Blockbuster enters the endgame

Photo: Andy Callahan (ferret111)

Entertainment will inevitably be distributed on demand over fiberoptic cable . . . not on plastic discs.

Blockbuster Inc has announced that it plans to file for bankruptcy. Blockbuster owns about 10,000 US stores.

I recall when Wayne Huizenga sold Blockbuster to Viacom for 8.4 billion dollars in 1994. As usual, Wayne sold high. It was obvious even then that the rental tape / disc model would make no sense in the future. (Ask the customer to drive a 3500 pound car to the store to transport a piece of plastic that weighs a few ounces? Are you kidding?!) Sooner or later, video content would be distributed over fiberoptic cable. I thought, "Mr. Huizenga has perfect timing". I wasn’t sure exactly what form electronic distribution might take, but it seemed inevitable. In 1994, Viacom bought a technology that had seen its best days.

Wayne Huizenga
Wayne Huizenga

This emphasizes just how prescient Wayne was: he bought Blockbuster in 1987 from a Dallas company which had grown to dominance because David Cook, its founder, had written his own inventory control / rental processing software that allowed it to operate more efficiently than its competitors. It tracked transactions and adjusted inventory mix to suit each neighborhood. That’s really all that Blockbuster had going for it: superior operating software. It was a good example of how important a company’s choice of software is; Blockbuster was able to turnover more inventory and squeeze more profit from each transaction of just a few dollars. Its competitors, who had sloppier inventory control, couldn’t keep up.

Now, years later, it seems that the fortunes of Blockbuster again hinge upon software: apparently their Total Access online service is inferior to Netflix’ software. So Blockbuster is going bankrupt.

Here’s a chronology of Blockbuster. There must be a lesson here. Maybe, software is the lifeblood of an organization. The trick is to keep it stable while updating it to reflect changing markets and technologies. That’s a tall order!

Visit my website: http://russbellew.com
© Russ Bellew · Fort Lauderdale, Florida, USA · phone 954 873-4695


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