Blockbuster Case Study

Blockbuster was, at one time, the primary way America got its movies. When VHS tapes were first offered, studios sold them for sky-high prices – it the range of $75 apiece. So, video rental stores became popular because, for a fraction of the cost of purchasing a VHS, customers could rent tapes to catch up on movies they missed in the theaters. The company grew and began buying up independent video retailers in the 1980’s and early 1990’s.

Then, in 2013, with only 300 stores remaining, it finally went out of business completely. What happened? There were a few factors – including some less-than-ideal business deals. However, the biggest problem was that the company failed to innovate. Blockbuster failed to adapt to the age of streaming video and internet downloads. While other companies – most notably Netflix – capitalized on the new technology with innovative approaches, Blockbuster completely failed to do so. At one point, Blockbuster even had the option to buy Netflix, but they turned it down. (Netflix is now worth over $19 billion.) By the time Blockbuster finally decided to try getting into the streaming business, it was just too little, too late. The company had stayed too attached to its existing model and been unwilling to innovate in order to survive.