Netflix's Rise Leads to Blockbuster's Bust

September 26, 2010

Blockbuster's bankruptcy shows that its business was built around a narrow definition of its value. Blockbuster defined itself as a chain of video rental stores. Blockbuster experimented with larger locations that offered a variety of in-store entertainment experiences, but this just showed that customers didn't care to hang out in a glorified arcade, when all they wanted was to rent a video for an evening.

Netflix, on the other hand, provides the possibility of watching a video without leaving the couch to order it. Now that Internet downloading and streaming are feasible and cost effective, customers can use their existing computer and Internet connection to watch a video. Smart phones also provide another means for downloading or video streaming.

I predict that as long as Netflix remains flexible about its methods of distribution, it will continue to be successful. If, however, it becomes enamoured with one method in particular, it will probably experience challenges similar to Blockbuster's.

Richard Martin is founder and president of Alcera Consulting Inc. He brings his military and business leadership experience to bear for executives and organizations seeking to exploit change, maximize opportunity, and minimize risk.

© 2010 Richard Martin. Reproduction and quotes are permitted with proper attribution.

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