Mark Perry has a nice post about creative destruction in the movie rental business on his blog, Carpe Diem.

Retail jobs in movie rentals declined by 90% in 15 years. Ouch.

Why didn’t politicians push to save those jobs like they do with so many other businesses feeling the effects of creative destruction?

Also, I think it’s misreading what happened to just say that digital beat bricks-and-mortar. I think there was more to it.

I believe Netflix changed the value proposition of renting movies in a way that consumers didn’t expect to be better, but once they tried it they discovered it was.

It was a simple innovation: the queue, subscription and keep-movie-until you’re ready changed the incentives and experience.

Much of my experience with Blockbuster was roaming the aisles that smelled a bit like stinky feet, bumping shoulders with others, trying to decide between two or three movies that I sort of wanted to see, but not really, and weighing that against the $4 fee I would pay to rent it and then have to drive back and return within a couple days.

Netflix improved on that experience. With the subscription service, I no longer evaluated each movie by the $4 fee. Whether a movie was worth $0.50 or $8 to me, it went on my queue.

The queue solved the problem of having to decide in the moment. As soon as I thought about or heard about a movie I wanted to see, it went on my queue. Thinking done.

I received it in the mail and had to watch to it to get my next movie.

Blockbuster could have done all of those things, and tried, but it was too late. They were following by the time they tried it.

The final thing to consider is that Netflix wasn’t solely responsible for the demise of Blockbuster. RedBox put the final nail in the coffin.

My guess is that about 90% of Blockbuster’s revenue came from about 20 – 30 titles at any given time. RedBox found a way to serve that demand much more efficiently. Again, Blockbuster tried to follow that model, but it was too late.


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