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Blockbuster INC.: Background and Factors for Decrease in Volume of Sales

Blockbuster’s decision to close 20% of its stores in the US

Blockbuster Inc. has made an announcement in September 2009 that it will shut down 960 stores in the US which is almost 20% of its total stores in the country by the end of 2010 (Liedtke). This decision has been seen as a major blow to the company which had a long-established global presence. This paper will provide background for this decision by the company and factors which actually triggered this move. Finally, it will ascertain whether this decision has made the company alter its business model.

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This decision came from the company as a result of its poor financial performance and low consumer demand. The company’s stocks plummeted by 76% on 3 Mar 2009 when the NYSE had to suspend trading in this stock. Since then the company has faced declining revenues both in the US and its international markets. One of the major criticisms of the company came from its inability to reinvent itself to the newer ways of doing rental business (Sandy). The company has focused too much on its physical existence to reach its customers who have started to prefer services offered by other competitors in the market. The company is also facing immense competition in the entertainment market at the hands of relatively newer companies that have business models favoring low costs and mass distribution. This has raised a warning for video rental stores which are faced with the dilemma of lower consumer spending amid the current financial crisis and changes in the buying behavior seeking cheaper options from alternate sources. Due to these poor conditions the company has liquidity issues and is also facing problems getting its debt to refinance (Sandy).

Factors leading to this decision

Major factors affecting Blockbuster’s business and its existence as one of the leading rental stores include the emergence of rental & mail services through internet and business operating at low profit margins. Two prominent companies namely Netflix and Redbox have successfully implemented these strategies. Netflix introduced a new business strategy almost 10 years ago which allowed customers to rent out DVDs through mailing service for a monthly subscription. The company had been able to acquire 10.5 million subscriptions and was able to post $55 million in revenues whereas Blockbuster reported a loss of US$15 million in the last year (MSNBC). Similarly, Redbox adopted a strategy that was different from Blockbuster and focused on giving value for money to customers. The company has set up a large number of kiosks across the US where DVDs are available at $1 per night (MSNBC). In addition to these companies, there are numerous online free source sharing websites that allow any type of file to be shared between their members. Despite legal proceedings against such websites, there is no stopping to unauthorized and illegal sharing of copyrighted material over the web. Such tough competitive conditions and the shortsightedness of Blockbuster plunged the company into darkness and some suggested that the company will collapse if it does not undertake important strategic decisions (Sandy).

Change in Business Model

The company has decided to close down physical outlets and add to the number of kiosks around the country which would in fact increase the number of rental points for its customers (Liedtke). In this way, the company attempts to shift from a business model which has been rejected by consumers and implement a similar model which its competitor Redbox has already in place.

Works Cited

Liedtke, Michael. Blockbuster may close as many as 960 stores to cut costs amid fierce competition. 2009. Web.

Sandy, Matt. Blockbuster ‘is close to collapse’ as shares plunge. 2009. Web.

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StudyCorgi. (2021, November 6). Blockbuster INC.: Background and Factors for Decrease in Volume of Sales. Retrieved from https://studycorgi.com/blockbuster-inc-background-and-factors-for-decrease-in-volume-of-sales/

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StudyCorgi. (2021, November 6). Blockbuster INC.: Background and Factors for Decrease in Volume of Sales. https://studycorgi.com/blockbuster-inc-background-and-factors-for-decrease-in-volume-of-sales/

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"Blockbuster INC.: Background and Factors for Decrease in Volume of Sales." StudyCorgi, 6 Nov. 2021, studycorgi.com/blockbuster-inc-background-and-factors-for-decrease-in-volume-of-sales/.

1. StudyCorgi. "Blockbuster INC.: Background and Factors for Decrease in Volume of Sales." November 6, 2021. https://studycorgi.com/blockbuster-inc-background-and-factors-for-decrease-in-volume-of-sales/.


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StudyCorgi. "Blockbuster INC.: Background and Factors for Decrease in Volume of Sales." November 6, 2021. https://studycorgi.com/blockbuster-inc-background-and-factors-for-decrease-in-volume-of-sales/.

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StudyCorgi. 2021. "Blockbuster INC.: Background and Factors for Decrease in Volume of Sales." November 6, 2021. https://studycorgi.com/blockbuster-inc-background-and-factors-for-decrease-in-volume-of-sales/.

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StudyCorgi. (2021) 'Blockbuster INC.: Background and Factors for Decrease in Volume of Sales'. 6 November.

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