It’s come to this: the success of Netflix and Redbox in the United States have driven Blockbuster, as expected, to file for bankruptcy protection after failing to adequately and swiftly adapt its movie-rental model from physical storefronts to mail-order and online technology pioneered by its aforementioned competitors.Now the question is: Can Blockbuster, slow to change its strategy in the past despite clear and present competitive danger, market itself into a profitable future? First, a look at the numbers:
- Blockbuster has 3,000 stores but will probably close hundreds and hundreds to cut its costs for bricks-based retailing and encourage customers to rent via electronic methods.
- Redbox has 23,000 kiosks in retail stores across the US and is expanding every day. Its costs are far lower than bricks-based Blockbuster and its limited inventory also keeps costs under control.
- Netflix has 15,000 subscribers and enjoys growth momentum. Its costs don't include storefronts, but renting DVDs by mail is more expensive than instant viewing (especially with a USPS rate increase in 2011). It must put more movies up for instant viewing to contain costs.
For an excellent analysis of Blockbuster's "blind spot," see this Fast Company post.