Last Blockbuster fascinating company rise fall story revealed - the story that made as many successes as mistakes, which you can already see in the documentary that has been released.

Those of us who are old still remember with nostalgia the fascinating experience of going to rent a movie to a video store, back in the 80s and 90s.

With the advent of video players, first Betamax and especially VHS, the possibility of enjoying at home, at any time, great successes that we had seen in cinemas or Z-series films that we had never heard of became a social and cultural phenomenon.

Soon we began to see how many establishments opened, rather modest, in which there was a catalog of films not too large, but enough to seduce users who only began to glimpse the possibilities of home video consumption, precursor of what are now large platforms such as Netflix, HBO or Amazon Prime.

Last Blockbuster fascinating company rise fall story revealed

It was in 1985 when a visionary entrepreneur, David Cook, raised the possibility of turning that phenomenon into something much larger, a global film rental company with a franchise model that became an example of innovation and success for many years.

And, just a couple of decades later —and after a handful of very bad decisions—, Blockbuster has also been shown to disaster business that has taken him from having to 9,000 stores in the world, and more than 60,000 employees (back in 2004), only one with just 12 people in the team, which has already become a tourist attraction for the small town of Bend, Oregon (USA).

The story of the last Blockbuster left in the world is the main reason for the entertaining and highly recommended documentary-especially if you lived the golden age of video clubs— that premiered last Sunday in Spain on the TCM channel, in which some of the protagonists of the company's history appear, very peculiar loyal customers and stars such as the film director Kevin Smith, who collected like few the essence of video clubs with his debut film Clerks and who at the beginning of the film confesses “we have lived something unique: the birth of a great company and then its resounding fall”.

Last Blockbuster fascinating company rise fall story revealed

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And, in addition, the documentary leaves us with very enriching lessons on business strategy, both on the innovation side and on the failure to anticipate the changes and challenges that came later, a journey that is worth breaking down because its lessons can be applied to any sector even today.

The successes of David Cook and his team were as loud as they were back to back in the late 80s and 90s, and they certainly showed that for several years they were really inspired.

Video clubs were money-making machines, as told in the documentary. Their business model actually consisted of buying films at a high price ($100 per film initially in the US, then between $ 70 and $ 75) and then renting them. With just a few views, the investment was already amortized. The rest of the costs consisted of renting a small place and minimally conditioning it with a counter and a few shelves.

David Cook obviously wasn't the only one who saw that it was an easy way to make money. His merit was to think big and glimpse that it could be a scalable business with which to open many stores under the same brand that generated a high turnover.

Last Blockbuster fascinating company rise fall story revealed

When 2 years later an investment group led by businessman Wayne Huizenga took a majority of the business, they began a much more aggressive expansion strategy: buy the premises of other competitors and transform them into Blockbuster. Many years later, big tech companies have followed exactly the same formula, like Facebook with Instagram or WhatsApp.

Although it is now a first concept of business strategy, by then it was not so internalized, or at least it was not given so much importance. Blockbuster, in addition to getting the name right, immediately set up a completely recognizable brand image, with the blue and yellow colors and its logo present throughout the company, from the boxes of the films to the uniforms of the employees.

Blockbuster's membership card became valid to identify you in certain situations in the United States.

Last Blockbuster fascinating company rise fall story revealed: Since opening the first establishment, David Cook managed to provide a differential value in the user experience. Understood from the outset that not only was renting films: the experience of a walk and to see the catalog was in itself an end (as we live many at that time) and the people came in family or groups of friends who end up taking not one, but several rented movies, something that very well reflects this documentary.

The goal was to spend the most time in the store, so that in the long run they consumed more and returned more often(Does Amazon ring a bell?).

As well, the Blockbuster opened up 12 of the night, you could return the movies at all hours (thanks to the mailbox), filled the local shelves in perfect order so that people could touch and see quietly all catalogue (it was huge), when before the majority of the video stores were the movies behind the counter, and the employees were experts "referrers" (what of influencers came after), which helped the customers to select the movie to suit your taste.

Last Blockbuster fascinating company rise fall story revealed: In the 80's had not yet arrived, or Big Data or Artificial Intelligence, but David Cook modernized to where allowed to the technology then the management of the business and, while many video stores were the rentals and returns, with paper and pen, in a Blockbuster, it was computerized, so that it took a very precise control of the behavior of the customers, as many movies rented in a month or that type of gender they preferred.

The information from all the financial management allowed him to open more franchises much faster than his competitors.

Another very innovative move came with the agreement with the big studios to make them participate in the business. Instead of having to buy the films for $ 75 and then rent them, David Cook reached an agreement with the studios through a shared benefit, what is called in business jargon, revenue share, something very common now, but quite revolutionary at that time in that type of business.

In this way, the studios were guaranteed an income that ended up being even higher than those obtained in the theaters (it also cost them to see it at the beginning...) and Blockbuster ensured to have an infinite catalog in a much cheaper way (between 3 and 5 euros per film), fast and direct. This move definitely ended the small video clubs, which were unable to compete against Blockbuster's unbeatable model.

The success of the company was so great that it ended up attracting the attention of large corporations, seduced much more by the numbers than by the long-term business vision. That was the beginning of the end.

Last Blockbuster fascinating company rise fall story revealed

In 1994, the media conglomerate Viacom buys Blockbuster, already with thousands of stores in the world, for 8,400 million dollars (6,870 million euros at the current exchange rate).

At first they had some interesting ideas, such as the organization of a Blockbuster film awards, an alternative to the Oscars in which the awards were given by the public instead of academics, and others less brilliant, such as the possibility of creating a Blockbuster theme park in Miami, which was never heard of again.

But the most serious thing is that Viacom began using Blockbuster's profits to fund another of its major purchases, Paramount. The idea might make sense ... until Viacom started spending the profits of future years that Blockbuster had not yet made. The debt became huge. When Blockbuster went public, worth almost $ 500 million, it had debts in excess of $ 1 billion.

Viacom made the huge mistake of not investing part of the profits of Blockbuster in continuing to innovate and adapt the business to the tremendous changes that were already approaching in the consumption of home video.

Last Blockbuster fascinating company rise fall story revealed: Netflix emerged at the turn of the century as a home movie rental company. Although the data are not completely clear about what actually happened, it seems that Reed Hastings organized a meeting with the address of Blockbuster, with John'antioco to the front, to explore possibilities, perhaps a merger, a collaboration, or, according to many sources, a possible purchase Netflix for $ 50 million.

Be that as it may, none of the options seemed interesting to Antioco and his team, who by then had successfully re-led the business with the arrival and popularization of the DVD (PlayStation 2 had a lot to do with it, but that's another story...) and the company, despite the debts, continued to give many benefits and had 25% market share in the world.

Four years later, Netflix already had one million subscribers.

Faced with threats from Netflix and other companies like Redbox, we must recognize that Blockbuster did take some action. It wasn't the right one, though.

Some brilliant mind in the direction (the main responsible was still Antioco) decided to go further in the user experience and eliminate the surcharge or the small fines that were applied in case of returning the film later than the established date. Something far similar to what Amazon would later do with its returns system, although in the case of Jeff Bezos's company in an infinitely better planned way and with impeccable logistics.

Last Blockbuster fascinating company rise fall story revealed

Because the result was that users, delighted with the new rules, began to return the films weeks later (or directly to keep them), so that many titles were left without copies in the premises to continue being rented and the user experience, far from improving, worsened considerably. The same thing happened with profits: they lost $ 250 million in a very short time and cash flow was reduced to a third.

As one of the guests who appear in the documentary, who owned dozens of Blockbuster, says, " even today I do not know how they thought that could work, it is as if a car rental company said that you can stay a vehicle as long as you want without any problem.”

Of course, there is no denying that it was innovative.

Last Blockbuster fascinating company rise fall story revealed: Reed Hastings is said to have decided to create Netflix after having to pay Blockbuster $ 40 in delay for delivering the film Apollo XIII later than it should have.

To this day, and despite its undeniable success in the VOD, Netflix still maintains its DVD delivery service, although it mainly works in the United States.

The beginning of the century was dizzying in technological advances: the popularization of the internet, cable TV, the arrival of new devices…

Like many other companies (Kodak, Nokia, Xerox), they did not see that what was coming was very very big. Or, to use a more glamorous term, very disruptive.

In 2007, Netflix launched its video-on-demand (VOD) service, first for personal computers only, but soon for all types of devices, including televisions. And they start implementing very innovative ideas, like recommending titles based on user scores.

Meanwhile, the physical rent began to agonize, in part also due to the drastic reduction in DVD prices, which began to be sold like churros, literally, in supermarkets. Why rent a movie if I can buy it for less than what the rent costs me?

Last Blockbuster fascinating company rise fall story revealed

It is hard to believe that a company that had been so innovative a few years before would not see what was coming and take action on it, especially when it comes to technological investment, which it knew so well in the 80s.

Although, according to Tom Casey, Blockbuster's CFO for many years, the real key was in the financial muscle: Blockbuster, despite its bad decisions, and Netflix were in the same condition to grow at the end of the first decade of this century. But while Netflix had the liquidity to continue investing in technology and attracting subscribers, Blockbuster was facing a debt of more than $ 1 billion.

Finally Blockbuster launched their VOD platform, Blockbuster Total Access, but it was too late and they found it very difficult to change their physical business culture for digital.

Although there were some attempts to revive the business, the company definitely declared bankruptcy in 2010 and was closing locations around the world until, in 2018, only the last establishment in Bend remained.

Blockbuster's business model has always been intermediation. They did not own the product they sold —the movies or series— and their great success came when they knew how to turn the process of getting that product to users into a big business.

They were the most innovative, and ambitious, in those 80s and 90s, but as soon as they ceased to be, and changes and disruptions came upon them, their fall was dramatic.

That's why Netflix, HBO or Prime have understood from the first moment the crucial importance of creating their own content (or comparing it, as Amazon has just done with MGM), in addition to distributing third-party content, and that's why their investments in producing movies and series is constant and very ambitious.

And for that reason too, big tech companies that don't create content invest so much money in offering the best and most advanced technology, in a way that forces content creators to depend on them. This is the case with the media regarding Google or Facebook. But that's also another story…

In the meantime, if you want to rent a movie in physical format, you'll have to make a trip to Bend.

Last Blockbuster fascinating company rise fall story revealed

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