BLOCKBUSTER
Watch: https://www.youtube.com/watch?v=30yQcF5Gtbg
We’ve all heard of Blockbuster, the video rental chain that once dominated
the market with its thousands of physical locations worldwide. However, do you
know how it fell from grace? When did the Blockbuster
failure story begin?
Blockbuster was an American-based provider of home movie and video game
rental services. The company was founded in 1985 and
headquartered in Dallas, Texas.
Throughout the 90s and the early 2000s, Blockbuster was the renowned video-rental
company in the US. Let’s trace its chronology.
- In 1988, Blockbuster
became the most popular video store chain in the US, with 800 stores.
- In 1992, it
expanded overseas and bought video-rental chain
Ritz in the UK with 2,800 Blockbuster stores.
- During early 2000,
Blockbuster had over 9,000 stores worldwide and over 45 million registered
users. It had an extensive movie collection and an unrivaled snack
space.
So what happened suddenly? Where did it all go wrong?
Reasons behind Blockbuster failure
1.Undermining customer satisfaction:
Blockbuster’s income was mainly based on late fees, a model that penalized customers
for keeping their VHS cassettes for too long.
For any movie rental that was not returned by the due date,
Blockbuster charged a steep late fee ($1 per day). It
also charged consumers a monthly subscription fee of $19.99 for three movie
rentals per month.
Since Blockbuster’s primary source of income was from penalizing its
customers, the strategy did not last long.
With the changing market conditions, the demand for online streaming
increased among consumers in their 20's.
However, Blockbuster ignored customers’ preferences by not shifting to
online streaming. Instead, it continued with its traditional rental model and
charged its customers per rental.
This was becoming less appealing to customers as
they looked for convenience and ease for watching videos.
On the other hand, companies such as Netflix recognized the demand for
online streaming and offered it as a core component of
its business. So, by offering a monthly subscription model with unlimited
rentals, Netflix was able to provide greater value and convenience to
customers, making it more appealing than Blockbuster’s rental model.
Blockbuster had poor customer service and high rental fees, which made it
difficult for customers. Blockbuster’s failure to understand client
preferences resulted in its downfall.
2.Unyielding to new opportunities:
Another factor in the company’s demise is the crucial mistake
Blockbuster made by rejecting an agreement with Netflix.
In 2000, Netflix sought to sell its business to
Blockbuster for $50 million. This Blockbuster Netflix deal was sure a
shot in the dark. With its company only having started in 1997,
Netflix was still a young and promising company in
those days. If the transaction had been approved, Netflix would have been in
charge of Blockbuster’s online operations.
Blockbuster raised $465 million in an IPO a
year prior, so, at the time, it could afford the price.
However, Blockbuster declined the offer, stating that the price was too
expensive.
Barry McCarthy, the former CFO of Netflix, claims that Blockbuster “laughed
us out of their office.”
After Netflix’s bid was rejected by Blockbuster, by
2006, Netflix had six million users. Within a few years, Netflix was
establishing a dedicated and expanding client base. And consequently, the
failure of Blockbuster started.
Blockbuster experienced the beginning of its demise in 2004 when Viacom
sold its majority stake in the video renting business.
According to a documentary, the chain had 9,000
physical locations globally in its zenith . When Dish
Network purchased Blockbuster out of insolvency in
2011, it had 600 locations.
3.The leadership disputes
Blockbuster’s board member and activist investor Carl Icahn
fought against the company’s entry into the online rental market, urging it
to remain to its brick-and-mortar origins. To achieve
this, Icahn handled the firing of John Antioco, who served as CEO of
Blockbuster for ten years beginning in 1997, and then in 2007, Jim Keyes
was appointed to the position.
Similar to Icahn, Keyes was dedicated to Blockbuster’s physical and mortar
operations.
Niko Celentano, a former Blockbuster shareholder, wrote
after Blockbuster filed for bankruptcy in 2010:
“Jim Keyes is the main reason Blockbuster is in this position today due to
his denial of being in a business model that did not
work anymore. If Jim Keyes would have seen the changes that were evolving in
this industry in the past few years, Blockbuster would not have been in the
courts today filing for bankruptcy protection. Jim Keyes has failed in his job
as CEO of Blockbuster and should resign immediately.”
According to Tom Casey, the Former Chief Financial Officer of Blockbuster
Video,
“Most people think Blockbuster went out of business because of Netflix.
What really happened was Blockbuster and Netflix were pretty evenly positioned
to grow in the mid-2000s and 2007, ‘08, and ‘09. They had capital, we did not.”
4.Blockbuster Failure in a Nutshell
Blockbuster’s inability to adapt to the changing market conditions, poor
customer service, high rental fees, and inability to understand and adapt to
client preferences resulted in its downfall. Netflix recognized the
market trends and offered a more convenient and customer-friendly model that
eventually surpassed Blockbuster. So when did
Blockbuster go out of business?
Finally, in 2010, Blockbuster filed for bankruptcy. The
company had to pay a debt of $1 billion.
The once great video rental chain serves as a business
innovation lesson. Being stuck in outdated models
and refusing to adapt to market trends can lead to the failure of a company.
In today’s world, companies must be willing to adapt to changes in the market
and invest in research and development to stay ahead of the competition.
1. Netflix is the current leading
platform in movie streaming. Who are their current competitors and how do they
try to diffrentiate themselves from Netflix?
2.Vocabulary
Paragraph
1
|
1. |
fall from grace |
a. |
widely acclaimed and highly honored; celebrated and famous. |
|
2. |
renowned |
b. |
better than everyone or everything of the same type. |
|
3. |
trace |
c. |
expected at or planned for at a certain time. |
|
4. |
unrivalled |
d. |
track down,
discover, detect |
|
5. |
undermining |
e. |
lessening the effectiveness, power, or ability of someone or something,
especially gradually or in a harmful and subtle way |
|
6. |
due |
f. |
in or to a foreign country, especially one across
the sea. |
|
7. |
overseas |
g. |
lose a position of power, dominance, influence or honour. |
Paragraph 2
|
8. |
demise |
h. |
quality or situation that makes something easy or useful for someone by
reducing the amount of work, time or effort required to do something. |
|
9. |
unyielding |
i. |
of a person beginning a particular activity or occupation making
good progress and likely to become successful. |
|
10. |
a shot in the dark |
j. |
an attempt to guess something when you have no information or knowledge
about the subject and therefore cannot possibly know what the answer is. |
|
11. |
convenience |
k. |
of a person or a behavior that is inflexible and uncompromising |
|
12. |
promising |
l. |
When a private company first sells shares of stock to the public, this
process is known as an initial public offering |
|
13. |
IPO |
m. |
death or the end of something, like a business or a relationship etc... |
|
14. |
bid |
n. |
offer a certain price for something OR make an effort or attempt to
achieve. |
Vocabulary
Paragraph
3
|
15. |
majority steak |
o. |
when an investor owns more than half the shares of that company |
|
16. |
chain |
p. |
the period of a person's, a company's, a team's etc.. greatest
success, popularity, activity. |
|
17. |
zenith |
q. |
refusing to admit the truth or reality of something unpleasant. |
|
18. |
insolvency |
r. |
a person who owns units of stock in a company and therefore gets
part of the company's profits and the right to vote on how the company is
controlled |
|
19. |
urging |
s. |
to intensely and persistently persuade someone to do something. |
|
20. |
shareholder |
t. |
a state of financial distress in which a person or business is
unable to pay their debts. It is very similar to bankruptcy except that
bankruptcy is a legal procedure while this one is a financial state |
|
21. |
denial |
u. |
consisting of a group of stores (two or more) that have the same brand
name, follow the same corporate policies, sell the same products, and are all
owned by the same parent company
|
Paragraph 4
|
1. |
recognize |
a. |
a legal proceeding initiated when a person or business cannot repay
outstanding debts or obligations |
|
2. |
file for bankruptcy |
b. |
old-fashioned and no longer useful or relevant to modern life. |
|
3. |
outdated |
c. |
accept or admit the truth of something; acknowledge |
|
|
3. SYNONYM MATCH A: Match the following synonyms from the article.
1.
founded
2.
extensive
3.
penalized
4.
steep
5.
shifting
6.
appealing
7.
core component
8.
demise
9.
sought
10. crucial
11. raised
12. purchased
13. appointed
14. in
a nutshell
15. surpassed
a.
large
b.
punish
c.
very high
d.
change
e.
attractive or interesting
f.
main part
g. death or the end of something
h.
search
i.
to collect, to gather
j.
bought
k.
chosen
l.
to summarize
m.
be better than
n.
important
o.
started
4.Role play: What do you know about these dinosaurs? Why do you think they
were initially successful and why do you think they eventually failed ? Who
were they replaced by ?
|
|
6.Discussion :
1. In what ways must companies
stay up-to-date these days ?
2. In what ways can/does
your company stay up-to-date?
3. What actions does your company
take in order to stay up-to-date?
4. What are the most things
people get nostalgic about ?
5. Do you have a place that you
used to go to as a child that makes you feel nostalgic when you think of it ?
6. Is there a modern technology
that is used now that you think will be replaced soon ?
7. Can you think of something
that used to be quite successful that you would like to see make a comeback?
8.What things are you happy
that they are not in style anymore ?
9. What things do you hope
will never make a comeback?
7. QUESTIONS :
1.What is the name of a series in which it is shot
like a documentary?
2. What is the name of each ¨chapter¨ of a series?
3. What is the singular and plural of ¨series¨?
4. What is the activity of watching a series that is
so good that we can not stop ourselves from watching ?
5.When an episode reaches a dramatic and exciting
ending , leaving the audience in suspense and anxious not
to miss the next one?
6.When the protagonist has both good and evil
characteristics?
7. What is the meaning of a blockbuster?
8. Fill in the blanks:
1. For many years blockbuster was the dominant leader in its market.
However, it eventually was
by Netflix.
2. Even though Blockbuster saw how the trend was changing, it refused
to accept the reality and adapt to the changes. Instead, it
its head in the sand.
3. If the industry that they are in is a very aggressive and ruthless one,
then it is a
industry OR
industry .
4. If the industry is very unpredictable and it has huge highs and lows,
then it is a
industry.
5. If your company specializes in a specific field but you want to expand
to other areas, then you want to
.
6. When a company is at its peak, those years are its
or .
7. When a new company is growing quickly and has a big possibility of
becoming quite successful in the future , we can say it's a
or
an
company .
8. If you had the chance to invest in a business but now it is too late,
you can say :
"I missed the
on that ".
Or "That
has
".
9. Toyota is the world's top selling automaker for the last 4 years. We can
also say they are the world's top selling automakers 4 years
.
10. Another way to say that a company has decided to
terminate its operations is :
"It has decided to
.
10. Compare these
inventions with their predecessors? What are the advantages and disadvantages
of each? Which one do you prefer and why?
Ipad
Iphone
E-Cigatettes
Emails
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