Blockbuster – 3 business decisions that back-fired (Chapter #3)

Blockbuster video turned down the opportunity to buy Netflix.

In the mid-nineteen eighties to late nineties when VHS was king, the problem back then was that VHS tapes would cost upwards of ninety seven dollars per movie and for this reason video rental stores like blockbuster came in to fill in that gap. They were the perfect solution and became a regular part of weekend plans for hundreds of millions around the globe; imagine the perfect video rental store that would have over 10,000 videos with no rush no hassle 24-hour quick drop return facility which would be open late every night. This model was the perfect video store department and was popping up all over. Eventually online video streaming services like Netflix and Hulu destroyed the old video rental business model.

Ironically in the year 2000 Netflix proposed that it would handle Blockbusters online component and Blockbuster could host Netflix as an in-store component thus eliminating the need for my old VHS which was Netflix’s business model at the time according to an interview with former Netflix CEO Mary McCarthy. Blockbuster just laughed Netflix out of their office but that’s not the end of the story by 2007 Blockbusters well on the right track they had an Internet Movie component that was steamrolling over Netflix. Netflix was struggling and their upper management wanted to sell the company to Blockbuster. To save face Blockbuster’s gross sales were strong at the time so they turned down the offer. In a strange twist later that year there were boardroom disputes over the Blockbuster’s decision, that sort of brought about a change of CEO, the new CEO was Jim Keyes formerly of 7-eleven. He came in with the wrong mindset and thought that blockbuster should be a retail business instead of an entertainment one because of this he didn’t see the value of an online component; huge mistake.

Within 18 months the new CEO had lost Blockbuster eighty-five percent of the company’s value and within three years Blockbuster was filing for bankruptcy. Blockbuster went belly-up and Netflix went on to thrive since then Netflix’s behind such original shows such as house of cards by Jack horsemen and daredevil with 83 million subscriptions worldwide Netflix has altered the way many of you the entertainment.

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