Blockbuster – what were they thinking?


http://news.bbc.co.uk/2/hi/business/4137532.stm

This one really does make me wonder. Apparently Blockbuster has made a $57m (£31m) loss in the second quarter – mainly attributed to its decision to drop “late fees” for people failing to return videos on time.

For those with a long memory, this will come as no surprise.

In 1997, Wired magazine had a cover feature on Blockbuster and why it was well aware of the (then far off) possible impact the Internet might have on their business.

I forget the man quoted, but even then, they admitted that fully 75pc of their profits were as a result of late return fees. So why are they so surprised now?

I guess what’s hard to understand is that here is a company that seemed to be well aware of the threats to its business years ago – and yet seems to have played at King Canute – for example, why on earth did they pursue earlier this year in an expensive bid to buy smaller rental chain Hollywood Entertainment?

As Nicholas Negroponte would have noted all those years ago (more nostalgia), they have been in the business of shifting atoms not bits.

It just seems bizarre that somebody, somewhere along the line didn’t notice something awry in their strategy.

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Comments

  1. Mary Branscombe says:

    I presume they’re trying to look attractive in comparison to DVD rental services by post which have no late fees

    Like

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