Netflix vs. Blockbuster

Netflix-Blockbuster

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To war or not to war

Did Netflix really put Blockbuster out of business?

Gross Profit (Blockbuster):
[7]
1995– $430 million
1996– $267 million
1997– -$214 million
1998– -$359 million
1999– -$122 million
2000– -$67 million
2001– -$217 million
2002– $347 million
2003– -$805 million
2004– -$1.242 billion
2005– -$383 million
2006– $74 million
2007– $39 million
2008– -$293 million
2010– -$351 million
2011– -$128 million

Netflix: Earning Acceleration
Gross Profit:[6]
(net income)
1998– -$11 million
1999– -$30 million
2000– -$57 million
2001– -$38 million
2002– -$22 million
2003– $7 million
2004– $22 million
2005– $42 million
2006– $49 million
2007– $67 million
2008– $83 million
2009– $116 million
2010– $161 million
2011– $226 million
2012– $17 million

2007: Blockbuster brings in 7-11 execs to focus on “package” customer leaves store with (candy, cokes, etc.)1997: NF founder returns Apollo 13 to BB 13 weeks late, dismayed by his late fees, he starts his own company.
1997-2005: point to mostly unprofitable trend of BB
2000: Blockbuster declines to purchase Netflix for $50 million
Blockbuster was hurting long before Netflix became a player.
But it looks better to lose a war, than to lose from sheer incompetence.

You can’t make this stuff up
BlockBuster: A decade in decline[2]
1985–First Blockbuster opens in Dallas
1994–Viacom acquires Blockbuster for $8.4 billion
1997–Reed Hastings returns Apollo 13 to Blockbuster 6 weeks overdue, and is dismayed by the $40 late fee.
1998–Reed Hastings founds Netflix.
1999–Viacom holds Blockbuster IPO, valued at $4.8 billion
2000–Blockbuster declines to purchase Netflix for $50 million. Creates 20 year deal to deliver on-demand movies with Enron Broadband Services, subsidiary of Enron.
2001–Enron files for bankruptcy, in accounting scandal. Blockbuster kisses streaming deal goodbye.
2002–Blockbuster posts $1.6 billion loss.
2003–Netflix posts first profit of $6.5 million.
2004–Blockbuster enters online DVD rental market. Reed Hastings tells analysts “in the last six months, Blockbuster has thrown everything but the kitchen sink at us.” The following day Hastings receives package from blockbuster: a kitchen sink.
2005–Blockbuster launches “no late fees” campaign. Is sued for misrepresenting policy to customers.
2006–Blockbuster surpasses 2 million subscribers for online services. Netflix reaches 6.3 million.
2007–Blockbuster loses 500,000 subscribers just in the third quarter.
2009–Blockbuster rolls out kiosk system designed to compete with Redbox.
March 2010: Blockbuster advertises 28 day quicker access to new movies than Netflix. Reintroduces late fees.
July 2010: Blockbuster launches Droid X app. Blockbuster de-listed from the NYSE, shares at all time lows.
September 2010: $1.1 billion revenue losses, with a company value of just $24 million–Blockbuster files for bankruptcy.

Blockbuster at its height:
Blockbuster’s Peak:
9,000 stores
60,000 employees [3]
$8 billion value

Netflix at its height:[9]
Watched more than any cable network
Accounts for nearly 1/3rd of Internet traffic
$20 billion worth

Netflix didn’t shut down Blockbuster, but they did steal the market Blockbuster needed to move into.

2012-2017 Growth in Global Spending:
Change per year [#so in five years about -25% loss for physical home video]
Electronic home video delivery (Or, Streaming): +19.1%[10]
Physical Home Video: -4.9%
2013:1/2 of those (18-29)
Use OTT–(free streaming sites online)
To satisfy entertainment needs, showing massive early adopters to digital delivery.[10]

Is it really a choice?

Blockbuster:
Head into the store for choice of a few hundred mainstream titles

vs.

Netflix:
Thousands of titles:
Recommendations, ratings, all genres
Streaming to:
Roku DVR’s, Blue-ray players, smart tv’s, Xbox 360’s, Xbox One’s, Playstation 3 and 4, PLaystation Vita, Wii’s, Nintendo 2 and 3DS, Tivo’s, Apple TV’s, Computers, Iphones, Androids, Chromecasts, Tablets

With Netflix even taking over its own programming:
House of Cards
Hemlock Grove
Arrested Development (season 4)
Lilyhammer
Orange is the New Black
Aziz Ansari: Buried Alive

After Blockbuster dug its own grave, Netflix’s 40 million[11] customers are forging into a new era of entertainment.

Netflix-Blockbuster_THUMB

Citations:

  1. Businessweek
  2. Fast Company
  3. NBC News
  4. The Herald Online
  5. Amit Deshpande
  6. Netflix Investor Relations
  7. Morningstar
  8. Policymic, Netflix instant purge
  9. Surprising Netflix Facts
  10. Global Entertainment Trends
  11. Engadget, Netflix Numbers