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Blockbuster goes bust

Blockbuster filed for Chapter 11 bankruptcy this morning, and the saddest thing about the news may be how many people respond by saying, "They're still around?"

blockbuster_logo.jpg

The Dallas-based company says this is a prearranged filing that will boil its debt down from nearly $1 billion to "$100 million or less." It wants consumers to know that its stores and Web sites remain in business.

But how many home viewers will this once-dominant chain have left when (if all goes as planned) it emerges from bankruptcy?

Bloomberg's story notes how two rivals in particular ate into Blockbuster's business: "Netflix grew by renting movies by mail and online, and Coinstar Inc. put Redbox DVD vending machines in supermarkets and drugstores." But that's only a partial list; I'd add the online movie rentals and purchases available at Amazon and Apple's iTunes and the vast libraries of on-demand movies offered by cable-TV services.

In my case, Blockbuster was dead to me the day it closed its one store within walking distance of my home. I could see stopping by to pick up or drop off a movie on my way to or from Metro or the grocery store, but not if I had to drive out of the neighborhood. (The nearest library branch meets those location requirements and has the added advantage of loaning DVDs for free.) I'd had no further interaction with Blockbuster until a few months ago, when I was annoyed to discover its movie-viewing app bolted onto some Verizon Android smartphones.

How about you? Does Blockbuster--or any land-based DVD-rental store--still fit into your viewing habits?

By Rob Pegoraro  | September 23, 2010; 1:04 PM ET
Categories:  Video  
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Comments

We stil use Blockbuster, but only because of promotional trials and free rental vouchers. In fact, we just finished a 1-month trial of their online Netflix-style service that included the ability to exchange in-store (we have one within walking distance), but found the wait for new movies to be nearly twice as long as Netflix, and even had an issue with the service not checking in a movie for nearly a week after we sent it back to them.

We have also tried their Redbox-like kiosks, but found them to have an extremely annoying interface, and poorly designed cases for the discs.

The one thing I do like about Blockbuster is that Blu-Rays are the same price as DVDs, and they do a very good job of meeting demand for most new release movies unlike Redbox.

We will continue to use the store by our home as long as it stays in business. I would probably miss the store if it were to disappear, but would likely move to renting from the Redbox.

Posted by: Russtinator | September 23, 2010 2:35 PM | Report abuse

Because I live in a motor home and travel around all the time where there may or may not be rental stores, I decided last year to try out the DVD-by-mail system. Because of my familiarity with the brand, I chose Blockbuster first.

What a disaster! Their system got stuck, and it started mailing me the same movie over and over and over again. Nothing I did appeared to be able to stop it, so I finally canceled the service.

My next try was Netflix -- because I had seen a lot of their advertising. Like night and day! Netflix totally has the system nailed. So far, for every problem I've encountered they have already crafted a simple, user-friendly solution. It's been a total pleasure dealing with them.

Too bad, Blockbuster, I gave you first crack and you blew it. You'll never get another chance.

Posted by: doggod42 | September 23, 2010 2:48 PM | Report abuse

Great example of a company that was too big and too slow to make changes in their business philosophy and strategy soon enough. Instead, the changes they made were re-active, not pro-active and too little too late.

Never liked them anyway.

They won't be missed.

Posted by: topwriter | September 23, 2010 3:16 PM | Report abuse

I still have my Blockbuster account, but I very rarely use it; the closest store is not conveniently located to my apartment, the rental fees are high compared to my per-DVD costs for Netflix, they often don't have on hand what I'm trying to rent, the lines at my local store are often daunting, and I have had to fight tooth and nail with management over what should have been simple problems to solve from a customer service standpoint. I actually told the regional manager at one point that I wasn't surprised that the business was in trouble, since they make little effort to treat customers well.

Posted by: maursullivan | September 23, 2010 4:10 PM | Report abuse

This is one company I'm GLAD to see go belly up. Blockbuster made a ton of dough unnecessarily overcharging folks for overdue rentals, which I'm sure they were glad to do, @ the time. Instead of using the money on R&D, i.e. a more progressive busines model like Netflix, Blockbuster CEO's were content solely on being greedy. This is a PERFECT example of what will happen to a company, if/when it refuses to consider it's own longevity, in the grand scheme of things. FAREWELL, SO LONG!

Posted by: The_Funknician | September 23, 2010 4:12 PM | Report abuse

The two blockbuster stores convenient to me (one near home, one near work) closed months and months ago. I've been using NetFlix, and am glad to not have to worry about making a special trip to the store to avoid late fees.

Posted by: Ghak | September 23, 2010 4:50 PM | Report abuse

I always thought Homeland Security should contact with Blockbuster to track down illegals. They're the best at finding deadbeat renters.

Another sad victim of those who do not change their business models to address the advent of new technologies.

Posted by: areyousaying | September 23, 2010 5:10 PM | Report abuse

We actually use our local BB store a lot. It is right on the way home from work. We use their unlimited rental program. I prefer it because I don't have to wait for the mail back and forth. Plus, I want to pick the movie I want to see right now, not the movie I thought I'd be in the mood for when I ordered it 2 days ago.

Posted by: jerryravens | September 23, 2010 10:13 PM | Report abuse

I think I rented a movie once in my life. Netflix I like. They have unusual stuff, old films, documentaries, foreign films. They even have newer films that have been out for six months. I use the streaming video as well as the mail DVD's.

Posted by: linear | September 23, 2010 11:35 PM | Report abuse

Block-who? Weren't they a 20th Century company like AOL and Western Union?

Innovate and grow or die. -Business 101

Posted by: hisroc | September 24, 2010 12:07 AM | Report abuse

Hey Russtinator,

Pretty trivial complaint about the Redbox cases. The only complaint that I have with Redbox is; if one rents a movie 5 times a week, you will run out of decent movies to select. I appreciate that I can rent a movie in Annapolis and drop it off in Pennsylvania. Streaming Netflix is great, if you have a good connection. I learned the hard way that Verizon will slaughter your bank account if you stream through an aircard.

Posted by: baronflyer55 | September 24, 2010 12:49 AM | Report abuse

Hey Russtinator,

Pretty trivial complaint about the Redbox cases. The only complaint that I have with Redbox is; if one rents a movie 5 times a week, you will run out of decent movies to select. I appreciate that I can rent a movie in Annapolis and drop it off in Pennsylvania. Streaming Netflix is great, if you have a good connection. I learned the hard way that Verizon will slaughter your bank account if you stream through an aircard.

Posted by: baronflyer55 | September 24, 2010 12:50 AM | Report abuse

The whole time I was reading this I kept thinking about Movie Gallery, a large video rental chain which around here operated under the name Hollywood Video. They filed for Ch 11 just like Blockbuster did and closed a lot of their stores. They reorganized and came out of bankruptcy a smaller and leaner company. To nobody's surprise they were back in bankruptcy a few years later. People call the cases Movie Gallery 1 and Movie Gallery 2. They are doing (have done?) a Ch 7 liquidation now.

It's hard not to see the same thing happening to Blockbuster. They aren't as good as Netflix at the movie by mail market, I haven't tried their video streaming to compare it to Netflix. It seems like the only way for Blockbuster to actually survive is to effectively challenge Netflix, which already has a huge distribution network.

The only thing I can see Blockbuster possibly exploiting is that they rent video games as well as movies. Maybe they can turn themselves into a service that does what Netflix and Gamefly do separately. But of course the real future is in streaming HD movies.

As a side note, I hate Redbox. There's never anything good in them on weekends.

Posted by: Booyah5000 | September 24, 2010 3:38 AM | Report abuse

Blockbuster couldn't bring itself to admit that Netflix had a better delivery system (via the mail) because they were competing with them. By the time they started eating crow and delivering movies by mail, it was too late. And now Netflix has gone to yet another level, streaming movies, and Blockbuster is again way behind. I wish them luck when they emerge from bankruptcy (or do I?).

Posted by: jfw9 | September 24, 2010 3:51 AM | Report abuse

I still remember getting movies from Erol's. These things happen!

Posted by: jennifermbodie | September 24, 2010 8:21 AM | Report abuse

Blockbuster turned me off when I would rent three movies on a Friday night....one for the kids, one for the wife and one for myself. All three would have a different return date! A scheme just screaming for late return penalties. I don't think many people mourn the demise of Blockbuster.

Posted by: jmcdon7230 | September 24, 2010 8:23 AM | Report abuse

Perhaps it's limited to the Kansas City area, but I stopped patronizing Blockbuster because of their abysmal customer service. To clarify 'abysmal': On my final visit to one of their stores, I encountered two employees wrestling in one of the aisles while the manager watched. Obviously, not the most tightly run ship in the fleet.

Posted by: oblio88 | September 24, 2010 8:47 AM | Report abuse

It's easier to innovate when you don't have a billion dollars in debt - the price of exiting Viacom - hung round your neck.

Posted by: mattintx | September 24, 2010 9:05 AM | Report abuse

The broader question about whether local rental shops can continue to survive against the competition from Netflix or Redbox really shouldn't be framed as part of a discussion about Blockbuster. Small mom and pop rental stores can run a much leaner operation than a place like Blockbuster which had typically invested in prime retail real estate. We have Netflix and it's great, but we also go to our local video store on a regular basis too. I have friends who have watched entire television series on their Ipods, but I'd rather get the disks.

What's really interesting to me is that Blu-Ray has not seen the same growth and penetration as DVD did. It begs the question of how long will there be a viable market in renting movies in a physical format.

Posted by: lepanto | September 24, 2010 9:10 AM | Report abuse

Something about my Amazon/Tivo online downloads and also iTunes made me happy that it still existed. Have Amazon and Apple finally convinced all of the movie studios to make their movies available online? I can't give good examples. But it seems like there is lot that isn't available. (When I go to Amazon's website and it lists the top-seller movie downloads, I'm amazed at how old some of the top sellers are.)

Posted by: reston75 | September 24, 2010 9:31 AM | Report abuse

I think Blockbuster is finished. They may emerge reorganized from this bankruptcy, but they will be gone within a few years, when there will be a way, be it Netflix or a new service we haven't heard of, to get whatever movie you want without leaving your house.

Posted by: irasciblecurmudgeon | September 24, 2010 9:31 AM | Report abuse

We rent movies rarely (maybe 3 or 4 times a year). But when we do -- like when 18 inches of snow is predicted -- it is a spur-of-the-moment thing and we want them right away, not by mail. So we still use BB. There is one store fairly convenient to us, though the closest one closed a few years ago.
I suppose we could get set up with Netflix and use the streaming service, but my understanding is that with Netflix you pay every month whether or not you use the service.

Posted by: suevee | September 24, 2010 9:47 AM | Report abuse

Frankly, I'm amazed that BB has hung on as long as it has. Back in the early 90's, I did some work with a firm that had BB as a major account. Even then, that firm was having internal discussions about how to replace the BB business, because it was only a matter of time before it would reach market saturation, and then be supplanted by new technology.

Posted by: SolontheGreat | September 24, 2010 10:11 AM | Report abuse

Stopped using them long before there were even any alternatives. As you say, my biggest surprise is that they are still around.

Biggest gripe: the number of times we returned home only to find that the movie we had just rented was unplayable due to wear and/or damage.

But customer service? Their customer service consisted of :How can we screw our customers?" When we took back the defective movies, exchange was the only option - even if that was the only copy of the movie we wanted to watch, we had to choose another title. And what happened to the defective movie? Right back onto the shelf. We also soon learned that the slotted return box was not an option: only way to surely avoid late fees was to deal with a clerk and obtain a receipt.

Your comments box doesn't have enough space for me to list all the problems we had prior to cutting them off. Sadly, I also cannot come up with a single thing that was good about them.

Posted by: WODRR | September 24, 2010 10:31 AM | Report abuse

Not sure what Blockbuster thinks they can do to reorganize, because they're finished. I just checked their website to find the nearest BB store, and it was 4 miles away from my house. The public library branch is less than a mile from me, so guess where I'm going in advance of the next snowstorm? Between Netflix, Amazon, iTunes, and the networks' online content, where's the niche for BB?

Posted by: privacy5 | September 24, 2010 10:36 AM | Report abuse

Blockbuster Online was a great deal at first, letting subscribers return DVDs to the store for a free exchange while waiting for the next DVD on the list. The service lost its appeal when that deal ended and prices went up, so I let my subscription lapse.

The overhead of the stores has been dragging the business down, and will continue to do so. They should close all the stores and start fresh with their DVD inventory online and in kiosks. Compete with Netflix on price, and with Redbox on selection. Even the stores that aren't losing money now will be losing money five years from now.

Posted by: pundito | September 24, 2010 11:27 AM | Report abuse

Blockbuster lost us in 1999 and we switched to Netflix. Back then, they were slow to shift from VHS to DVD's. Stores were packed with tapes, and a pitiful selection of DVD's.

Posted by: sasha_j | September 24, 2010 12:23 PM | Report abuse

I remember a while back, right about the time Blockbuster started offering the free exchange and online service deal, a friend of mine kept insisting that "That was the end for Netflix. They're doomed." I said, "That'll be the day! Netflix is going to win this fight... it won't even be close." And it wasn't.

I think my favorite part of the battle, back when Blockbuster launched it, was the TV commercials they made where they tried to portray it as a huge hassle to get your DVD rentals mailed to you. I was just looking at the screen and thinking, "You're kidding, right? You're actually trying to say it's more convenient to drive to the store instead?"

Posted by: psknight | September 24, 2010 12:42 PM | Report abuse

I agree with the post in that Blockbuster's value is in their proximity to you. We were using their mail service b/c we could trade in movies at the local store if we didn't want to wait for the mail. Once that store closed down, so did our membership. We currently use Netflix, but nothing is perfect. The winning formula is getting recent releases (to DVD) the day they come out without paying $6/movie (cable On Demand) to watch. Blockbuster needs to partner with either Netflix or RedBox to leverage the BB same day DVD release timing with either of those two companies. Netflix and RedBox are required to wait several weeks following DVD releases before they can start offering the movie.

Posted by: rpfeist | September 24, 2010 1:16 PM | Report abuse

I think we might make a slight tip of the hat to Blockbuster, despite their many shortcomings noted above, because ten years or so ago, they were the stores that had the biggest selection. We forget how we used to be impressed by signs saying "2,000 movies to choose from!".

No one, by the way, mentioned my favorite aspects of Netflix (besides the prompt mailings): their finding films I might never have heard of, based on films I and others have rated highly, and their making my rental history available to me.

A feature no one has offered (and may never offer due to copyright issues) that I would enjoy using is a means of excerpting short clips of movies, which I could email to friends. It could be seen as word-of-mouth advertising, instead of plagiarizing, but I don't suppose the legal beagles would let it happen.

Posted by: richman0829 | September 24, 2010 1:51 PM | Report abuse

Oh I dunno, lots of complaints here, not sure if that's the real story. It's more a caution tale for the "buy and hold stock" crowd: Like beta before them, Blockbuster thrived when movies were on VHS, prohibitively expensive to mail, they fit perfectly in the bricks and mortar world, Blockbuster beat out the rest of the chains including the local Erols. So they emerged from the pack, beat out the others, made a ton of money and then... when movies became CDs and DVD the world changed again, netflix won (and remember there was a time when it looked like they would fail) because they recognized it was now cheap enough to mail movies (albeit with a little "throttling" to slow some customers down.

Netflix and others already see the writing on the wall though, with instant downloading over the internet. So unlike earlier generations, we can see the rise, success and fall of an industry in a decade or two. time marches on. All the bad service is a result of weakinging financials rather than a cause of it.

Posted by: jhtlag1 | September 24, 2010 3:33 PM | Report abuse

I remember when BLOCKBUSTER took out EROLS and I was mad....so I guess it's easy come easy go.......

Posted by: mcseacna | September 24, 2010 3:39 PM | Report abuse

I got screwed by Blockbuster so many times. The Customer Service was aweful and the fees infuriating. When they closed the BB store down the block.I tried Netflix and fell in love with it. And it only got better and cheaper and than Instant Video. The customer service was super.
I wouldn't even give BB online a chance. Payback for all the hassles over almost 10 years as a customer at BB. I am sure my story is not unique

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Posted by: shoestrade28 | September 24, 2010 10:07 PM | Report abuse

When BB came on the scene, they took no prisoners. They put every local video store out of business. They proceeded to treat their customers with the same disdain. They have no friends. The only positive thing I have to say about BB is that in ONE store (Fairfax, VA, Fair City Mall), the employees were awesome. Incredibly knowledgeable, and always willing to talk film, and make a great recommendation. Clearly, in spite of BB's corporate arrogance. BB, you won't be missed for a microsecond. You deserve to go belly up.

Posted by: archtop | September 24, 2010 10:47 PM | Report abuse

I never liked blockbuster. It should have been called mom and pop buster for running local retal stores out of business. I never liked thier greedy policy of late fees, either. The selection was mediocre, and strickly family oriented. They rented edited for TV versions of R movies. It was great when some real competetion came along. Netflix is superior in every way. The comcast on demand movie system is the real dinosour - paying for a single movie? Give me a break, and the selection is god awful.

I hooked my computer to my TV and use Netflix watch instantly. I've found some real movie gems to watch, and great British TV re runs too.

Posted by: 666TheDevil | September 25, 2010 12:07 AM | Report abuse

Great thread, everybody. Reading all these recollections of bad service makes me want to rent Kevin Smith's "Clerks."

@lepanto: Unfortunately, indie movie-rental places with interesting selections aren't immune--Alexandria's Video Vault packed it in this spring.

@reston75: You nailed one of the biggest problems with movie downloads--Hollywood's insanely balkanized "release window" business model.

- RP

Posted by: Rob Pegoraro | September 25, 2010 9:04 AM | Report abuse

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