Introduction
Founded in 1986 by a software supplier in the oil and gas sector, David Cook, Blockbuster LLC remained the biggest video-rental chain in the United States for decades. At the pinnacle of its popularity, Blockbuster had 9,000 stores across the country and employed almost 85,000 people worldwide (Ash, 2018). In the early 90s, Blockbuster added music and video game rental services to their store, which also resonated with consumers. Besides, the US-based company developed a unique system of tracking supply in its stores to offer buyers a wide range of titles at any time. Over time, Blockbuster LLC had built up a customer base of 65 million registered users (Ash, 2018). However, in the 2010s, the company that was once valued at $3 billion had to file for bankruptcy. The employee count went down from 84,000 to only three in 2019.
Main body
Anchorage, Alaska was the company’s last frontier: the city still had two stores operating at the beginning of 2018. However, by July 2018, they had to close as well (Taylor, 2018). The general manager for Blockbuster in Alaska, Kevin Daymude, called his customers “a family” in his final announcement about closing the last two stores (Taylor, 2018). The case of Blockbuster in Anchorage, Alaska is truly curious. The question arises as to what factors allowed the outdated business to remain strong when the outlets in all our states were consistently failing. The harsh Alaskan climate with long winters and snowstorms pushed people to spend a lot of time at home. Another reason is the overall poor quality of the Internet in the state that has only improved in the last few years. Lastly, many visitors frequented the Blockbuster stores out of nostalgia. Their yellow-and-blue design has long been seen as iconic, and Anchorage residents enjoyed the retro atmosphere of the place.
What played against Blockbuster in Anchorage is residents’ growing access to broadband Internet. For instance, in 2018, the absolute majority of residents, 95.4%, had computers at home (U.S. Census Bureau, 2018). 88.7% of all households enjoyed a broadband Internet subscription (U.S. Census Bureau, 2018). Besides, the median household income has risen far above the national average of $55,000 and amounted to $83,000 (U.S. Census Bureau, 2018). These facts suggest that former video rental store customers now had more purchasing power and could enjoy the convenience of streaming services such as Netflix.
Speaking of which, Netflix is seen as a disruptive innovation in general, not only in the case of Alaska. Founded in 1997 as a DVD-by-mail company, Netflix essentially revolutionized the way consumers could get their daily dose of entertainment. Before the Internet era, the company was outsmarting Blockbuster by eliminating probably the most annoying part of the video rental experience: late fees (Taylor, 2017). In some years, Blockbuster could make as much as $800 million by charging customers for returning CDs and DVDs with a delay (Ash, 2018). Netflix allowed customers to keep DVDs as long as they wanted. Once customers were done, they could return a DVD in a prepaid envelope and receive another movie from their list.
Today, Netflix is the world’s most popular streamlining service: it is attracting customers by not only hosting popular titles but also producing original action movies and documentaries. Netflix even has a few titles about or set in Alaska such as “Wild Alaska” and “Frozen Ground.” Such films might have a special appeal for the residents of the Northern state and increase their loyalty to the brand. What is interesting is that back in the late 1990s, Blockbuster had a chance to buy Netflix for $50 million but chose not to do so (Ash, 2018). A decade and a half later, Netflix is at the peak of its popularity while the history of Blockbuster has come to an end.
Conclusion
To sum up, the failure of Blockbuster in Anchorage is a natural occurrence in the world where outdated business models and solutions are quickly replaced with innovative disruptions. The longevity of its stores in Alaska is more of a wonder than their eventual discontinuation. At first, the poor Internet quality and the climate making people stay indoors were the reasons for the popularity of video rental services. However, today, Anchorage residents enjoy better Internet and prefer streamlining websites such as Netflix. As opposed to Blockbuster, Netflix was caring more about the satisfaction of its customers than about the ways to charge more in late fees and otherwise. Blockbuster was shortsighted: it did not understand the realities of the modern world and soon became irrelevant.
References
Ash, A. (2018). The rise and fall of Blockbuster. Business Insider. Web.
Taylor, B. (2017). How Coca-Cola, Netflix, and Amazon learn from failure. Harvard Business Review, 10, 2-4.
Taylor, K. (2018). The last Blockbusters in Alaska are finally closing, leaving just one location of the video rental chain left in the entire US. Business Insider. Web.
U.S. Census Bureau. (2018). U.S. Census Bureau QuickFacts: Anchorage municipality. Web.