The following post is a guest post from LeHenryJr at Lehsys.com . Enjoy!

After great conjecture, it’s now pretty much common knowledge that Blockbuster has filed for Chapter 11 bankruptcy, but this fact isn’t altogether a surprising factor for anyone on the Internet or that’s ever rented a DVD.

The rumor Blockbuster going bankrupt has been circulating around the Internet for years, the video rental giant has been fighting trending technology for the last couple five years [or more]; trying to find ways to stay edgy and competitive, but the true result was that they provided a shining example of how lethargic large corporations can be.

Blockbuster’s true demise was that the executives for the corporation were simply trying to ride the wave of old methods of business for long as they could. And as everyone knows, simply putting your face in the sand and hoping that the problems will go away, just isn’t going to work.

Blockbuster’s whole premise of operation was to get people to come into the stores, purchase movies, accessories, specialty items and to rent movies & games.

In 1997 Netflix came out with DVD rentals by mail; at the time this was a new idea in the market, and Blockbuster was at the height of its DVD rental kingdom, but with Netflix coming out with unlimited DVD rentals for fixed low price, no late fees and not having to return the DVD to a brick-and-mortar store, this really attracted customers.

Renting DVDs by mail was really a fantastic idea that customers really got into, and the fact that they could rent as many movies as they wanted and not have any late fees for doing so was awesome, because Blockbuster was taking a lot of bad publicity based on their late fees policy.

And ultimately this was to be the beginning of the end for Blockbuster. Blockbuster simply thought that they could ignore such a spot on the radar and continue doing business as usual. It wasn’t until years later where Netflix’s popularity really came into play and started taking a financial bite out of Blockbuster’s apple that they actually started paying attention to what Netflix was doing; but at this point it was already too late.

Other rental services had already started doing rental by mail; essentially copying the exact process that Netflix was using-services like GameFly, and while these types of services are still relatively popular, dealing with physical media, Netflix realized that delivering movies over the Internet was really where the service was going to, and it’s what customers really wanted- movies on demand.

Blockbuster had absolutely no response to this type of service. They almost tried to ignore the fact altogether.

And while Blockbuster is trying to turn their head and ignore the fact that there revenue stream was going down, other competitors were stepping in to replace Blockbusters DVD media services; undercutting them on brick-and-mortar locations, personnel and other ancillary operational costs- I’m talking about Redbox.

Over the past couple of years between Netflix’s movie streaming service, which makes up 60% of their customer base currently, and with the popularity of Redbox kiosks popping up all over the place; both of these companies were undercutting Blockbuster in a 360 type circumstance- money was simply slipping through their fingers.

I’m not saying that Blockbuster didn’t try to recover from situations like this.
Blockbuster never could get their streaming movie service to work as well as Netflix, simply because they were considered as the other guy who’s trying to do streaming movies [just not as well].

Redbox had their kiosks, and Blockbuster was starting to strategically place Blockbuster kiosks in urban areas, but again, they were considered the second place horse- and just trying to copy something that was already there and working perfectly. At this point, the Blockbuster brand name was simply floundering; everyone knew there was a problem and was expecting some sort of announcement about an impending collapse.

According to Blockbuster, on the subject of their future, they are still going to continue to operate, they’re still going to provide the newest releases of DVDs, and with the announcement of the bankruptcy protection, the movie studios have agreed to continue working with Blockbuster, and will now have a controlling interest in how the corporation functions.

The superfluous example and stellar business education that Blockbuster has provided here is that you have to pay attention to what the customers want. As a company, or a corporation, you have to keep innovating your services, finding new ways of delivery that are going to be attractive to your customer base, and if you choose to ignore current trends in technology, you can find yourself in the same situation as Blockbuster.

Busted…

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