Feature

Business columns: Blockbuster failed to escape its past

Blockbuster’s “strengths turned out to be weaknesses,” said James Surowiecki in The New Yorker.

James Surowiecki
The New Yorker

What killed Blockbuster? asked James Surowiecki. The video-rental chain filed for bankruptcy protection last month. In its battle for the DVD-rental market with upstart Netflix, Blockbuster initially had all the advantages: “customer expertise, sophisticated inventory management, and strong brands.” But Blockbuster’s “strengths turned out to be weaknesses.” Its managers invested “both literally and psychologically” in physical stores. While they also poured money into an online distribution system, they failed “to colonize the Web the way they colonized suburbia.”

Netflix, unburdened by legacy stores, focused on devising an efficient distribution system from scratch and built a lead that Blockbuster could never overcome. Now the question is whether Netflix will go the way of Blockbuster when new technology—like streaming video—renders its own business model obsolete. Can Netflix triumph where Blockbuster failed? Can it reinvent itself? That depends on whether its leaders have learned that “sometimes you have to destroy your business in order to save it.”

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