Thursday, November 7, 2013

Bye Bye Blockbuster, via Marketing Myopia

Blockbuster turns out to be the definitive case study of a company so successful and so powerful that it couldn't imagine its business model being overtaken by new technology.

Once upon a time, Blockbuster was the 800-lb gorilla of video rentals, with giant stores from coast to coast, filled with thousands of VHS tapes (later, DVDs). Then came Netflix and other DVD-by-mail rental startups, challenging the market leader with inexpensive subscriptions and more lenient return policies. Blockbuster tested some new services but with legacy leases, its retail structure probably dominated strategy discussions year after year.

Another important consideration was customer behavior. Wouldn't viewers rather pick up a DVD for that day's viewing, instead of waiting for a DVD to arrive by mail? Blockbuster clearly thought so, and Redbox had the same strategy. But customers were busy booting up new devices and living the wireless life--disruptive technology. And that's what flattened Blockbuster, in the end.

Blockbuster went bankrupt in 2010. Then the brand and assets were bought by Dish Network in 2011. Now Blockbuster is finally admitting defeat and closing all its remaining stores. Redbox still has its DVD rental kiosks but it also has an instant streaming subscription option.

In contrast to Blockbuster's marketing myopia, Netflix had its strategists looking ahead and steered its customer base toward all-digital delivery, reducing costs and allowing for instant analysis of customer likes/dislikes/behavior. Thanks to big data (a top buzzword of 2013), Netflix was able to determine exactly what its customers want to see--and commission or license entertainment exclusively for its streaming viewers. In other words, Netflix realized it was NOT only in the entertainment-by-mail business.

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