With Blockbuster's deft PR manipulation of the Wall Street Journal to write about its "remake" on the same morning it announced the continued collapse of its business yesterday, I also feel compelled to write about the company. This will be the last time I do so.

In the spirit of full disclosure, I joined Blockbuster's senior leadership team in the late 1990s soon after Viacom acquired it; I was fired three years later in one of those bloodless corporate coups when a new CEO brought his own team along. Blockbuster took excruciatingly good care of me, however, and my experiences there had been very positive, so I've always been an alum who hoped the company would succeed.

This is why I've been so disillusioned, and why the latest news has put me over the top.

Blockbuster has been transforming itself for going on two decades now. I can clearly remember the headlines declaring that digital distribution would eat its lunch and that consumers wouldn't go to geophysical stores to rent little plastic boxes called "videotapes" for much longer. I was part of the furtive effort to remake the stores into customized local retailers, utilizing state-of-the-art BI (built from scratch, as this predated the CRM revolution) and a new high-tech distribution center in Texas. This strategy didn't last a year before it was chucked for a succession of other, equally short-lived initiatives intended to discover the company's future somewhere outside the four walls of its stores.

Blockbuster's corporate history since has read like the script for the movie "Dead Man Walking." 

The core plot conceit has been that physical rental of entertainment is going away, and the experts in the media and analyst community have opined on all of the "rivals" that have been responsible for "major shifts in how people rent and watch movies." The company has invested its time and money in a variety of these alternate businesses, like on-demand, mail order, and vending machines, but can't seem to get ahead of the disastrous decline in its same-store sales (it lost $435 million in 4Q09 on a 16% decline in store traffic).

That's because it has wasted over a decade trying to fix the wrong problem.

Blockbuster is a retailer. It operates geophysical stores. There are always going to be other ways to get digital content, but they don't necessarily have to be better ones. Distribution channels aren't a zero-sum game and an increase in one doesn't automatically link to a decline in the other. Blockbuster's primary competition was not, and isn't now, the proliferation of other ways to get movies: it competes with other retailers for store visits, and it has done a woefully poor (and perhaps terminal) job of meeting this challenge.

Back in the 1990s when the company was first supposedly going out of business, it was generating more than a million store visits per day. Think of it for a moment...that meant a million+ daily opportunities for customers to engage with the brand:

  • Establish stronger relationships (the company could bring new meaning to membership)
  • Derive new value, and find new benefits (discover better displays and more services)
  • Reinforce the routine of visiting Blockbuster stores (with a million people already in the habit, how could every visit been made into a reward?)

Nobody was looking to stop renting videotapes (or DVDs), per se, though circumstances and convenience would have still allowed for the invention of other distribution models. The idea that such innovation had to represent a trade-off or decline in Blockbuster's business was (and is) simply and utterly wrong. The company all but made it real by ignoring the reality of its retail business -- most stores today look exactly like they did a decade ago, with no real innovation in how products are displayed, offered, tracked, or how its hard-working employees are trained and empowered -- and instead did a successful job at failing to address issues that were beyond the purview of its expertise or control.

It was always about retail and never about the macrocosmic shifts that consultants are paid to blather on about, yet the Journal article reveals that Blockbuster is still incapable of acknowledging, let alone addressing the only real thing it could do to save its business. Instead, the story is full of all the typical nonsense we've heard about entertainment content and how the company has hired more experts to study more strategic options..though one analyst had the guts to say "If they can't build a profitable stores operation, then there is no Blockbuster. It's real simple."

Finally, someone speaks the truth. 

So I'm done with it, having made the same basic point in essays going back many years. I simply cannot fathom how a company could be so repeatedly and consistently dumb. Complaining about it isn't fun anymore.

Image source: Paul L McCord Jr

Original Post: http://dimbulb.typepad.com/my_weblog/2010/02/the-last-time.html

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