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Blockbuster is one of the most well known video and movie rental chains in America and it recently went bankrupt. There are several reasons including chronic mismanagement, absence of any clear vision and the failure to read the future and follow the consumer.
Among these the failure to read the future is the most important reason why Blockbuster went bankrupt. First, its business model contained huge overheads since it had to maintain large number of physical, on the ground stores so that people could make their selections in person and rent the DVDs.
This strategy worked well until the 1990s but not in the 21st century when people are reluctant to do any physical activity and want to spend their entire time at home. This means consumers would prefer the DVDs to be shipped to their home, where they can watch the movies, and return the DVDs after the rental period is over.
Due to huge overhead costs for Blockbuster versus lower more cost effective warehouse model for Netflix, the cost to rent a DVD was much higher for blockbuster consumers versus Netflix consumers. This led to massive consumer migration from Blockbuster to Netflix.
Another far reaching decision made by Netflix was to heavily invest in streaming or on demand rentals, where consumers could rent the movie online and view it instantly on demand through streaming on internet. This instant gratification with modern technology meant that consumers no longer even had to wait for DVDs in mail and if they just had a broadband connection, they could download unlimited number of movies and videos and play it instantly on their large computer or even television screens.
