Blockbuster’s belly up: least surprising bankruptcy since David Crosby

Blockbuster’s belly up: least surprising bankruptcy since David Crosby

(Image: travdir) 

On the heels of this week’s Netflix launch in Canada—with a pretty major PR snafu—comes the news that Blockbuster Video (one of Netflix’s biggest U.S. rivals) is filing for bankruptcy protection. South of the border, the once-ubiquitous blue-signed video rental stores have been steadily losing business to services like Netflix, while the less legally inclined have been turning to the Internet to download movies. Here in Canada, Netflix has been less of a factor, but there’s more than one shuttered Blockbuster outlet in Toronto. The company says its international stores are doing fine (outside of Argentina), but it’s not hard to see the writing on the wall. How did Blockbuster come to this?

DVDs: Video rental makes a lot of sense when VHS tapes are expensive, bulky, and have lousy enough picture quality that they’re not worth buying. With DVDs—which have ended up being ridiculously cheap compared to old tapes—all of those factors are inverted. They’re also small enough to be mailed easily, hence the success of services like Netflix and zip.ca.

The Internet: So we hear that there are ways to download DVD-quality video without paying anything at all. Even those of us willing to pay can turn to iTunes or any of the legal streaming video sites out there. In eliminating multiple trips to the video store, such sites are quickly increasing in popularity. Just don’t expect to always be able to find what you want.

Late fees: Like any library, Blockbuster needed a way to make sure people returned their DVDs and videos. If a late fee on a rental comes close to $10, a DVD selling for $15 at HMV looks pretty good. Then, when Blockbuster “got rid of” late fees, it got sued for its imprecise marketing.

Some people don’t want to watch Keanu’s latest turkey: Blockbuster’s emphasis on new releases over a deep selection makes some economic sense, but small independent rental places like Queen Video and the legendary Suspect Video seem to be doing all right.

Scandal! Or maybe not enough: Blockbuster refuses to stock pornography, and if we learned anything when we bought Tropic Thunder, it’s that pornography and video games are the two most powerful forces in the consumerverse. Maybe if it had stocked some more naughty flicks, Blockbuster wouldn’t be in this mess.

• Blockbuster files for bankruptcy protection [Toronto Sun]
• Blockbuster fizzles in US, but renters overseas haven’t switched to Netflix – yet [Christian Science Monitor]
• The Challenges Facing Icahn at Blockbuster [New York Times]
• How Netflix (and Blockbuster) Killed Blockbuster [US News and World Report]
Netflix shares hit high after Blockbuster bankruptcy [Reuters]