The Dark Side Of Blockbuster’s Demise

1. Late Fees

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Over the years, Blockbuster became very well known for its extremely strict late fee policy where it charged customers quite a high fee for returning rentals after their due date.  And there was rarely any situation where a customer could get away with not paying either!

2. "No Late Fees" Campaign

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So with more than a few customers feeling put out by paying the strict late fees, Blockbuster launched its "No Late Fees" campaign where the late fees are waived.  But instead of actually charging late fees, if a customer brought their rental back late, they were charged for the full price of their movie.  And this led to a lawsuit that saw Blockbuster paying a settlement and clarifying what they actually meant!

3. Censorship

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You might have been a little put off by Blockbuster's limited selection of titles to choose from.  And rightly so too.  The truth is, Blockbuster actually censored what they had on their shelves, particularly if it had explicit content or controversial themes.  This inevitably drew criticism from customers and filmmakers alike!

4. Treatment of franchisees

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Some of Blockbuster's franchisees claimed that the stores and the company itself tended to impose burdensome conditions including high fees and limited autonomy.  And this led to legal actions and many disputes between Blockbuster and the franchisees.

5. Undermining the competition

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during the 1990s Blockbuster also faced several legal suits related to allegations of anti-competitive practices.  These practices included using predatory pricing and exclusive deals with movie studies aimed at undermining its competition in order to maintain its dominance in the rental industry.

6. Dissatisfied customers

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Blockbuster also had a very limited focus on the overall customer experience and was extremely unclear on its late fee policy and its strictness with this led to an overall dissatisfied customer base.  So it's no wonder many people disengaged with the company.

7. Slow to adapt to digital distribution

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Blockbuster was too slow to adapt to digital distribution and with this rapid growth of digital channels providing instant access to media, there was really no need for physical rental stores anymore.  And instead of investing in its online presence, Blockbuster continued to invest in its bricks-and-mortar.

8. Strategic errors

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Blockbuster made some serious strategic errors that certainly contributed to its rapid decline.  One of these big mistakes was declining a huge opportunity to purchase Netflix in its very early stages.  An opportunity that would've definitely altered its future!

9. Revenue-sharing agreements

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Blockbuster also entered many revenue-sharing agreements with big movie studios.  These agreements meant that a significant portion of Blockbuster's revenue went back into the studios.  This seriously impacted the rental company's profits which made it impossible to compete with its emerging competition.

10. Financial challenges

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With its increased competition, many of Blockbuster's previously loyal customers decided to look elsewhere for their entertainment so it struggled with many financial challenges.  And this, along with the high costs associated with maintaining its physical stores led to its decline.

11. Limited international expansion

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Blockbuster did attempt a few times to expand into the international market but their attempts were not as successful as they had hoped.  And with limited international expansion, Blockbuster struggled financially and this resulted in layoffs and store closures.

12. Competition from Netflix

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In its early stages, Netflix began as a DVD-by-mail rental service and because of the convenience of this service, Blockbuster faced some serious competition from them.  And this only got worse for Blockbuster when Netflix switched over to the dominant and highly successful streaming platform that it is today.

13. Limited diversification

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During its lifetime, Blockbuster focused primarily on physical rentals from physical stores.  And their content was quite limited as well, especially due to their censoring of the media they rented out.  And other competitors, like Netflix, diversified into new areas like creating and producing their own content and using streaming services.

14. Declining store experience

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It was no lie that Blockbuster struggled financially toward the end of its life, and you could see its decline really obviously within its stores.  The lack of resources was really telling as their customer-facing stores began to look outdated, worn out, and much less clean and inviting.

15. Changes to customer preferences

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With the rise of mail rentals, digital content, and online streaming, people found it less convenient to actually even visit the physical Blockbuster stores once to rent the DVD and then again to take it back.  So it's no wonder that their preferences generally began to lean towards convenience.

16. High prices

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Inevitably, customers began to prefer other platforms because they were actually cheaper than Blockbuster.  Blockbuster's high rental prices made the company a lot less competitive in the forever-evolving market and this certainly led to its decline too.

17. Too much investment in a physical presence

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When all of the other emerging platforms were investing in their digital presence, Blockbuster continued to make the mistake of investing too much in their physical presence.  And the high prices of running their brick-and-mortar stores led to a misallocation of resources.

18. Piracy and illegal downloads

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Even before the rise of online streaming platforms like Netflix and Hulu, Blockbusters also faced challenges with the increasing number of people finding new ways of accessing their movies and TV shows.  And this was through piracy and illegal downloads.

19. Debt, debt, and more debt

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Blockbuster also had a huge debt burden too.  They acquired other companies like Musicland and Movie Gallery and this meant that they inherited their debt and were unable to invest in new initiatives.  With its limited financial flexibility, they were unable to invest in new technologies to have a chance against its new digital competition.

20. Employee layoffs

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Like with many struggling companies, as soon as Blockbuster began to face significant financial difficulties, it began to look for ways to save money, and one of these ways was to lay off a number of employees, impacting their livelihood and income, and close many of its stores.

21. Brand image challenges

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With the rise of more and more digital platforms, Blockbuster's rental practices and late fees became increasingly outdated which obviously put many of their new and old customers off using them.  So their customers tended to seek more modern and convenient services.

22. Competition from Redbox

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Redbox was a DVD rental kiosk service and it was early competition for Blockbuster because it provided an alternative to the increasingly outdated and unreasonably expensive traditional rental stores.  Redbox was also really convenient too because of its kiosk locations and lower pricing.

23. Overexpansion

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Blockbuster expanded really quickly in its early years and because of the speed with that it emerged and grew, sources state that Blockbuster bosses failed to carry out sufficient research and evaluation of the market.  This created an unsustainable business model that was doomed from the start.

24. Shift to online streaming

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Online streaming platforms such as Hulu, Netflix, and Amazon Prime Video, have emerged ad developed rapidly in recent years and no one can argue that they are way more convenient (and a lot cheaper) than renting media from an old-fashioned rental store.

25. Failure of Blockbuster Online

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Have you ever heard of Blockbuster Online?  We thought not.  In fact, Blockbuster's attempt at creating an online platform was so ineffective that it faced too many technical issues.  Its failure to provide a user-friendly and easy service didn't keep their customer's attention for long and they looked elsewhere for their entertainment.

26. Loyalty programs failed to keep pace

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Blockbuster tried many avenues to stay afloat in the competitive market and one of these was their loyalty program.  And it did work for a short while.  However, after its initial success, Blockbuster reverted to its usual story of lacking innovation and the loyalty programs lost momentum and fizzled out.

27. Failure to utilize customer data

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Blockbuster had a treasure trove of customer data from its membership program just sitting there doing absolutely nothing it seems.  They failed to utilize this data effectively (or at all!) meaning they couldn't personalize recommendations to try to attract customers back through their doors.

28. Limited content selection

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Compared to many of the digital platforms and online streaming services, the physicality of Blockbuster meant that it just couldn't keep up with the speed of content made available online.  This, along with the censorship of titles, meant that it had a more limited selection available to rent.

29. Poor timing

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Blockbuster closed its stores way too late.  In fact, the declining interest in physical rentals came long before Blockbuster decided to close its doors to its physical stores to save on money and resources.  If they'd have closed sooner, perhaps they would've been able to invest more in their online platform.

30. Lack of innovation

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Blockbuster's rapid decline and inability to survive was, ultimately down to its lack of innovation with a number of issues, including evolving into a more convenient digital platform, its pricing, limited titles, censorship, and loyalty programs.  And there were clear missed opportunities too, like failing to see Netflix's potential and failing to close its physical stores soon enough.