularly popular in America (the company become famous worldwide during the 1990s). It is easy to understand why Blockbuster enjoyed so much success; they offered an easy way for consumers to access the games and movies that they wanted most. However, as the world became more technologically oriented, Blockbuster failed to follow suit.

In 2000, Reed Hastings, the founder of a fledgling company called Netflix, flew to Dallas to propose a partnership to http://moviepros.net/ CEO John Antioco and his team. The idea was that Netflix would run Blockbuster’s brand online and Antioco’s firm would promote Netflix in its stores. It was estimated that it would cost the company $200 million to stop collecting late fees and another $200 million to start the new venture, Blockbuster Online, according to a Harvard Business Review article by former CEO John Antioco. It’s a memory the movie rental company’s fans looked back at fondly this week after realizingBlockbuster’s website is still live with a new landing page. These examples are programmatically compiled from various online sources to illustrate current usage of the word ‘blockbuster.’ Any opinions expressed in the examples do not represent those of Merriam-Webster or its editors.

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