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Thursday, June 15, 2023

Abandoned Blockbuster, location unknown

Abandoned Blockbuster, location unknown.

A brief history of the rise and fall of the media giant and the ensuing Netflix takeover.

For almost two decades, Blockbuster was the go-to spot on Friday nights for families around the world. At its peak, it had 9,000 stores. However, by 2010, it had gone bankrupt. So, what happened to the video rental giant?

In 1997, Reed Hastings, the future founder of a fledgling company called Netflix, went to a movie store to return the movie "Apollo 13" and was hit with a $40 late fee. This incident, among others, sparked his idea for Netflix. By 2000, when Netflix was still in its infancy, Hastings flew to Dallas to propose a partnership to Blockbuster CEO John Antioco and his team. The idea was for Netflix to run Blockbuster's brand online, while Blockbuster would promote Netflix in its stores. However, Hastings was laughed out of the room.

Ten years later, Blockbuster was out of business, and Netflix is now worth over $200 billion. It's easy to wonder what Antioco was thinking, but the answer isn't that simple.
Antioco, the Blockbuster CEO, was a competent executive who had doubled the company's revenue during his tenure. At the time Hastings approached Blockbuster, it had thousands of retail locations, millions of customers, massive marketing budgets, and efficient operations. Blockbuster dominated the competition, while Netflix was just a blip on the radar.

However, there was a major weakness in Blockbuster's model that wasn't clear at the time—the late fees. Blockbuster earned an enormous amount of money from late fees at its stores worldwide. Penalizing its patrons turned out to be its Achilles' heel.

Netflix, on the other hand, could cut out retail locations, lower costs, and offer a much greater variety of titles. Customers could subscribe instead of renting, and they could watch videos for as long as they wanted without worrying about returns. By the time Antioco and the company realized this, it was too late.

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