You, Adversity and Blockbuster Video
What would it take for your business to survive in the face of adversity? Let’s take a look at the possible bankruptcy filing by Blockbuster Video and what that has to do with you.
All over the country there are now chains of stores that have a video dispensing machine where a person can rent a DVD for $1. Then there is Netflix where you can order videos on your computer, and there is Hulu, where you can stream video to your computer.
Last week it was announced that Blockbuster might push for Chapter 11 bankruptcy protection. In a filing with US regulators, Blockbuster pointed to “significant liquidity restraints” and a steadily-mounting debt.
This is what they said, according to the Associated Press: “The increasingly competitive industry conditions under which we operate have negatively impacted our results of operations and cash flows and may continue into the future. These factors raise substantial doubt about our ability to continue as a going concern.” Blockbuster lost $569 million dollars last year and currently has more than $975 million dollars in debt.
Could the era of video stores be coming to a screeching halt?
How does this apply to you?
Here are my thoughts on what may have happened at Blockbuster headquarters…
Blockbuster saw the rising trends, but they believed they could withstand them. They added an online arm to their business to try and address the online trend, but their offline business model remained basically the same. They thought that if they marketed heavily enough they could have the best of both worlds.
Many of the upper managers were probably also trying to protect their jobs, so the solutions they were coming up with were all limited to solutions that worked along the lines of job protection. If this was the case, no one could really come up with creative solutions that matched reality…the growing trends. Their solutions could only be extensions of the old blockbuster model, which didn’t take into account the current technological trends, since those trends did not exist at the time the model was created.
Coming up with solutions to extend the old model in the face of new trends is certain to lead to demise of a company. If the company is to survive, the model has to be changed to include the new trends, not patched up or added on to. No amount of marketing will help the company survive unless its model is redone to accommodate the new trends.
How about you? Is your business model being redone to accommodate the new trends in the business world? Or are you hoping that with enough marketing, perseverance, and grit you will pull through? Are you or your employees holding on to the old model because you believe that’s the way to protect your “job”? Actually holding on to the old model is the guaranteed way to lose your “job”.
If you haven’t done so yet, start taking the trends you observe seriously, and begin to adjust your business model to incorporate those trends. Unless you do, your business may meet the fate Blockbuster is facing.
Let me know your thoughts about this article and what challenges you may be facing in adjusting your business to make sure it survives and thrives in the face of the rapid changes going on around us.
Ken, great post! So many businesses think they can outsmart market trends by just throwing more money at marketing. Like Blockbuster, they end up losing their shirt.
Every entrepreneur today must pay close attention to all trends, take advantage of technology to streamline and automate redundant tasks, and most importantly – sell what the market wants.
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Ken Varga Reply:
June 2nd, 2010 at 11:45 pm
Adam, points well taken! These are challenging times for most businesses, as so many things are in flux at the same time. But keeping their eyes on what matters…their market and what it wants…will help businesses determine what to do.
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The insurance industry is also changing. The yellow pages has dropped significantly in significance
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Ken Varga Reply:
June 2nd, 2010 at 11:38 pm
True Steve…on both points. Businesses need to keep up with their customers as customers migrate to new platforms for getting what they want. This requires investment of time, learning, funds and a lot of agility.
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Great post and point Ken,
I was just @ block buster the other night and notice on a movie poster had this banner across a new release “28 days before Redbox & netflix”.
I had heard about there trouble a few months ago and thought the same way as you do on this post, which also made me think…hmmm
Since my business relies on local marketing and branding was I following a dead business model?
the Answer, of course not. Although old marketing methodes take time and lot’s of cash to feed the marketing monster, I chose not to follow traditional marketing, per say, (traditional marketing does still work and I do plan on using some direct response marketing like post cards with coupons ect).
Instead I use a blog for my business site instead of a traditional website because it is easy to implement and I can take care of it myself.
Plus, I can post helpful articles which may give my business an extra authortive edge over my competition in local search results online.
The internet, is where I plan on placing 75% of my markeitng, due to the public using cell phones and the Internet in one big package.
After all almost everyone twitters, googles and face books.
So what do you think?
am I lost like block buster?
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Ken Varga Reply:
June 8th, 2010 at 9:38 pm
William, on the contrary…you are not lost. It sounds to me like you are thinking along the right lines and like you have a very workable strategy to the situation. Here’s to your success!
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The challenges from competitors and the market place give businesses a clue as to what is brewing up in the horizon. Some company executives don’t want to see it or are blind folded in their personal security and ambition which causes the demise of big companies.
In this environment big banks are going to be the next one if they don’t make adjustments based on the declining fee structure and revenue challenges that may come from from the mobile sector.
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Ken Varga Reply:
August 5th, 2010 at 6:23 pm
@Harry,
Good points, Harry.
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Interesting article. I am not sure how to do more than I am doing. But I am always on the lookout for new ideas. Though in my business, we specialize in face to face consultations. Of course getting to sit with a person and give them the personal attention is the challenge and then we call, email, create a website, send post cards, put up flyers and take one boxes and purchase leads too. I would like to find ways to do this part with less hours invovled and more return. I wonder if Blockbuster could do something differently or it was just an end to a good thing. But they haven’t left us yet I don’t think. I like Blockbusters but it is true $1 is hard to beat and a machine on every corner is very convenient when you can get it and return it where you like.
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Ken Varga Reply:
August 6th, 2010 at 9:43 am
@Mountainbird,
Mountainbird, I don’t think it’s about doing more. I think it’s about changing the business model to match the long-term trends you see coming, while keeping the purpose of the company in mind. In some cases, a business can create small innovations that work. In some cases, like Blockbuster’s, the company has to be re-invented.
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Blockbuster didn’t have a chance against Netflix. Netflix and the extra fast track return and delivery of their CD’s are the best. Now you can download movies instantly on your TV with their special box.
The future of blockbuster and other box store videos are doomed!!
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hi ken,
i think this u have made a great observation; but what suggestions do u have if a company like blockbuster and/or other older models are not working? what are 3 or 4 actionable things that u would recommend?
i was thinking, if it were me, i would do things that u can’t do over the internet. i would focus on the in store experience. for example, it would seem to me that a company this size could bring celebrities into the stores for autographs and photo shoots. u can’t do that over the internet. what do u think?
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Ken Varga Reply:
December 13th, 2010 at 11:14 pm
@dan,
Hi Dan, bringing celebrities into the stores is a very short term solution to long term cash flow and profits. A company has to get its fundamentals right to succeed in the long term. And everything starts with what the customer wants on an ongoing basis. I think a company like Blockbuster has to look in the direction that Netflix is looking in to give the customer what he really wants. And once it isolates those wants, it has to re-evaluate the ability of its model to deliver those wants.
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