Wednesday, January 11, 2006

Blockbuster Sinking

I'm usually suspicious of claims that the "old" way of doing things is dead because the latest favorite trend or company or business model of the techno-elite is going to blow it away. And 95 percent of the people who don't live within the boundaries of the Valley or Boston or RTP have never heard of whatever the hot new thing is. And wouldn't want it if they did.

But sometimes things really do change.

John Paczkowski of Good Morning Silicon Valley notes:
Blockbuster's days are numbered. Hemorrhaging cash, the video rental chain that once claimed a market value of $8.4 billion is today worth just under $700 million... If only it had purchased Netflix when it had the chance. A paltry $50 million and it would have had owned the company that destroyed its single biggest profit-earner -- charging late fees to customers who kept videos past the due date -- and forced it to invest millions in an also-ran online rental business that is too little, too late.

A commenter to the post counters that "i disagree. i used to feel the same way but those of us in the valley are too close to our own technology. go to anywhere outside of a high tech center like our own and blockbuster still thrives." Perhaps. But there's little disputing that Blockbuster's financials are a grim thing indeed.

There may indeed still be a significant demand for bricks-and-mortar video rental—but likely not at the scale or at the price structure of current operations. And here's a very real question: If the corner video store's costs require a premium over online and video-on-demand rental charges, how much additional business will it lose?

Still, we'll have video rental stores for a long time—perhaps most of all in cities. But we may well not have Blockbuster.
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