By Tara Lane, Staff Writer
Although the recession seems to be coming to a close, it does not seem to be good news for everyone. Blockbuster, the popular movie and game rental store, announced on Wednesday their plans to close at least 960 stores by the end of 2010. The news comes just a few years following a similar announcement by Blockbuster’s competitor, Hollywood Video. For many movie fiends, the announcement seems long overdue. With the wildly popular Netflix service, along with the growing popularity of Redbox kiosks and other on-demand cable services, Blockbuster has been facing heavy competition for years. Although they have made attempts to compete with these new services, each one has been too little, too late.
Blockbuster launched their Blockbuster Online service in 2004 following increased competition from the well-established Netflix service, but was hit hard again in 2005 with the introduction of Redbox, a DVD vending service that costs customers only $1 each night. The company has matched their online service pricing model to Netflix, but has suffered by coming in too late in the game. Current estimates of Netflix customers average 10 million, while Blockbuster averages only 2 million. Other pricing models used to entice customers, such as a “No Late Fee” promotion and lower prices to match those of Redbox, have seemingly done nothing to attract customers.
Many other companies in a variety of industries have experienced downfalls similar to Blockbuster due to emerging technologies that are changing the way customers consume goods and services. The difference between those who are successful and those who are not has to do with how quickly the business can think on its feet, having the ability and foresight to adapt and change to a new business climate, and taking the risk before it’s too late.
Kodak is another prime example of this. Although they had a heavy hand in the creation of digital photography and many other digital processes, they waited too long to get a good lead in the digital market, allowing competitors like Cannon and Nokia to forge ahead in its place, and now Blockbuster has done the same. While Kodak failed to “own” their own concept, Blockbuster failed to take the risk and move forward when the time was right.
Going to get a movie at a store like Blockbuster used to be an outing many looked forward to. With the advent of online distribution like Netflix, the novelty has worn off, trading in a trip to the store for a little something in the mail, a tactic that also appealed to many during the economic downturn. Online retailers have many services that a typical store just can’t match, the biggest being selection and price. A store can only hold so many products, while an online service can offer millions because they’re no longer limited to space and time constraints.
This brings about the thought of the Long Tail theory; services like Netflix offer a much wider variety of products to choose from, and don’t face pressure to pull something off the shelf. Netflix is able to carry more products that their competitor, thus keeping older movies new again by allowing users to discover those which were previously unavailable.
Companies such as iTunes also contribute to the theory of the Long Tail, and also to the emerging technology trend. Digital music has seemingly put stores such as the Virgin Megastore and FYE out of business. This begs the question: Who else is at risk? The decline of the publishing and print media is constantly buzzing, and U.S. News & World Report recently compiled a list of companies that might not survive 2009, with Blockbuster included on their list. It will be interesting to see how companies caught in the middle of the physical to digital transition will handle themselves over the next few years, as well as seeing the growth of new companies who embrace technology and are willing to take the risk.
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