10 Valuable Business Lessons to Learn From the Downfall of Blockbuster


As the years go by, we learn that owning a business is no easy task. There are times when business is good then there are times when companies are barely earning anything— well, that’s the economy.

It’s not all gloom and doom though. Some brands manage to brave the storm and come out stronger than before. However, there are many that don’t survive and end up failing. About 50% of small businesses have a tendency to fail in their first year and 95% fail in their first five years.

What about big businesses? Well, they’re no different. Although they have a better chance of survival, there are many ways they can fail. We’re often exposed to huge names who are thriving, we don’t get a good look at huge businesses that have disappeared or are failing.

As technology becomes more advanced and eCommerce becomes the next shopping destination, the need for brick and mortar stores decrease. Trends come and go and with all the trends we’ve seen in 2019, we have to admit that it’s not easy to keep up with.

However, it’s important to keep an open mind in an era of constant change and instant gratification to survive in the economy.

The Downfall of Blockbuster

Blockbuster was first established in 1985 when it opened its first store in Dallas, Texas. They started with an inventory of 8,000 VHS and 2,000 Beta tapes. Due to its early success, the company grew and expanded its business throughout the nation by opening more stores.

In time, they became the staple for home movie and video game rental services through a video rental shop, DVD-by-mail, streaming, video on demand, and cinema theater before Netflix and chill came into existence. At its peak, Blockbuster had a total of 84,300 employees and 9,094 stores worldwide in 2014.

In the end, it wasn’t a happily ever after for Blockbuster. Other than competition from Netflix and the development of technology became the death of them, there were the obvious poor leadership and lack of innovation. There were a lot of major factors that contributed to the demise of Blockbuster which we will get into in a bit.

In the end, Blockbuster began to lose a lot of revenue during the 2000s and they finally filed for bankruptcy protection in 2010 after failing to pay their debt. In 2011, its remaining 1,700 stores were bought by the “Dish Network”.

By 2014, the last 300 stores were permanently closed. In 2019, Blockbuster finally retired. However, there’s still one last Blockbuster which remains open in Bend, Oregon.

Blockbuster store

The last blockbuster store on earth (AP Photo/Gillian Flaccus). (Image Source: Voa News)

There were a lot of mistakes Blockbuster made that caused them to fail as a business. As the times were changing, they didn’t put in any effort in innovating. Instead, they stuck to their old ways and opened more stores.

This was a huge mistake since competitors were starting to move online and utilize technology. Other than that, they declined help from others and made bad business decisions (invested in Enron’s broadband services).

We can definitely learn a lot of things from Blockbuster. So here are 10 things we learned from their downfall and hopefully not repeat:

1. Retail is a Highly Competitive Industry

Whether you want to hear it or not, retail is a highly competitive industry and if you can’t keep up, it’s going to be the end of you. It’s competitive because it’s broad and there are so many competitors for all kinds of niches.

With so much competition, it’s bound to get tough when you need to stand out from the crowd. Also, since trends in the industry are constantly changing, companies are constantly looking for ways to keep up without investing in too much.

To survive in such a competitive industry, a company needs to do its research thoroughly, keep an open mind, know its customers inside and out, and connect with them on social media.

2. Price is a Sensitive Issue

One of the reasons Blockbuster failed was because their competitors had the same thing at a lower price. Due to their persistence in keeping their brick and mortar stores, they had to make up for the loss of sales which was supposed to help fund the rent.

They did this by negating late fees for customers when they provided DVD rentals. Blockbuster was highly dependent on these fees and this chased their customers away quickly.

Netflix, on the other hand, streamed their movie online and that reduced a lot of unnecessary fees in their customers’ eyes— raking in 130 million subscribers.

3. Debt Can Make or Break Your Business

Break business(Image Source: Unsplash)

Every business is bound to have debt, but there are two kinds of debt— good and bad. Of course, you want to have good debt. Simply defined, good debt is an investment that will grow in value or generate long-term income.

An example is investing in something that will bring in more sales such as a new website or app that helps customers purchase your products or use your services easier.

So, when incurring debt, make sure it’s something that will grow in the future. To do this, you need to be sure of what you’re investing in by getting to know what your customers really want.

4. Don’t Ever Think You’re Invincible

Blockbuster made a mistake when they thought they were invincible, even refusing help from others. While many companies were keeping up with the times and innovating, they thought their current strategy was the best.

Remember that there’s always room for improvement. Although Blockbuster was at its peak in 2014, they thought that they would stay on top forever. The reality was that the world was changing and moving in a different direction than brick and mortar stores.

In the end, it’s critical to remain humble and look for ways to improve than stay content with what you have.

5. Be Adaptable to Changes

We mentioned earlier that industries and the world of business are constantly changing with different trends coming and going. For any business to survive today, they need to keep up with the times and be adaptable to changes.

Companies that survive in the long run are often flexible and can respond to the unexpected very well. This is because they do a good job planning in advance how to work things out if things don’t go as planned.

6. Have a Strong Identity

As a brand, it’s essential to have a strong identity amidst the crowd. The reality is there are lots of brands with unique qualities and competition is getting tougher.

Your brand is what you wish to portray to the world— making it an important asset for your company. Visuals such as your company logo and design are important but how your brand communicates with your customers is much more important.

Developing a strong identity for your brand is extremely important. Great branding can help businesses build their reputation and make them stand out.

7. Understand Your Customers

The customers make your business. Without any customers, a business wouldn’t survive. A couple of components of a successful and healthy business are customer satisfaction and retention.

When you don’t understand your customers and ignore what they want, it can be harmful to your business. It’s important to take all initiatives to make customers happy and know what they want or need and provide a solution for their problem.

8. Have Good Financial Management

Financial management is critical when it comes to owning a business. As a business owner, you should know firsthand what your expenses are and how much you’re earning. You should also know where to invest and where to allocate your funds.

Blockbuster didn’t allocate their funds well by opening up more physical stores instead of investing in something beneficial for their future. By opening up more stores, they had to pay more rent which made their expenses bigger than their income.

9. Don’t Get Stuck in the Past

Don’t stick to old ways that worked in the past when you’re faced with new problems. Keep in mind that there are constantly new trends and your business needs to adapt to the changes. Without flexibility and opting to stick to past methods, you might end up losing more.

In this case, Blockbuster depended highly on their customers’ late fees and stuck to that for their business to survive. Instead of allocating their funds to create something innovative, they remained stagnant and did nothing.

10. Keep Innovating

Innovation is creating more effective processes, products, and ideas. Who doesn’t want their business to thrive with innovation? By being more innovative and implementing new ideas, your business can grow and adapt better in the marketplace.

Although it might seem tedious, changing your business model and making changes in the industry to create better products or services can help your business in the long run.

Wrap Up

Now that we’ve gone through the 10 valuable business lessons we learned from the downfall of Blockbuster, we can conclude that there are a lot of ways to survive in the marketplace despite changes and new trends.

Businesses must remember to keep their customers in mind and create solutions for them instead of running their business based on what they think works. Other than that, keeping up with changes in the industry and marketplace and having an open mind to change is also essential for a business to survive.


Author’s Bio

Andre Oentoro is one of the co-founders of Milkwhale, an internationally acknowledged infographic production agency. He helps businesses increase visibility on the internet with visual data and well-placed outreach campaigns.