Did Web Video Bankrupt Blockbuster?

Blockbuster ruled the home video rental industry for over a decade but, according to the LA Times, the video giant will be filing for bankruptcy in a couple of weeks. The mid-September "pre-planned" bankruptcy might not come as a surprise to folks that have followed the growth of DVD-rental by mail services like Netflix and kiosk rentals like Redbox. But Blockbuster still managed to hold it's own through years of these services being available. It's only following the recent rise of online rental and web video streaming services that Blockbuster is finally throwing in the towel. Is web video to blame for the demise of Blockbuster? Growing up, Blockbuster was part of my weekend routine. On Friday nights, I would head to my local branch to pick up a couple of videos for he weekend. I knew I had to get there early to avoid half-hour long lines and empty shelves. The last time I went to Blockbuster on a Friday night, the place was practically empty. It's clear that the days of going to a video store to pick up a DVD are coming to a close. And why would you take the time to get in your car, drive to Blockbuster, browse the shelves and wait in line to pay an exorbitant amount to rent a DVD when you can pick one up from a Redbox kiosk while grocery shopping or hop on the Internet, do a quick search for the movie you want to watch and stream or download it in a single click? It is clear that Blockbuster understands that the world of movie rentals is changing. They have taken major measures to compete with video services like Netflix. Blockbuster started their own DVD-rental by mail program, which has competitive rates and terms, and they also offer their own On Demand service that gives users the option to download movies on the Web for rental or purchase. They have also taken measures to keep customers in their stores, including doing away with late fees and offering downloadable coupons on the web for in-store rentals. However, the truth of the matter is that no matter how well their On Demand and rentals by mail services do, they still have thousands of stores that are eating away at their profits and sinking the company further and further into debt. The LA Times reports that, "Blockbuster has lost a total of $1.1 billion since the beginning of 2008 and has been severely hamstrung in efforts to grow its business due to interest payments on $920 million in debt." However, the bankruptcy does not mean the end for the video rental company. Blockbuster plans to use the pre-planned bankruptcy in order to close down about five hundred of its worst performing stores and work on improvements to put them in a more competitive position in the future. They have been speaking with Hollywood studios in preparation for the mid-September bankruptcy, and a spokesperson for the company said, "Our discussions continue to be productive and we have every reason to believe we will come out of the recapitalization process financially stronger and more competitively positioned for the future." It will be interesting to see just how many stores Blockbuster will shut down, and what changes they will make to become more competitive in the industry. Companies like Netflix and Web streaming services like MegaVideo and Hulu are at an advantage because they don't have live store locations eating into their revenue. If Blockbuster keeps thousands of stores open, I'm not sure that they will ever be able to truly compete with these online video rental services. When was the last time you rented a movie from Blockbuster, or another movie store location? Do you think that Blockbuster will be able to compete efficiently with web video services in the future, should it get through it's bankruptcy in one piece?

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Did Web Video Bankrupt Blockbuster?

Megan O'Neill

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Megan O'Neill