Picture this.
It's a hot September morning in Dallas, Texas.
It's the year 2002.
Men nervously enter the headquarters
of Blockbuster, the movie rental giant, in a desperate plea to sell their
struggling business, they've flown in all the way from California.
The offer $50 million.
But the Blockbuster executives aren't impressed.
Holding back their laughter, they turn the two men away.
Luck just wasn't on their side, it seems.
Or maybe it was, because fast forward a couple of decades
and that same business is now worth hundreds of billions of dollars.
While Blockbuster spiralled downhill
and declared bankruptcy in 2010, the company that those two men tried
to sell off one morning in northern Texas is now the biggest name in film and TV.
I bet you can guess what it's called. It's Netflix.
Yes, it's true. Those two men were Reed Hastings,
the founder of Netflix, and his partner Mark Randolph.
And it's mostly because of them that Blockbuster went from being worth
almost $6 billion to just 300 million in only a few years.
So I'm guessing you want to find out what happened.
How exactly did Blockbuster end up with $900 million of debt and just one
store left after years of monopolising the movie rental industry?
Well, crack open the popcorn, turn down the lights and get comfy.
The show's about to begin.
Now, if you were an 80s or 90s kid,
you probably know you definitely remember Blockbuster.
That big yellow sign,
the endless rows of movies, the excitement of checking out the new releases.
Before the days of Netflix and Chill,
you had to rent your favourite movies on VHS, tape or DVD.
And Blockbuster was the place to go.
After all, the company basically invented the movie rental market.
At its peak, Blockbuster owned over 9000 different stores across the US.
On top of that, it had more than 84,000
employees worldwide and over 50 million members.
This was all thanks to software
entrepreneur David Cook, who founded Blockbuster in 1985 forging
a new path in what was otherwise a pretty empty market.
The company soon started making waves.
Nobody else could come even close to matching Blockbuster's giant catalogue
of titles, plus David Cook's Computer Wizardry meant
that the company had a state of the art digital barcoding system.
And just like that, the stars were aligned for a successful franchise.
It was to nobody's surprise
that the company started growing in its first year.
However, things really kicked off when Cook sold Blockbuster to a trio
of investors in 1987, who pumped the company with $18.5 million.
That is when Blockbuster expanded big time.
Pretty sure Blockbuster wasn't just renting out movies, but video games too.
And as the company swept through the US, it brought up all of the local competition
and converted them into more Blockbuster stores.
It had over a thousand by the start of the 1990s.
1992 then marked the beginning of Blockbuster's expansion abroad,
where it bought out the video rental store Ritz Video.
In the UK.
Then, in 1994, Blockbuster merged with Viacom for a whopping $8.4 billion.
However, despite all of its success, there was a chink in Blockbuster's armour.
And that was late fees.
Late fees were what you had to pay if you didn't return your movie rentals on time.
They cost a dollar a day and they were one of Blockbuster's biggest revenue sources.
In the year 2000, they made the company $800 million.
This was great for Blockbuster, of course, but its customers weren't so happy.
In fact, it was these late fees that caused one man to go on a crusade
that would cause Blockbuster's eventual downfall.
In 1997, Reed Hastings got handed a $40
late fee for a copy of Apollo 13 that he'd rented.
One year later, he decided to launch Netflix.
Netflix started life as a pay per rent movie service, much like Blockbuster.
Main appeal, however, was that it didn't charge late fees.
Customers just paid one flat monthly cost.
We all know how successful Netflix would become, but it was once the new kid
on the block and it was actually having problems.
Due to the.com crash,
netflix was on track to lose tens of millions of dollars a year.
The DVD by mail rental service just wasn't
catching on quickly enough to support the company.
Netflix had been successful in its first couple of years.
So much so, it turned down an acquisition offer by Amazon.
But the road ahead was starting to look tough.
And so, in the year 2000, netflix's founders turned to Blockbuster
and offered the company up for a measly $50 million.
Not measly at the time, maybe, but in hindsight, blockbuster missed out
on the deal of a century by turning Netflix down.
But after all, Blockbuster just felt it was too big to fail.
And it's easy to see why.
Throughout the 1990s and into the company monopolised the movie rental industry.
It was even valued at over $5 billion.
By the end of 2004, it had everything that Netflix had too.
Online services, a paper rent system, thousands of titles.
Plus it had something that Netflix didn't a massive legacy.
But in the end, it just didn't matter.
As the new century rolled on, blockbuster started taking some massive blows.
Despite being at the top of its game
in 2004, everything changed when Viacom split from the company in the same year.
In fact, by 2005, blockbuster had already lost 75% of its market value.
It became clear that Blockbuster was
losing out to rivals like Netflix and Red Box, especially their flat fee systems.
In 2004, Blockbuster launched Blockbuster Online to try to rival
Netflix, and then it cut late fees altogether.
This was a controversial move, of course,
as it meant that the company lost a lot of money.
It also posed a second problem.
Blockbuster couldn't rent out movies
to other customers because people were keeping them for too long.
So Blockbuster tried to do something about it.
In 2006, the company launched the Total Access programme to encourage
customers to return rentals for a free instore exchange.
And it was just for one low flat fee too.
And this was actually successful.
But Blockbuster was losing $2 each time someone cashed in on the offer.
This meant that Blockbuster had to increase the price of the programme.
And this just brought it back to the drawing board.
Customers were leaving and they were going to Netflix.
By 2007, it was too late for Blockbuster to make a comeback.
This was the year that Netflix released
the online streaming service that we all know and love.
And to make matters worse, Blockbuster's new boss, John Antiocho,
had actually decided to stop the company's online service altogether in 2004.
He thought that Blockbuster's power still
resided in the world of physical movie rental.
Of course, he couldn't have been more wrong.
In February 2010, the company stocked its
operations in Portugal and put out a bankruptcy warning.
The following month, as it started up racking up billions
of dollars in debt, members from its board of directors began to quit and the company
was delisted from the New York Stock Exchange.
Once the media caught wind
of Blockbuster's downfall, even its CFO resigned.
Blockbuster finally declared bankruptcy in September 2010.
At first the company said it would keep
3000 stores open, but that number continued to plummet.
Now there is just one store in Bend, Oregon.
Funnily enough, it's been converted into an airbnb.
Now, if you've seen our video on the fall
of Kodak, you might have guessed early on where this story was going.
Kodak's biggest mistake was to focus
on a physical film when the world of digital cameras was exploding.
Now we are here with Blockbuster, which ignored all the warning signs
that online streaming was a force to be reckoned with.
Both companies paid the price.
And yes, it's easy to blame Netflix for Blockbuster's downfall.
But it wasn't the only culprit responsible.
Maybe Blockbuster was always doomed to fail.
After all, its main source of income was what you could call bad profit.
Blockbuster was raking in hundreds of millions of dollars from late fees,
something that people were constantly complaining about.
And when bad profits are your main source of income, you are in trouble.
In the end, the death of Blockbuster boils down to complacency.
As we've seen with some of the other brands in this series,
blockbuster's massive legacy eventually became a massive liability.
The company started losing touch with its customers.
But due to its size, it didn't really have to worry.
That was, of course,
until a bold rival stepped forward that was willing to adapt to the market.
Yes, this was Netflix, but in reality it could have been any
other streaming company with similar ambitions.
Maybe we should cut Blockbuster some slack though.
After all, how many of us in the early
2000s could really predict how big streaming services would get?
If anything,
Blockbuster defined a generation and just like our favourite movies.
Every story has to end somewhere.
Not all brands are meant to last forever.
We have our time in the limelight and then one day the credits roll.
But that doesn't mean it wasn't worth it. Hey.
Thank you so much for sticking with me to the end of this video.
Make sure you like and subscribe to the channel while you're at it.
And I'll catch you in the next one.