With the advancement of fiber optic technology, there is a rise in demand for entertaining movies as online streaming can now be done with much ease. The technological developments have made the viewers access movies at the comfort of their homes (Gomery, 2013). They no longer need to go to movie stores to purchase their best movies. That presents the reason why the movie store companies failed and became bankrupt. Because of the peak of fiber optic as well as competition from companies like Redbox, Netflix, and Gamefly, the once hero movie company became a victim of digital technology and later filed for bankruptcy in 2010 September because of the enormous loss of revenue.
How did the leader in video rentals self-destruct at the end of the 20th century and end up in bankruptcy court?
Delegate your assignment to our experts and they will do the rest.
The leader of the blockbuster had manifested great operational understanding, but even with management qualities, he failed to foresee the fact that unseen connections networks would lead to the downfall of the movie store company (Gandel, 2010). For a long time, researchers have studied how the hidden connection networks work and how the destruction of the blockbuster company could be avoided. When competitors came with better options of providing the same service with much ease to the customers, most of the customers shifted from movie store to digital way. The blockbuster model also had several weaknesses which were not clear at that time. Charging late fees on customers had become a significant part of the company's revenue model. The profits of the company highly depended on penalties charged on its patrons. Missteps Blockbuster made that doomed them to fail as a retailer.
Competition
Blockbuster failed to handle competition from companies such as Netflix and Redbox properly. Netflix had come with significant advantages over blockbuster. For example, by eschewing store locations, the company lowered costs and offered greater variety to its customers. Further, Netflix provided subscription instead of charging customers to rent videos. This made the unpopular late fees to be unnecessary. For this reason, customers could keep the videos for a long time and watch them as much as they wanted without the fear of late fees penalties. Netflix was indeed a disruptive innovation since blockbuster would only match up to its competition by altering its business model and this would interfere with its profitability (Gomery, 2013). Although Netflix was then a small niche service at that time, it had exhibited potentiality in upending Blockbuster Company.
Customer Preference
Even though customers were at first reluctant to embrace the digital change, they slowly adopted the change and liked browsing movies and picking them up at a moment's notice. As news spread about the Netflix and their better service, more customers tried it too and loved it. Many people wanted to try out the new services different from the one that existed before. Network researchers indicate that for any given idea, the level of resistance would vary amongst different people. However, as a few people become willing to adopt change or new concept, even the resistant ones join in. New ideas usually spread faster to the late adopters. Once they join, the majority who had entered earlier begin to get comfortable with the new concept. With time, the next group adopts the new scheme (Gandel, 2010).
Changes in Technology
With the rise of advanced technologies, there was a new level of demand for entertaining movies since streamlining movies online could be done with much ease. Customers could watch movies at the comfort of their homes, and this made everything easy for movie lovers as even the cost of renting a movie was cut. Viewers no longer had to travel to the movie stores to get themselves movies to watch. With time, customers abandoned the movie stores and started to embrace the digital way which was easy and enjoyable. Blockbuster failed to acknowledge the fact that the new technology would bring new development to the movie industry which would, in turn, affect their business (Stringer, 2013). Because of the peak of fiber optic, blockbuster almost became irrelevant. The company became a victim of the companies which had already embraced digital technology.
Unsustainable model
It was evident that the model of Blockbuster Company was not sustainable. Netflix had started operating for some time even before Blockbuster launched services of the movie by mail. Blockbuster had ample time to adapt to the new system, but they did not. Instead, the management hinted that they could crush the company if they tried to copy Netflix. Since 1999, the company has only managed to pay out 12% of the money to the operations generated (Stringer, 2013). Worse still, managers who succeeded the company have squandered money on various schemes to keep the movie store business alive, but even that did not stop its demise, it just delayed. On 23rd September 2010, the company filed for its bankruptcy, only some few weeks before its 25th anniversary.
Late Fees
Many customers did not like the idea of late fees payment which was imposed on them by the company. When other companies came with a different idea which did not involve late fees, customers shifted to the new service providers.
The steps that should have been taken by the company
The company would have focused on advisory or consultative selling as well as turning its retailer associates into recommenders. Moreover, it would have used its social networks to catalog and rate the new movies and use the data of its customers to develop a channel through which its customers could locate the new movies titles. Retailer associates could also have been incentivized to continue establishing the customer relationships as well as finding new ways to promote the company's library titles. This would have enabled the company to migrate its brand into a new platform of distribution through its reinvention.
References
Gandel, S. (2010). How Blockbuster failed at failing. Time Magazine .
Gomery, D. (2013). The Hollywood blockbuster: industrial analysis and practice. In Movie blockbusters (pp. 84-95). Routledge.
Stringer, J. (2013). Movie blockbusters . Routledge.
