Talk about a modern day buggy whip story: Blockbuster, Inc.

Here is a company that literally is existing on fumes right now. Even the famed raider Carl Icahn has lost faith in the company, dumping shares and resigning from the Blockbuster (NYSE:BBI) board. The NYSE has warned Blockbuster that it is in danger of being delisted because the company’s market cap is not sufficient.

Oh the woes of being a manufacturer of expensive buggy whips circa 2010.

I hate to say this because there are certainly many decent and smart people working for Blockbuster. But, I have absolutely zero sympathy for the company. I remember clearly when Blockbuster started its video industry busting roll up, all the way back to the 80s. Prior to this predatory company, there were many local video stores that knew their customers and even stocked interesting movies that really fit local tastes.

When I first moved to New York City in the mid eighties, your local video store was a really cool place. They understood their customer and tailored their offerings to them. I remember one store that had a huge collection of classic films and really unique animated films from Japan. Blockbuster changed all that by focusing only on best sellers, the lowest common denominator of the industry (not that offering popular films is bad in and of itself, but that is pretty much all Blockbuster offered and still offers).

Blockbuster muscled into the industry like a video rental King Kong and stomped every other small or large player to death. They used their financial clout and size to sweep virtually all of the other video retailers out of the business — especially those great little local video stores — and then had the industry all to itself.

Bu, it was to be a relatively short-lived, and decidedly pyrrhic victory for Blockbuster.

Of course, because Blockbuster’s brand promise (if it could even be called that) was never based on anything more than just renting a lot of hit movies, the company was ill prepared for the day of reckoning that eventually arrived in the name of Netflix. That innovative, web-based competitor changed the game on Blockbuster, which was as flat footed and clumsy as you would expect King Kong to be.

Sure, Blockbuster tried to respond with its own web distribution service (and they even tried selling refreshments, as if they really were a movie theater for their customers), but they never really made that strategy stick.

Blockbuster sold buggy whips, pure and simple. And, they weren’t even very competent at that rapidly dying business.

Now Blockbuster is getting killed by Netflix on the web, Redbox, with its $1 vending machine rentals at grocery store checkouts, and the growth of digital movie offerings being rolled out by every media and technology company out there. No wonder the real life Gordon Gecko, Carl Icahn, is bailing rapidly on Blockbuster. This is a company that literally can’t find its derriere with two hands in the dark!

The lesson here: Size and scale only get you so far. If you can’t or don’t come up with new innovations that excite customers/consumers and solve problems for them, then even your size advantage won’t last forever. Just ask GM. It took bankruptcy and a government bailout to get them back on the right road. They were never going to get there by themselves.

Truly great, lasting companies continually innovate, placing a priority on developing new ideas, products and services that change the game by improving, expanding and even transforming the customer experience. Blockbuster was always five days late and $100 short.

Of course, their terrible service didn’t help them. Did you ever go into a Blockbuster store (I know you have at one point in your life…probably many moons ago)? Their service made your average 7-11 look like a Four Seasons Hotel by comparison.

Blockbuster failed to innovate and stay ahead of the curve. Blockbuster thought their size and mastery of buggy whips would keep them in the game forever. They were wrong and they are now dying.

They won’t be missed.

Trackback URI | Comments RSS