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Lessons From Blockbuster Vs Netflix

Blockbuster once reigned king of the film rental market but it didn’t take long for its empire to come crumbling down. With Netflix now reigning supreme, what business lessons can we learn from the fall of Blockbuster?

I’ve been frankly confused by this fascination that everybody has with Netflix…Netflix doesn’t really have or do anything that we can’t or don’t already do ourselves.

John Actioco Blockbuster, CEO, 2008

The story of Blockbuster is often trotted out as a textbook example of how not respond to a changing business landscape. Bought for $4.8bn in 1999, by 2010, Blockbuster, once the world’s largest film rental company, had gone into administration.

It’s a familiar tale.

Having dominated the video and DVD rental market since the 80s, Blockbuster’s model came under threat as the internet slowly changed media consumption habits. Overly reliant on its bricks and mortar outlook, upstarts such as Netflix, originally a mail-order service, pounced on this hugely lucrative market opportunity and outflanked established players by launching their own video streaming services – Blockbuster being the principle victim.

Framed next to John Actioco’s quote, it’s hard to have much sympathy towards Blockbuster’s downfall. There was a certain arrogance in their reluctance to adapt (indeed, they continued to buy more stores right up to 2011 whilst in administration) and this was contrasted by Netflix’s bold, often risky, expansion strategy (most recently, their decision to produce original content).

Blockbuster even had the chance to buy Netflix back in 2000. Similar to Decca turning down the Beatles in 1962, it was to be a galling miscalculation.

The big lesson for your business

Most importantly, Netflix, conceived as an alternative to the inflexible Blockbuster experience, with its punitive late return fees, had customer-centricity at its very core.  They sensed vulnerability and moved to create a simplified, and ultimately better, customer experience.

That’s true also of Uber, Airbnb and Spotify – some of the most notable ‘Digital Disruptors’ (as they’ve become known). They all share one major thing in common: the drive to challenge established business models, empowering customers through digital technology.

Taxi firms, record labels and hotels may not like it, but for many, it’s created a golden age of entrepreneurship. As Dave Hrycyszyn, director of technology at Head, a digital agency puts it “for those with the drive, imagination, and capability, it’s an amazing time to launch new ideas.”

That’s great if indeed you are a swashbuckling tech-innovator looking to take on the status quo. However, most of us can learn a simpler lesson and that’s never to take your customers for granted.

The bar for customer service has been raised. Enabled by technology, consumers have more choice than ever and that means you need to be savvier. Today, customers can vent their frustration in a variety of forms, from social media to TrustPilot and TripAdvisor reviews – not forgetting, word of mouth. With that empowerment, that extra choice, it’s foolish to expect any loyalty.

In Blockbuster’s case, they wrongly assumed customers would feel a loyalty to their brand and failed to get on the front foot as challengers emerged. From their established position, they actually had the breathing room to do something about this. That’s not a luxury most businesses can afford.

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Huw Moxon is the Digital Marketing Manager for Informi

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